CMS throws rural hospitals a lifeline with wage index plan
Skip to main content
MDHC_Logotype_white
Subscribe
  • My Account
  • Login
  • Subscribe
  • News
    • This Week's News
    • COVID-19
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • People
    • Regional News
    • Digital Edition
    • Healthcare construction primed to rebound faster than other sectors
      Drug executives: Big jump in vaccine supply is coming soon
      States rush to catch up on delayed vaccines, expand access
      Becerra supports access to care, provider funding during confirmation hearing
    • Drug executives: Big jump in vaccine supply is coming soon
      States rush to catch up on delayed vaccines, expand access
      White House promises vaccine help as states rush to catch up
      Michigan health aides to lose $2 raise without legislation
    • Dr. Imran Andrabi
      Q&A: ThedaCare CEO says lessons from COVID-19 will inform new approaches to population health management
      The Check Up: Dr. Imran Andrabi
      The Check Up: Dr. Imran Andrabi of ThedaCare
      Hospitals confront water shortages in winter storm aftermath
      beaumont-hospital-royal-oak_i_i_i.jpg
      Beaumont says nearly 2,000 second-shot vaccinations canceled due to vaccine shortage
    • Beyond the Byline: Insurers are betting on virtual-first plans as COVID-19 shifts care pathways
      Beyond the Byline: Insurers are betting on virtual-first plans as COVID-19 shifts care pathways - Transcript
      Health insurance execs' salaries grew faster than company revenue in 2020
      Five chronic conditions cost employers $2.5 billion over two years, study shows
    • States rush to catch up on delayed vaccines, expand access
      Becerra supports access to care, provider funding during confirmation hearing
      White House promises vaccine help as states rush to catch up
      Biden asks high court to drop two Trump-era Medicaid cases
    • deloitte GDP image chart graph going up
      Sponsored Content Provided By Deloitte
      Breaking the cost curve
      Modern Healthcare CEO Power Panel
      Providers focus on adding nurses, expanding outpatient care
      By the Numbers: Largest taxable not-for-profit bond issuances, 2021
      Dennis Dahlen
      Health systems aren't rushing to cut back on financial liquidity
    • man and woman looking at ipad wearing face masks stock image
      Sponsored Content Provided By Surescripts
      Improvements to benefits data can enhance ePrescribing and the patient experience
      Oscar Health's $1B IPO sets the stage for more health tech exits in 2021
      A map of the U.S. with images of the coronavirus.
      The digital divide becomes a new social determinant of health
      Google opens Rochester, Minn., office to be closer to Mayo Clinic
    • angela karpf headshot
      Sponsored Content Provided By B. Braun
      Making patient safety a policy priority
      Michigan Maze Woman-main_i.jpg
      State of confusion: Michigan's mental health system has many layers for those in need to navigate
      Next Up Podcast: Educating patients on the COVID-19 vaccine with Tanya Andreadis
      Next Up Podcast: Educating patients on the COVID-19 vaccine with Tanya Andreadis - Transcript
    • Michael Jordan, Novant team up to address health equity
      Former Ascension CEO, the first to lead the health system, passes away
      Biden's pick to head CMS would be first Black woman to hold post
      RAKESH SURI MD_i.jpg
      Cleveland Clinic creates president of international operations position
    • Midwest
    • Northeast
    • South
    • West
  • Insights
    • ACA 10 Years After
    • Best Practices
    • Special Reports
    • Innovations
    • The Affordable Care Act after 10 years
    • Dr. John Fischer
      Patient-reported outcomes tool for hernia surgery helps physicians improve care
      New care model helps primary-care practices treat obesity
      doctor with patient
      COVID-19 treatment protocol developed in the field helps patients recover
      Rachel Wyatt
      Project to curb pressure injuries in hospitals shows promise
    • What's next for on-demand telehealth companies?
      A CalOptima PACE vaccination clinic.
      Will COVID-19 be the catalyst for creating a more sustainable healthcare system?
      A map of the U.S. with images of the coronavirus.
      The digital divide becomes a new social determinant of health
      Ascension’s St. Mary’s Hospital Surgery Center at Towne Centre and Allegheny Health Network’s Bethel Park surgery center
      Hospitals see opportunity, risk in ambulatory surgery centers
    • Dr. Daniel Hall
      UPMC pilots machine learning, telehealth to inform patient transfers
      A woman being recorded using her inhaler on a smartphone.
      Digital check-ins, connected inhalers help control asthma
      A phone screen showing the question, "Mary we hope this information was helpful and we'd like to keep guiding you. Are you interested in knowing when it's your turn to receive the vaccine?"
      Chatbots, texting campaigns help manage influx of COVID vax questions
      A woman with a wearable sensor talking to her provider.
      Wearable sensors help diagnose heart rhythm problems in West Virginia
  • Transformation
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • What's next for on-demand telehealth companies?
      Rising prescription copays drop adherence, spike mortality, research shows
      Dr. John Fischer
      Patient-reported outcomes tool for hernia surgery helps physicians improve care
      Highmark Health inks six-year cloud, tech deal with Google
    • California hospitals prepare ethical protocol to prioritize lifesaving care
      Amazon, JPMorgan Chase, Berkshire Hathaway disband Haven
      Digital pathways poised to reshape healthcare continuum in 2021
      Healthcare was the hardest hit by supply shortages across all U.S. industries
    • Dr. Daniel Hall
      UPMC pilots machine learning, telehealth to inform patient transfers
      A woman being recorded using her inhaler on a smartphone.
