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Robin Hood To Rescue Of Rural Hospitals? New Math Promised On Medicare Payments

As rural hospital closures roil the nation, some states are banking on a Trump administration proposal to alter the way in which hospital funds are calculated to rescue them.

The aim of the proposal, unveiled by Centers for Medicare & Medicaid Services Administrator Seema Verma final month, is to bump up Medicare’s reimbursements to rural hospitals, a few of which obtain the bottom charges within the nation.

For instance, Alabama’s hospitals — most of that are rural — stand to achieve a further $43 million from Medicare subsequent 12 months if the federal company makes this adjustment.

“We’re hopeful,” stated Danne Howard, govt vice chairman and chief coverage officer of the Alabama Hospital Association. “It’s as much about the rural hospitals as rural communities being able to survive.”

The proposed tweak, as wonky as it’s, comes with appreciable controversy.

By legislation, any proposed modifications within the calculation of Medicare funds should be budget-neutral; in different phrases, the federal authorities can’t spend extra money than beforehand allotted. That would imply any change would have a Robin Hood-like impact: growing funds to some hospitals and lowering them to others.

“There is a real political tension,” stated Mark Holmes, director of the University of North Carolina’s Cecil G. Sheps Center for Health Services Research. Changing the elements in Medicare’s calculations that assist hospitals in rural communities usually would imply that city hospitals get much less cash.

The federal proposal targets a long-standing and contentious regulation identified in Washington merely because the “wage index.” The index, created within the 1980s as a means to make sure federal Medicare reimbursements have been equitable for hospitals nationwide, makes an attempt to regulate for native market costs, stated Allen Dobson, president of the consulting agency Dobson, DaVanzo & Associates.

That means beneath the present index a rural group hospital may obtain a Medicare fee of about $four,000 to deal with somebody with pneumonia in contrast with an city hospital receiving almost $6,000 for a similar case, according to CMS.

“The idea was to give urban a bit more and rural areas a bit less because their labor costs are a bit less,” stated Dobson, who was the analysis director for Medicare within the 1980s when the index was created. “There’s probably no exact true way to do it. I think everybody agrees if you are in a high-wage area you ought to get paid more for your higher wages.”

For a long time, hospitals have questioned the equity of that adjustment.

Rural hospitals nationwide have a median wage index that’s constantly decrease than that of city hospitals, based on a latest transient by the Sheps Center. The hole is most acute within the South, the place 14 of the 20 states account for the bottom median wage indices.

Last 12 months, the Department of Health and Human Services Office of Inspector General found that the index could not precisely replicate native labor costs and, due to this fact, Medicare funds to some hospitals “may not be appropriately” adjusted for native labor costs. More plainly, in some circumstances, the funds are too low.

In an emailed assertion to KHN, Verma stated the present wage index system “has partly contributed to disparities in reimbursement across the country.”

CMS’ current proposal would improve Medicare funds to the largely rural hospitals within the lowest 25th percentile and reduce the funds to these within the highest 75th percentile. The company can be proposing a 5% cap on any hospital’s lower within the closing wage index in 2020 in contrast with 2019. This would successfully restrict the loss in funds some would expertise.

Dobson, a former Medicare analysis director, stated he expects “enormous resistance.” (The CMS proposal is open for public remark till June 24.)

HHS Secretary Alex Azar, foreshadowing how troublesome a change might be, stated throughout a May 10 Senate budget hearing that the wage index is “one of the more vexing issues in Medicare.” It’s problematic, agreed Tom Nickels, an AHA govt vice chairman, noting in an emailed assertion that there are different methods “to provide needed relief to low-wage areas without penalizing high-wage areas.”

It’s this cut up that seems to be dictating the vary of reactions.

The Massachusetts Health & Hospital Association’s Michael Sroczynski, who oversees its authorities lobbying, questioned in an emailed assertion whether or not the wage index is the proper mechanism for offering aid to struggling hospitals. The state’s hospitals have traditionally been on the larger finish of the wage index.

In distinction, Tennessee Hospital Association CEO Craig Becker applauded the proposed change and stated the Trump administration is recognizing the “longstanding unfairness” of the index. Tennessee has been among the many hardest hit with hospital closures, counting 10 since 2012.

In Alabama, the place four rural hospitals have closed since 2012, Howard stated that with out the change she “could see a dozen or more of our hospitals not being able to survive the next year.” Indeed, Howard stated, hospitals in additional than 20 states may acquire Medicare dollars if the proposal passes and “only a small number actually get hurt.”

Kaiser Health News requested the Missouri Hospital Association, in a state the place most hospitals don’t stand to achieve or lose considerably from the rule change, to calculate the precise variations in hospital funds beneath the present wage index components. Under the complicated components, a hospital in Santa Cruz, Calif., an space on the high finish of the vary, obtained a Medicare fee fee of $10,951.30 — or 70% extra — for treating a concussion with main problems in 2010, in contrast with a rural Alabama hospital, on the backside finish, which obtained $6,441.76 to supply the identical care.

Even extra, MHA’s information evaluation confirmed that the decrease funds to Alabama hospitals have compounded over time. In 2019, Medicare elevated its pay to the hospitals within the Santa Cruz-Watsonville space for a similar concussion care. It now stands at $13,503.37 — an almost 23% improve above the 2010 fee. In distinction, rural Alabama hospitals recorded a three% fee improve,  to $6,646.80, for a similar care.

For Alabama, addressing the calculation disparity might be “the lifeline that we’ve been praying for,” Howard stated.

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