Rural hospitals support wage index reform

ALEX KACIK  July 03, 2019

Hospital and health system executives and practitioners were largely supportive of the CMS' proposed changes to the wage index that they say has disproportionately impacted rural providers.

Hospital presidents and concerned employees, predominantly from rural areas, claim in some of more than 2,000 public comments that the "fundamentally flawed" system the CMS uses to set hospital payments has led to hospital closures. They hope that the agency's plan in October to raise the index for low-wage hospitals at the expense of decreasing it for high-wage hospitals will close a wide payment disparity.

"Without the relief CMS has proposed, Tennessee hospitals will continue to suffer and more may be forced to close their doors to the many Tennesseans who need care," wrote Bruce Hartmann, senior vice president and chief community relations officer for the University of Tennessee Medical Center, describing the proposal as a "lifeline."

Under the current wage index, all 95 counties in Tennessee fall among the lowest reimbursement rates in the U.S., Hartmann wrote. He noted a self-perpetuating cycle under the current index's budget-neutral framework where certain states record higher wages resulting in higher payments to the detriment of lower-wage states like Tennessee that receive lower payments.

To address that disparity, the CMS called for hospitals that have a wage index value below the 25th percentile to get an increase that is "half the difference between the otherwise applicable wage index value for that hospital and the 25th percentile wage index value across all hospitals."

Meanwhile, a hospital in the 75th percentile will get a decrease to ensure the wage index change is budget-neutral. The agency also proposed a 5% cap on any decrease to a wage index in fiscal 2020 compared with 2019.

The proposal also recommended removing the "rural floor" provision after HHS' Office of Inspector General found that some urban hospitals have used it to improperly classify themselves to get a higher payment. The agency revealed that the wage index often relies on inaccurate wage data, resulting in at least $140.5 million in overpayments to 272 hospitals from 2014 to 2017.

Currently, a wage index value for an urban hospital can't be less than the wage index for a rural hospital in the same state.

"It is discouraging to see others across the country be able to game the system to acquire much higher payment rates," wrote Ashley Chuck, a healthcare professional in Tennessee. She said she has worked at hospitals with a wage index below the 25th percentile the entirety of her 40-year career.

The index pulls data on wages, hours worked and related costs from hospitals' Medicare cost reports to set payments. It also factors in the cost of living as it sets market-based payments, which means a larger hospital would impact an area's wage index more than a smaller facility.

The southern portion of Pittsburgh's core-based statistical area, which is home to Monongahela Valley Hospital, has seen a continued "death spiral" in its area wage index over the last 20 years, hospital President and CEO Louis Panza said. This has cost hospitals in Western Pennsylvania more than $1 billion in the last 20 years, he said. A board member from the Ozarks Medical Center in Missouri also described the situation as a "death spiral."

"This has put small, independent hospitals, like Monongahela Valley Hospital, in very challenging financial situations in trying to care for the patients of our community," Panza wrote, adding that it has made it increasingly difficult to recruit and retain clinical staff, provide ongoing investments in capital, and provide services for the area's aging population.

Panza asked the CMS to amend the proposed rule for the Pittsburgh core-based statistical area to have their wage index increased by 50% of the decline experienced since fiscal 2000. This proposal would apply to core-based statistical areas that do not otherwise benefit from implementation of the 25/75 criteria within the CMS' proposed rule, those that have a wage index below 1.00, and a wage index decline of more than 10% over the last 20 years.

"I want to thank CMS for recognizing the area wage index system is truly in need of a major revision, and ask for specific revisions to the AWI (area wage index) for the Pittsburgh CBSA (core-based statistical area) and other similar CBSAs across the country," Panza wrote.

Avery Sexton said that she lives in a rural county that has already seen its hospital close twice, meaning its 30,000 residents must travel an hour for emergency care.

"This change (to the wage index) could literally make the difference between life and death for thousands … millions … of rural people," she wrote.

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