      Digital check-ins, connected inhalers help control asthma
      Humana partners with in-home provider for 24/7 care
      A phone screen showing the question, "Mary we hope this information was helpful and we'd like to keep guiding you. Are you interested in knowing when it's your turn to receive the vaccine?"
      Chatbots, texting campaigns help manage influx of COVID vax questions
    • Coordinated payment policies could speed transition to value, experts say
      CMMI's geographic direct contracting model needs an overhaul, experts say
      Hospitals fight UnitedHealthcare policies over lab test, specialty drug payments
      Cigna eliminates prior authorization for coronary CT scans
  • Data/Lists
    • Rankings/Lists
    • Interactive Databases
    • Data Points
    • Health Systems Financials
      Executive Compensation
      Physician Compensation
  • Op-Ed
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
    • Dr. Alan Kaplan
      The risks, rewards of taking organizations 'where they haven’t gone before'
      Wellstar CEO calls adapting for the pandemic her bold move
      Howard P. Kern
      Recognizing the value of telehealth in its infancy
      Dr. Stephen Markovich
      A bold move helped take him from family doctor to OhioHealth CEO
    • Dr. Stephen Markovich
      Making sure we're aligned along the path to achieving inclusion
      Barry Ostrowsky
      Ending racism is a journey taken together; the starting point must be now
      Laura Lee Hall and Gary Puckrein
      Increased flu vaccination has never been more important for communities of color
      John Daniels Jr.
      Health equity: Making the journey from buzzword to reality
    • In-person visitation must be part of the national COVID-19 response
      We've lost so much to the pandemic, but we've also made gains that will endure
      Medical groups key to meeting president's vaccine pledge
      We need a better social care referral loop, but it requires technology as well as the human touch
    • Letters: Eliminating bias in healthcare needs to be ‘deliberate and organic’
      Letters: Maybe dropping out of ACOs is a good thing for patients
      Letters: White House and Congress share blame for lack of national COVID strategy
      Letters: VA making strides to improve state veterans home inspections
    • Sponsored Content Provided By Optum
      How blockchain could ease frustration with the payment process
      Sponsored Content Provided By Optum
      Three steps to better data-sharing for payer and provider CIOs
      Sponsored Content Provided By Optum
      Reduce total cost of care: 6 reasons why providers and payers should tackle the challenge together
      Sponsored Content Provided By Optum
      Why CIOs went from back-office operators to mission-critical innovators
  • Awards
    • Award Programs
    • Nominate
    • Previous Award Programs
    • Other Award Programs
    • Best Places to Work in Healthcare Logo for Navigation
      Nominations Open - Best Places to Work in Healthcare
      Nominations Open - 50 Most Influential Clinical Executives
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top 25 Innovators
    • Minorities in Healthcare
      • - Luminaries
      • - Top 25 Minority Leaders
      • - Minorities to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Excellence in Nursing Awards
    • Design Awards
    • Top 25 COOs in Healthcare
    • 100 Top Hospitals
    • ACHE Awards
  • Events
    • Conferences
    • Galas
    • Webinars
    • COVID-19 Event Tracker
    • podium march webinar logo lockup
      Sponsored Content Provided By Podium
      Webinar: Critical Touchpoints for Every Patient’s Journey — How Technology Plays an Important Role
      scp health logo lockup march 2021
      Sponsored Content Provided By SCP Health
      Webinar: COVID’s call to action — Reset for success in 2021
    • Women Leaders in Healthcare Conference
    • Social Determinants of Health Symposium
    • Healthcare Transformation Summit
    • Leadership Symposium
    • Virtual Briefings
      • - Hospital of the Future
      • - Mental Health
      • - Patient Safety & Quality
      • - Strategic Marketing
      • - Virtual Health
      • - Workplace of the Future
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Minority Leaders Gala
    • Top 25 Women Leaders Gala
  • Listen
    • Podcast - Next Up
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
    • Next Up Podcast: Educating patients on the COVID-19 vaccine with Tanya Andreadis
      Dr. Joseph Cacchione
      Next Up Podcast: Educating patients on the COVID-19 vaccine with Dr. Joseph Cacchione
      Dr. Karen DeSalvo
      Next Up Podcast: What to expect with telehealth and healthcare technology in the next four years
      Carter Dredge
      Next Up Podcast: Ready, set, innovate! Innovation and disruption in healthcare
    • Beyond the Byline: Insurers are betting on virtual-first plans as COVID-19 shifts care pathways
      Beyond the Byline: How residents' stories shape our coverage of the vaccination rollout in nursing homes
      Beyond the Byline: Regulators aim to boost value push with fraud and abuse law updates
      An older man wearing a mask receiving a vaccine.
      Beyond the Byline: Verifying information on the chaotic COVID-19 vaccine rollout
    • Outreach during COVID-19
      Leading intention promote diversity and inclusion
      Introducing Healthcare Insider Podcast
    • The Check Up: Dr. Imran Andrabi
      The Check Up: Dr. Imran Andrabi of ThedaCare
      The Check Up: Tanya Blackmon
      The Check Up: Tanya Blackmon of Novant Health
      The Check Up: Dr. Patrick Hwu
      The Check Up: Dr. Patrick Hwu of the Moffitt Cancer Center
      The Check Up: Suresh Gunasekaran
      The Check Up: Suresh Gunasekaran of the University of Iowa Hospitals & Clinics
    • ivana naeymi-rad one on one intelligent medical objects
      Video: Ivana Naeymi Rad of Intelligent Medical Objects
  • MORE +
    • Advertise
    • Media Kit
    • Newsletters
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Government
April 27, 2019 01:00 AM

