HHS Secretary Alex Azar told lawmakers they should draft legislation to update and fix the Medicare wage index.
The index, which was created in the 1980s, sets payments to hospitals as adjusted for market conditions, such as the differences in hospital wage rates among labor markets. It also takes into account the cost of living.
Increasingly, rural hospitals in areas where the cost of living tends to be lower cite the index as a reason for closures.
"We believe the wage index needs to be addressed and fixed," Azar told members of the House's Education and the Workforce Committee Wednesday. "It's been stuck in time."
Azar was responding to concerns raised by multiple committee members who say their constituents are suffering.
Since 2011, 12 hospitals have closed in Alabama. Another dozen are in danger of closing in the next two years, according to Rep. Bradley Byrne (R-Ala.). He said it's crucial that HHS partner with lawmakers as they seek to change the index.
"We have a crisis in rural America," Byrne said. "We have to have you in this with us; if we don't we're going to lose a lot more hospitals," Byrne said.
Senate lawmakers shared similar concerns with Azar last month. Hospitals and physicians with higher average wages tend to be in higher cost areas, get larger reimbursements, and regions with lower wages are reimbursed at lower rates. This leads to a shortage of some provider types in rural areas, according to Sen. Jerry Moran (R-Kan.).
"What happens is if you're a cardiologist you have a tendency to move to the East Coast where you can get paid more for the same procedure," Moran said.
Azar said he welcomed working with lawmakers but noted it would be difficult to alter the index without taking funds from some hospitals to increase reimbursement at others.
"It's going to be winners and losers unfortunately among Congress, among states, and that will be difficult," Azar said. "But we will gladly work with you."
