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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 best way hospital funds are calculated to rescue them.

The purpose of the proposal, unveiled by Facilities for Medicare & Medicaid Providers 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 yr if the federal company makes this adjustment.

“We’re hopeful,” stated Danne Howard, government vp and chief coverage officer of the Alabama Hospital Affiliation. “It’s as a lot in regards to the rural hospitals as rural communities with the ability to survive.”

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

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

“There’s a actual political pressure,” stated Mark Holmes, director of the College of North Carolina’s Cecil G. Sheps Middle for Well being Providers Analysis. Altering the components 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 manner to make sure federal Medicare reimbursements had 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.

Which means underneath the present index a rural group hospital might obtain a Medicare cost of about $four,000 to deal with somebody with pneumonia in contrast with an city hospital receiving almost $6,000 for a similar case, based on CMS.

“The concept was to provide city a bit extra and rural areas a bit much less as a result of their labor prices are a bit much less,” stated Dobson, who was the analysis director for Medicare within the 1980s when the index was created. “There’s most likely no actual true approach to do it. I feel all people agrees if you’re in a high-wage space you must receives a commission extra to your increased wages.”

For many years, hospitals have questioned the equity of that adjustment.

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

Final yr, the Division of Well being and Human Providers Workplace of Inspector Basic discovered that the index could not precisely replicate native labor costs and, subsequently, Medicare funds to some hospitals “is probably not appropriately” adjusted for native labor costs. Extra 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 throughout the nation.”

CMS’ present proposal would enhance 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 also be proposing a 5% cap on any hospital’s lower within the last wage index in 2020 in contrast with 2019. This may successfully restrict the loss in funds some would expertise.

Dobson, a former Medicare analysis director, stated he expects “monumental 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 Might 10 Senate price range listening to that the wage index is “one of many extra vexing points in Medicare.” It’s problematic, agreed Tom Nickels, an AHA government vp, noting in an emailed assertion that there are different methods “to offer wanted aid to low-wage areas with out penalizing high-wage areas.”

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

The Massachusetts Well being & Hospital Affiliation’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 increased finish of the wage index.

In distinction, Tennessee Hospital Affiliation 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 4 rural hospitals have closed since 2012, Howard stated that with out the change she “might see a dozen or extra of our hospitals not with the ability to survive the subsequent yr.” Certainly, Howard stated, hospitals in additional than 20 states might achieve Medicare if the proposal passes and “solely a small quantity really get harm.”

Kaiser Well being Information requested the Missouri Hospital Affiliation, 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 underneath the present wage index method. Beneath the complicated method, a hospital in Santa Cruz, Calif., an space on the high finish of the vary, acquired a Medicare cost fee of $10,951.30 — or 70% extra — for treating a concussion with main issues in 2010, in contrast with a rural Alabama hospital, on the backside finish, which acquired $6,441.76 to offer the identical care.

Much more, MHA’s knowledge 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 — a virtually 23% enhance above the 2010 cost. In distinction, rural Alabama hospitals recorded a three% cost enhance,  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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