CMS throws rural hospitals a lifeline with wage index changes

Robert King
Alex Kacik
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print
    CMS Administrator Seema Verma
    AP Photo

    CMS Administrator Seema Verma

    Alabama hospitals, some of the lowest-reimbursed hospitals in the country, could get a $34 million boost next fiscal year if the CMS holds firm on a plan to tweak the hospital wage index. 

    Starting in October, the agency wants to raise the index for low-wage hospitals at the expense of decreasing it for high-wage hospitals. The goal is to help close a wide payment disparity that some advocates say is fueling the rash of rural hospital closures. Still, rural hospitals are worried about how the change will affect them, and if it will be enough. Meanwhile, urban hospitals are likely to fight the expected reimbursement cut.

    The change is one of the most sweeping ideas in the CMS’ inpatient prospective payment system proposed rule, which was issued April 23 and totals more than 1,800 pages. Overall, the proposal called for a net 3.2% pay raise—roughly $4.7 billion—for hospitals compared with fiscal 2019.

    Winners and losers in CMS’ proposed IPPS rule

    Winners

    Rural hospitals 
    Rural facilities are cheering the increase to the wage index as a much-needed boost to address a wide gap in hospital payments. Some are also happy about the proposal to remove the “rural floor.” Currently, a wage index value for an urban hospital can’t be less than the wage index for a hospital in a rural areas in the same state. However, some urban hospitals have used the “rural floor” provision to improperly classify themselves in order to get a higher payment.

    Device manufacturers 
    The proposal includes a new technology add-on payment for breakthrough medical devices that are significantly better than a device already on the market. Such devices get expedited approval from the Food and Drug Administration, but sometimes the CMS reimbursement can lag behind market entry.

    CAR-T therapy 
    The CMS decided to increase the add-on payment for this novel but pricey cancer treatment. The maximum add-on payment will increase from 50% of the estimated costs of the treatment to 65%. The maximum would increase from $186,500 to $242,450.

    Losers

    Urban, high-wage hospitals
    Changes to the wage index must be budget-neutral. If rural hospitals gain, urban hospitals will lose. That means hospitals earning above the 75th percentile will see a dip in their payments, but no more than 5%.

