Alabama congressional members sent a letter to CMS Administrator Seema Verma on Friday to support the HHS' Office of Inspector General's recommendation to overhaul the wage index, something lawmakers say has jeopardized the state's rural hospitals.
The letter, which was signed by U.S. Senators Richard Shelby (D-Ala.) and Doug Jones (D-Ala.) along with U.S. Representatives Robert Aderholt (R-Ala), Mike Rogers, (R-Ala.), Mo Brooks (R-Ala.), Martha Roby (R-Ala.), Terri Sewell (D-Ala.), Bradley Byrne (R-Ala.) and Gary Palmer (R-Ala.), said that the wage index "is a fundamentally flawed and administratively burdensome system" that is negatively impacting the Alabama healthcare system. Legislators asked Verma to revamp the index as the CMS finalizes the proposed Inpatient Prospective Payment System rule in fiscal year 2020.
"Most recently, Georgiana Medical Center in Georgiana, Alabama, announced its plans to close, making it the thirteenth hospital in our state to close since 2011," the letter reads. "If left unaddressed, many more hospitals in Alabama could follow suit, and the wage index will continue to be a major contributor."
The index pulls wage, associated hour and wage-related cost data from hospitals' Medicare cost reports to set payments to hospitals. 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.
That framework is flawed, resulting in at least $140.5 million in overpayments to 272 hospitals from 2014 to 2017, the OIG found.
Modern Healthcare examined the state of rural healthcare and Alabama's struggle to keep its rural hospitals open. Many are overleveraged as they face lower occupancy levels and higher operating costs.
The CMS lacks the authority to penalize hospitals that submit inaccurate wage data and Medicare administrative contractors' limited reviews don't always catch incorrect data, the report revealed. The wage index's rural floor and hold-harmless provisions decrease the tool's accuracy, the agency said.
Although the system is budget-neutral, which means that Medicare isn't overspending, some hospitals incorrectly receive too much money while others collect too little. Notably, that $140.5 million sum only reflects the findings of the agency's last five reports.
Alabama has been acutely impacted, Danne Howard, chief policy officer at the Alabama Hospital Association, told Modern Healthcare in November. The median rural hospital in Alabama operated at a negative 12.2% margin in 2016 and 88% were losing money. The wage index and number of uninsured in the state, which didn't expand Medicaid, are the two biggest contributing factors, she said.
Without comprehensive reform, which is the OIG's top suggestion, Alabama residents will lose access to care, Howard said.
"It will cause more closures, some of which are imminent," she said. "It's probably the most fragile of situations I have seen in my 23 years at the association."