House bill seeks to raise reimbursement for rural hospitals in bid to close payment disparity

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A new House bill seeks to create a minimum for the hospital area wage index used to calculate Medicare inpatient care payments. (Getty/OgnjenO)

New legislation aims to raise Medicare reimbursement levels for rural hospitals in an attempt to help rebuild facilities hit hard financially by the COVID-19 pandemic.

The bipartisan legislation, introduced Wednesday by Reps. Terri Sewell, D-Alabama, and Drew Ferguson, R-Georgia, would create a national minimum of 0.85 for the Medicare Area Wage index, which determines payments to hospitals. The lawmakers said the payment boost is needed to ensure fairness for reimbursement of rural hospitals.

“Even before the pandemic, rural hospitals struggled with inadequate reimbursement, low volume and high operating costs,” Sewell said in a statement. “Now it is imperative that we provide reimbursements these hospitals so desperately need.”

The Centers for Medicare & Medicaid Services (CMS) determines hospital inpatient Medicare payments based on differences in hospital wage levels. The hospital wage index is a ratio based on an area’s average hourly wage to the national wage.

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But rural hospital advocates have charged that the wage index has inordinately led to rural hospitals getting lower Medicare reimbursements. Last year, CMS did raise the wage index for hospitals that were below the 25th percentile of the index.

The bill would not affect the reimbursements for urban hospitals but instead boost payments to rural hospitals by ensuring that the area wage index can not be less than 0.85.

The legislation also would apply the same minimum to area wage adjustments for hospital outpatient department services.

Rural hospitals traditionally operate on thinner profit margins than their urban counterparts and have been hit especially hard by patient volume declines spurred by the COVID-19 pandemic.

The $178 billion Provider Relief Fund passed as part of the CARES Act did include targeted allocations to rural health providers.