    Critical-access hospitals 
    While rural advocates were excited about the wage index change, they say that a lot more needs to be done. For instance, the rule “doesn’t impact the critical-access hospital or the rural health clinic that (are) also subject to closures recently,” said Maggie Elehwany, vice president of government affairs and policy at the National Rural Health Association.

    Price transparency
    Last year, the CMS rolled out a major requirement for hospitals to post chargemaster prices online and in a readable format at the start of this calendar year. However, there isn’t any such major price transparency initiative in this year’s rule.

    “A hospital in rural Alabama can receive a Medicare payment of $4,000. A hospital in a high-wage area could receive a payment of $6,000 for the same case,” CMS Administrator Seema Verma said in a call last week with reporters. 

    Alabama lawmakers sent a letter to Verma in March urging reform of the wage index, which they say has jeopardized the state’s rural hospitals. Their letter followed a November report from HHS’ Office of Inspector General suggesting a complete overhaul. It found that the wage index often relies on inaccurate wage data, resulting in at least $140.5 million in overpayments to 272 hospitals from 2014 to 2017. The OIG said in a statement that it was pleased that CMS’ proposal echoed some of its findings.

    The index pulls data on wages, hours worked and wage-related costs from hospitals’ Medicare cost reports to set payments. It also factors in the cost of living as it sets market-based payments, which means a larger hospital would impact an area’s wage index more than a smaller facility. 

    But the CMS lacks the authority to penalize hospitals that submit inaccurate wage data and Medicare administrative contractors’ limited reviews don’t always catch errors, the OIG found. Some hospitals also manipulate the reclassification process to secure higher pay.

    The agency’s tweaking of the math, however, doesn’t address those underlying problems of data quality. 

    “Rather than fix it, they are saying it is not very accurate so we are going to move up the low end and cut back the high end, which is really getting even further away from the philosophy of a payment system—to use good data to make these decisions,” said Paul Ginsburg, director of the USC-Brookings Schaeffer Initiative for Health Policy.

    A proposal from the Medicare Payment Advisory Commission, which Ginsburg is a member of, ensuring Medicare funding for rural hospitals that transition to a free-standing emergency department may have more of an impact, he suggested. 

    The Alabama Hospital Association said that the CMS proposal is a positive step to help shore up the state’s healthcare delivery system. Three-quarters of Alabama hospitals are operating in the red—88% for its rural hospitals—and 13 hospitals have closed in the past eight years, according to the association.

    Wages adjusted by Medicare's wage index van vary measurably

    The CMS proposal would bring Alabama in line with hospitals across the country, said Danne Howard, chief policy officer at the association.

    “Rural hospitals are just struggling to exist,” added Maggie Elehwany, vice president of government affairs and policy at the National Rural Health Association. “Two years ago, we had 40% of rural hospitals operate as a loss. Today we have 46%.”

    Still, the Massachusetts Health & Hospital Association, which objected to “providing relief to one subset of hospitals by arbitrarily cutting payments to another subset of hospitals that have genuinely higher labor costs,” questioned if the wage index was the right mechanism to help ailing rural hospitals.

    That broader question may dog the CMS as it goes through the comment period and if it ultimately implements the change. Since it needs to be budget-neutral, any decreases in the wage index are sure to infuriate hospitals on the losing end and turn up the heat on the CMS to scale back the proposal, which is open for comment until June 24.

    “Improving wage index values for some hospitals—while much needed—by cutting payments to other hospitals, particularly when Medicare already pays far less than the cost of care, is problematic,” according to a statement from the American Hospital Association. “CMS has the ability to provide needed relief to low-wage areas without penalizing high-wage areas.”

    The CMS called for hospitals that have a wage index value below the 25th percentile to get an increase that is “half the difference between the otherwise applicable wage index value for that hospital and the 25th percentile wage index value across all hospitals.”

    Meanwhile, a hospital in the 75th percentile will get a decrease to ensure the wage index change is budget-neutral. The agency also proposed a 5% cap on any decrease to a wage index in fiscal 2020 compared with 2019.

    “We don’t know how the formula is going to break down because we know they want it to be budget-neutral,” Elehwany said. “We would love to see them invest new money in fixing this.”

    Five changes to quality programs

    The IPPS proposal included several updates to the quality programs for lowering hospital-acquired conditions (HAC) and hospital readmissions, some of which would bring measure development in line with other agency initiatives. Key changes include:

    1) Adopt eight factors already incorporated into value-based purchasing and inpatient quality reporting programs for determining if HAC and readmission measures should be removed. 

    2) Adopt a new process to address minor changes to the payment adjustments.

