Starting Oct. 1, rural hospitals across the U.S. will get the wage index boost they have long begged for, the CMS' said in its final rule on inpatient prospective hospital payments for fiscal 2020.
The agency's original proposal would have made this change by redistributing money from the top 25% of hospitals—such as politically heavyweight states like California and New York. In the final rule, the CMS will instead decrease payments across the board and cap any cut at 5%.
In a call with reporters after the regulation's release, CMS Administrator Seema Verma said every state will now see an overall increase to their Medicare payments compared to last year, thanks in part to the final rule's other payment updates known as the hospital "market basket.
She also acknowledged that in the nearly 8,000 comments, stakeholders "urged us to implement the changes in a non budget-neutral manner," but said by law the agency couldn't do so.
The new policy will be in effect for at least four years starting this fall, and Verma emphasized that the change is a critical part of the Trump administration's strategy to buoy rural hospitals by enabling a boost to their employee wages.
Additionally, the agency has officially tweaked the "rural floor" calculation to try to preempt some gaming of payments by urban hospitals. The rural floor comes into play because the inpatient Medicare wage index for an urban hospital within a given state can't be less than a rural hospital in the same state. This has led to some urban hospitals reclassifying themselves as rural in order to influence the rural floor wage index value.
The CMS said this has made wage index disparities worse, and so starting Oct. 1 the urban-to-rural reclassifications will no longer be factored into the rural floor wage index value.
Verma also took a dig at the Democratic momentum for Medicare for All or single payer, which Republican critics say would stall innovation. The final rule updates "antiquated Medicare payments," the administrator told reporters, with pay boosts for new technologies and therapies.
As proposed, the CMS is increasing Medicare's "new technology add-on payments" for 18 technologies including CAR T-cell therapies for cancer — a costly and sophisticated treatment. The rule hikes this payment from 50% to 65%.
However, the agency said it's not ready to make any major structural change to the way Medicare approaches CAR-T, despite some stakeholder pressure.
"After a review of the comments received, we continue to believe, similar to last year, that given the relative newness of CAR T-cell therapy, and our continued consideration of approaches and authorities to encourage value-based care and lower drug prices, it would be premature to adopt structural changes to our existing payment mechanisms, either under the IPPS or for IPPS-excluded cancer hospitals, specifically for CAR T-cell therapy," the agency said.
Additionally, the CMS is trying to manage the mounting public health threat of antibiotic-resistant infections by boosting hospital payment for new and developing medications that can treat these diseases by 75%.
There will also be coding changes so that hospitals will get higher payments for treating patients who have these drug-resistant infections.
The most controversial part of the proposed rule was the wage index change.
After the CMS first outlined its proposal, AHA walked a careful line between the conflicting interests of its member hospitals by supporting an increase for rural states but urging the CMS not to cut elsewhere.
"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," the AHA wrote in its comment letter. "CMS has the ability to provide needed relief to low-wage areas without penalizing high-wage areas."
The Greater New York Hospital Association had estimated that in total $242 million would be redistributed, and the group hinted at potential legal action in its comment letter to the agency.
The CMS "simply cannot use its authority … to circumvent Congress's intent in enacting the wage index provisions," the GNYHA wrote. "Nor can it appropriately interpret this section to permit adjustments to the wage index calculation."
The final rule hasn't appeased all the critical hospital groups.
"We appreciate CMS' decision to lessen the financial impact on California's hospitals, however we remain concerned about the precedent of the 'rob Peter to pay Paul' scenario contained in this rule," said Jan Emerseon-Shea of the California Hospital Association. "CHA is considering next steps and all options remain on the table."
Meanwhile a congresswoman from Alabama, where hospitals estimated they could get a $34 million pay increase under the proposed rule, applauded the change.
"For years, I've been working with Alabama's hospitals and the delegation to advocate for increased Medicare reimbursements for Alabama's hospitals, which are currently reimbursed at the lowest rates in the country," said Rep. Terri Sewell (D-Ala.). "Today's announcement is great news for Alabama's hospitals, especially those in rural areas of the state where every dollar counts."
HHS' Office of Inspector General last November called for a complete overhaul of the wage index in a report that found the payment system is based on inaccurate wage data. The OIG estimated that 272 hospitals got at least $140.5 million in overpayments from 2014 to 2017.
