MEDICARE (CONT)

In recent weeks, 3M has sent out marketing materials that urge hospitals to buy 3M software and use 3M experts to help them "make a successful transition" to the new Medicare payment system.

Richard F. Averill, research director of 3M Health Information Systems, said the sole-source contract was justified and denied that his company had a conflict of interest. As an inventor of the 1983 payment system, Mr. Averill said, he and his colleagues at 3M know more about it than their competitors.

Moreover, Mr. Averill said in an interview: "The contract required us to use the 3M system in our analysis. There was no evaluation of alternatives."

The goal of the new payment system is to pay hospitals more accurately for the cost of care. But Jayson S. Slotnik, director of Medicare policy at the Biotechnology Industry Organization, a trade group, said that payments would, in many cases, be less accurate because the government had relied on old hospital cost reports and claims data that did not reflect the use of new technology.

Without a delay, Mr. Slotnik said, hospitals can expect to see a 35 percent reduction in Medicare payments for stroke patients treated with clot-busting drugs. The basic payment for such cases is now $11,578.

It is no surprise that the Greater New York Hospital Association, which represents many teaching hospitals in a high-cost area, objects to the new system. But hospitals in North Dakota are also concerned.

Arnold R. Thomas, president of the North Dakota Healthcare Association, said the new system would cause "radical shifts" of money among the state's 52 hospitals. "The effects would be rather random and inequitable," Mr. Arnold said.

When hospitals lose Medicare revenue, they often seek higher reimbursement from private insurers. J. Brian Munroe, vice president of WellPoint, one of the largest private plans, said he feared that the Medicare changes "will introduce a significant amount of disruption to the commercial health insurance marketplace, driving up health care costs and causing marketplace confusion."

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