Commentary: End the 'Bay State Boondoggle'

Imagine a bank robbery gone wrong. Now, imagine the robbers ask the police for a do-over.

We all know that the reward for a botched bank robbery isn't a second shot at someone else's money. Astoundingly, the hospitals in the Commonwealth of Massachusetts are asking for exactly that kind of do-over.

As the Affordable Care Act was winding its way through Congress, a backroom deal allowed every hospital in Massachusetts to benefit from the labor rates paid by tiny 19-bed Nantucket Cottage Hospital. The sweetheart deal came at the expense of nearly every other hospital in the U.S. Known to many as the “Bay State Boondoggle,” the sleight of hand has already resulted in $1.3 billion in additional payments to Massachusetts hospitals and could reach $3 billion over 10 years.

At the heart of the issue is Section 3141 of the ACA. The provision allowed Massachusetts hospitals to gerrymander the arcane Medicare wage index system to their advantage by using an extremely remote, low-volume hospital located on an extremely high-cost-of-living island as the floor for all wages statewide. The increase benefited Massachusetts significantly and a few other states marginally. It disadvantaged the vast majority.

When the Alliance of America's Hospitals recognized that a robbery was underway, we tripped the alarm. Backup appeared quickly. The CMS, the federal agency that administers Medicare, quickly criticized the ACA policy as a “manipulation.” Unfortunately, they are required by law to enforce it. The Medicare Payment Advisory Commission, charged with reviewing Medicare on behalf of Congress, challenged the provision's equity. As MedPAC pointed out, Nantucket Cottage Hospital treats only about 150 inpatients a year, yet it influences payments nationally.

Karma seems to have worked faster than policy change. This year, the hospital's consultants misreported wages. The error was found only after the report was duly validated and accepted by the CMS. Now, some in the commonwealth are asking the CMS to reverse the mistake and restore $160 million in funding that Massachusetts hospitals would otherwise lose in fiscal 2017.

There are some obvious reasons that the CMS should decline the request.

First, the fiscal 2017 submission was made by professional consultants who had ample time to collect the correct data and additional time to review and revise the data after it was submitted. Section 3141 aside, the Medicare wage index process is available to all hospitals, and is transparent and formal. There should be no special exceptions.

Second, Massachusetts' one-year loss of $160 million is a small loss compared with the billions that have already been and will be gained through the manipulation from the budget-neutral program. Massachusetts' hospitals benefited from rules they rigged. Now that the tables have turned, their cries for justice and special treatment should fall on deaf ears.

Finally, the request for resubmission is the strongest evidence yet of a broken system. Inaccurate data from a similar hospital in most states would have resulted in a change reminiscent of a rounding error. Under a rigged system—such as what we are presently witnessing—a data error from Nantucket Cottage Hospital can generate changes national in scope. That's absurd.

The mistake has turned the “Bay State Boondoggle” into the “Bay State's Boondoggle.” We have little sympathy, but a small share of empathy. Hospitals in our states, and throughout the nation, understand how important the wage index system can be. We've been living under this rigged system.

Congress can repair past injustice by repealing Section 3141 of the ACA. Two bills currently before Congress—H.R. 1479 and S. 1135—would address the manipulation. These bipartisan measures have the support of both House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell. They deserve swift consideration and adoption on behalf of the Medicare beneficiaries that depend on our nation's hospitals.

But in the interim, the CMS should say no to Massachusetts' request, and Congress should act quickly to fix the system. The only do-over that deserves consideration is repeal of the provision.

Herb Kuhn is president and CEO of the Missouri Hospital Association; Bill Pully is president of the North Carolina Hospital Association.