A new approach to capital payment in a competitive era.

Abstract

Prologue: One important item on the health agenda of the new Congress will be the formulation of a policy to prospectively pay hospitals for the Medicare portion of their capital costs. When the Medicare prospective payment system was signed into law in 1983, Congress delayed its decision on how to fund capital costs until it could research the issue more fully. Now, with the October 1987 deadline for determining a capital payment policy around the corner, discussion of capital issues has been active among the health policy community. In this article, Jonathan Betz Brown analyzes the thought behind the various flat-rate capital payment proposals under consideration, asserting that while they look simple and effective, they probably are not. Additionally, they “will get us into deep trouble in the long run,” he argues. The author then presents a new approach to capital payment that has emerged from a three-and-a-half-year study by the Harvard Health Capital Project. This proposal of “planned payment” looks at the long-range implications of designing capital policy and attempts to build in the flexibility that is so necessary in our rapidly changing health care environment. Brown, an assistant professor of public policy and health planning at the Harvard School of Public Health, emphasizes the need to recognize capital payment—beyond Medicare— as a fundamental health policy issue: “Present capital decisions cast a long shadow. Long-term commitments based on short-term thinking or mistaken forecasts could have tragic consequences.” Also, Brown asks, How can we design community and governmental institutions that really work in a competitive era? He suggests that this question of integrating public policy and community planning into a competitive market needs to be addressed as seriously as are questions surrounding financial reimbursement. Brown , who holds both a master's degree and doctorate in public policy from Harvard's John F. Kennedy School of Government, has studied capital issues for the past five years and has been closely involved in the Health Capital Project.