Hospital association: Wage index rule positive, but uncompensated care needs work

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The Centers for Medicare and Medicaid Services on Friday unveiled its final rule on Medicare payment policies for hospitals under the inpatient prospective payment system for fiscal 2020. Though the Greater New York Hospital Association sees modifications to the agency’s proposal to address area wage index disparities as a boon, it’s not pleased with the outcome when it comes to uncompensated care.

“On a positive note, CMS modified its proposal to address wage index disparities between low and high wage index areas and will apply a uniform national budget neutrality factor to all hospitals instead of cutting only high wage area hospitals,” wrote Kenneth Raske, president and CEO of the association, in a letter to members.

The area wage index applies to the reimbursement of hospitals and raises or lowers Medicare payments to account for geographic differences in labor costs.

The final rule is designed to increase the wage index for hospitals with a value below the 25th percentile. Specifically, it will increase those hospitals’ wage indexes by half the difference between the otherwise applicable value for a hospital and the 25th percentile value across all hospitals. And there will be a 5% cap on any decrease in a hospital’s wage index from its final wage index for fiscal 2019 to mitigate significant decreases.

CMS’ previous proposal would have targeted only high wage index hospitals—such as those in New York—to address disparities. The modified provision will cost New York hospitals about $26 million, including fee–for–service and managed-care payments, less than half of what the original proposal would have cost them, a spokesman for the Greater New York Hospital Association said. Nationwide, the proposal will cost about $330 million.

Before the final rule, the New York congressional delegation took issue with the initial proposal to increase the wage index for hospitals that fall in the lowest 25th percentile of wage areas at the expense of hospitals that are above the 75th percentile of wages.

“CMS argues that its proposed changes to the area wage index seek to help rural hospitals, yet not one of New York’s rural hospitals—who face the same fiscal challenges as rural hospitals across the nation—would see a benefit from the policy,” the lawmakers wrote in a letter to CMS administrator Seema Verma. “Rather, states like New York with many hospitals that have legitimately high wages commensurate with market competition will be forced to transfer hundreds of millions in Medicare funding to a small handful of states.”

With the issue of wage index out of the way, state hospitals’ greatest concern may now be the finalized uncompensated care pool proposal. Raske noted the Greater New York Hospital Association has “fiercely opposed” the proposal.

“To mitigate the impact of the data issues and reduce the volatility in the uncompensated care distributions, GNYHA had recommended that CMS continue the fiscal year 2019 policy and base the distribution on a weighted average of low-income days and uncompensated care costs,” Raske wrote. “Instead, CMS finalized its proposal to base the distribution on 100% uncompensated care costs using 2015 data.”

In March the Greater New York Hospital Association called the proposal dangerous and said it would base distributions on bad debt and charity care data and cap the pool’s rate of growth, representing a $98 billion cut over 10 years. —Jennifer Henderson