    3) Clarify the administrative process for validating National Healthcare Safety Network healthcare-associated infection data submitted by the Centers for Disease Control and Prevention.

    4) Substitute a proposed hybrid hospitalwide all-cause readmission measure for the claims-based measure in the inpatient quality reporting program.

    5) The agency is also seeking comment on a measure requiring use of an open application programming interface as an alternative to the patient-access measure.

    Raising the wage index for lower-wage, often rural, hospitals is a bit of an advantage, but by no means a big fix, added Christina Campos, administrator of Guadalupe County Hospital in Santa Rosa, N.M.

    Elehwany noted that lawmakers have talked about boosting rural payments but have taken little action. Several bills were introduced last Congress that would have reversed some prior cuts to rural hospitals. The Save Rural Hospitals Act, for instance, called for ending cuts to facilities instituted by budget sequestration and eliminating cuts to disproportionate-share hospitals mandated by the Affordable Care Act. While Congress has moved to delay the DSH cuts, other reforms were not addressed and legislation has yet to be reintroduced in the new Congress.

    HHS Secretary Alex Azar also bashed the wage index during a Senate hearing earlier this year, but said that there is only so much his department can do on its own.

    “I appreciate you recognize so much of the absurdity is based in statute,” Azar said to Sen. Sheldon Whitehouse (D-R.I.), who questioned Azar about the disparity during the hearing.

    The proposed rule also laid out some new changes to the data that the CMS provides for calculating the wage index.

    Hospitals often will refer to printed or online documents from the CMS’ public-use files to calculate their own wage index. However, the CMS will occasionally round data, which has led to inconsistencies for stakeholders making their own calculations.

    “Therefore, to help ensure consistency in the calculation, we are proposing to modify how the wage data numbers are rounded,” the CMS proposed rule stated.

    The agency will not round up or down certain data such as cost support. But the CMS will round numbers for any dollar amounts in the wage index calculation, such as average hourly wages, by two decimals.

    The CMS identified and excluded 81 providers with aberrant data that should not be included in the wage index in 2020 unless the data is corrected. 

    Still, given the system’s core flaws, the ultimate impact of the wage index changes is uncertain, Ginsburg said.

    “You really don’t know what these changes are going to be accomplishing, for better or worse,” he said.

    RELATED STORIES

    CMS backtracks on mandating EHR-PDMP integration in 2020

    CMS proposal would boost CAR-T payments

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    States rush to catch up on delayed vaccines, expand access
    States rush to catch up on delayed vaccines, expand access
    Feds OK’d export of millions of N95 masks as U.S. workers cried for more
    Feds OK’d export of millions of N95 masks as U.S. workers cried for more
    Sponsored Content
    Get Free Newsletters

    Sign up for free enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today

    The weekly magazine, websites, research and databases provide a powerful and all-encompassing industry presence. We help you make informed business decisions and lead your organizations to success.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS
    • Instagram

    Stay Connected

    Join the conversation with Modern Healthcare through our social media pages

    MDHC_Logotype_white
    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • News
      • This Week's News
      • COVID-19
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition
    • Insights
      • ACA 10 Years After
      • Best Practices
      • Special Reports
      • Innovations
    • Transformation
      • Patients
      • Operations
      • Care Delivery
      • Payment
    • Data/Lists
      • Rankings/Lists
      • Interactive Databases
      • Data Points
    • Op-Ed
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Awards
      • Award Programs
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top 25 Innovators
        • Minorities in Healthcare
          • - Luminaries
          • - Top 25 Minority Leaders
          • - Minorities to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Nominate
      • Previous Award Programs
        • Excellence in Nursing Awards
        • Design Awards
        • Top 25 COOs in Healthcare
      • Other Award Programs
        • 100 Top Hospitals
        • ACHE Awards
    • Events
      • Conferences
        • Women Leaders in Healthcare Conference
        • Social Determinants of Health Symposium
        • Healthcare Transformation Summit
        • Leadership Symposium
        • Virtual Briefings
          • - Hospital of the Future
          • - Mental Health
          • - Patient Safety & Quality
          • - Strategic Marketing
          • - Virtual Health
          • - Workplace of the Future
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Minority Leaders Gala
        • Top 25 Women Leaders Gala
      • Webinars
      • COVID-19 Event Tracker
    • Listen
      • Podcast - Next Up
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • MORE +
      • Advertise
      • Media Kit
      • Newsletters
      • Jobs
      • People on the Move
      • Reprints & Licensing