Hospital groups argue CMS wage index proposal flawed

By | June 28, 2019

Dive Brief:

  • Hospital groups approve of CMS attempts to prop up rural hospitals with a change to the wage index but most don’t agree with the specific method the agency suggested earlier this year, according to comments submitted this week on the proposed Inpatient Prospective Payment System.
  • The American Hospital Association, Federation of American Hospitals and America’s Essential Hospitals all opposed the redistributive nature of the wage index adjustment CMS proposed. In its comments, AHA said a “policy that penalizes certain hospitals simply because of where they fall in the wage index distribution is not based on evidence — it is based on an arbitrary cut-off point. This contradicts the efforts that both hospitals and CMS make in order to have consistent and accurate wage data reporting, including regular data submissions, revisions and audits.”
  • AHA and FAH also said they support the proposal to use fiscal year 2015 uncompensated care data from S-10 forms to determine Disproportionate Share Hospitals payments for 2020. AEH, however, cautioned the agency should be provide more transparency concerning its S-10 auditing protocols and should make several changes to ensure the data’s accuracy.

Dive Insight:

The proposed wage index adjustment is CMS’ attempt to send a lifeline to struggling rural hospitals. About 100 rural facilities have closed since 2010 and hundreds more are at risk. Nearly half of rural hospitals currently operate at a loss, and the percentage is increasing, according to the National Rural Health Association.

Hospital groups, unsurprisingly, are all for the spirit behind these efforts but worry the proposal from the IPPS rule would unnecessarily punish facilities in urban areas. Some state hospital associations in rural areas, however, submitted comments in support of the wage index adjustment as proposed.

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The Alabama Hospital Association said the proposal is a justifiable and logical step. “High wage index states may complain that they are being penalized, but the adjustment CMS is proposing only reflects a small shift to balance decades of overpayments to those same hospitals,” the group said.

The change CMS laid out in April would raise the wage index for hospitals with a value below the 25th percentile,  while, in order to be budget neutral, decreasing the index for facilities above the 75th percentile over a four-year transition period.

AHA and AEH argued CMS regulations have no obligation to be budget neutral and AHA said the agency “should not penalize hospitals given the below-cost reimbursement that all inpatient PPS hospitals face and the lack of evidence to justify reductions to wage index values.”

A recent analysis of the proposal from the University of North Carolina Center for Health Services Research found it would result in 51% of rural hospitals with an increased wage index versus 19% of urban hospitals. About 53% of urban facilities would not see a change while 28% would see a decrease. For rural hospitals, 41% would have no change and 7% would decrease, according to the report.

The authors note the adjustment would help small rural hospitals with relatively low levels of net patient revenue. “Given that a positive wage index adjustment could result in an increase in Medicare revenue, the proposed quartile adjustment may reduce the risk of financial distress for some rural hospitals,” they wrote.

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