Last week, several U.S. Senators introduced a bipartisan bill to ensure that rural hospitals are more fairly reimbursed for their services.
The Fair Medicare Hospital Payments Act of 2016 (S.2832) is intended to correct a flawed payment formula that results in disproportionately low Medicare reimbursement to hospitals in rural and low-wage areas. More specifically, it would establish a national minimum area wage index of 0.874. That number is based on the relative hospital wage level in a geographic area compared to the national average.
In a statement, Sen. Tim Kaine (D-VA) said, “The bipartisan Fair Medicare Hospital Payments Act aims to reform the way hospitals are reimbursed by Medicare for services by establishing a national standard, as opposed to the status quo, which places an undue burden on rural hospitals in economically disadvantaged areas."
Many rural hospitals are on the verge of going under
Sen. Kaine said rural hospitals are faced with financial challenges that affect access to care and long-term viability.
Over the past 30 years, legislative and regulatory changes and broader economic trends have combined to create an uneven playing field that has resulted in rural hospitals losing out on millions of dollars in Medicare payments each year.
Sen. Mark Warner (D-VA) said in a press release many hospitals in rural areas are struggling to keep their doors open due to unique challenges “that are exacerbated by the federal government’s skewed payment system for services provided to Medicare beneficiaries.”
According to an iVantage Health Analytics report, although costs for rural hospitals are the same or higher than those for hospitals that are not in rural areas, rural hospitals tend to charge less for their services.
Since 2010, more than 60 rural communities have had to face a hospital closure. The iVantage, report says among the issues that have been driving the closures are loss of market share, lower patient volumes, declines in quality and outcomes and decreases in reimbursements.
In its report, iVantage says an additional 673 rural hospitals, (more than 33% of US rural hospitals) in 42 states are currently vulnerable to or at risk for closure. Southern states have a higher rate of vulnerability. Sixty-three percent of the vulnerable hospitals are in states that chose not to expand Medicaid.
If all 673 of the hospitals that are vulnerable or at risk were to close, iVantage estimates it would result in a loss of 11.7 million patient encounters, 99,000 healthcare jobs, $137,000 community jobs and $277 billion to the gross domestic product (over 10 years).
The iVantage report says many of the hospitals that are currently at risk for closure are in communities that can least afford to lose them. “Rural hospitals are the lifeline of their communities,” Sen. Johnny Isakson (R-GA), a member of the Senate Finance Committee, said in the press release. “Establishing a national minimum level for hospital payments will help to prevent future closures of hospitals in these medically underserved areas and ensure patients have access to emergency and needed care.”