After an unsuccessful legal challenge, lawmakers and hospital representatives are trying to pressure HCFA to allow some rural hospitals to receive higher Medicare disproportionate-share payments.
Beginning Oct. 1, HCFA plans to eliminate the "other urban" classification of hospitals for purposes of determining Medicare payment reimbursements, leaving only two classifications, "rural" hospitals and "large urban" hospitals. "Other urban" were nonrural areas with a population of less than 1 million.
The move affects 28 hospitals that had requested reclassification from "rural" to "other urban" but were denied the move under the new rules. HCFA still will allow rural hospitals located near large urban areas to reclassify from "rural" status to "large urban" status.
The distinctions between classes are important since rural hospitals must serve a higher percentage of the poor to qualify for disproportionate-share funds and receive lower payments even when they do qualify.
The hospitals that were denied reclassification stand to lose about
$23 million because of the change, or an average of nearly 9% of revenues for each hospital. Because by law HCFA's change must not affect overall Medicare spending, the nation's other hospitals that receive Medicare disproportionate-share payments will see a 0.05% increase.
"This is a case of reverse-Robin Hood," said Dale Baker, a healthcare consultant and lobbyist with Indianapolis-based Baker & Associates. "HCFA is taking from rural hospitals and giving to everyone else."
Hospital groups argued that if hospitals were still able to reclassify from "rural" to "large urban" to receive higher disproportionate-share payments, then hospitals that are close to "other urban" areas also should be able to continue to reclassify.
HCFA disagreed, and the issue ended up in court. The District Court for the District of Columbia found that HHS Secretary Donna Shalala hadn't overstepped her authority in deciding not to allow the hospitals to reclassify to "other urban."
Unable to jawbone HCFA into action, hospitals turned to Congress, which is working on a legislative remedy that hospitals hope will pass before Congress recesses at the end of the month.
Several rural lawmakers, led by Rep. Robert Ney (R-Ohio), sent a letter to HCFA Administrator Bruce Vladeck that said the reduced payments to the rural hospitals will "cause significant cutbacks in services and staffing levels."
However, Charles Booth, director of HCFA's Office of Hospital Policy, said HCFA wouldn't budge unless there is legislation forcing it to allow the hospitals to reclassify.
While there appears to be no significant congressional opposition to allowing the rural hospitals to reclassify to "other urban," finding a bill to attach the measure to is a problem.
"There are no guarantees that such a vehicle will be passed during September," Baker said.