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CMS Proposes Wage Index Hike for Rural Hospitals

Analysis  |  By Steven Porter  
   April 23, 2019

The proposal aims to solve a disparity that CMS says can create 'a downard spiral' for low wage index hospitals. That means a decrease for high-wage index hospitals.

The Centers for Medicare & Medicaid Services announced Tuesday afternoon a proposal to increase the inpatient hospital wage index for low-wage index hospitals, with the goal of supporting quality healthcare in rural areas.

The change was announced as part of the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) proposed rule for fiscal year 2020, which begins in less than six months.

"This would have a huge impact on rural communities that have been forgotten by previous administrations," CMS Administrator Seema Verma said during a call with reporters.

"One in five Americans are living in rural areas and the hospitals that serve them are the backbone of our nation's healthcare system," Verma said in a statement. "Rural Americans face many obstacles as the result of our fragmented healthcare system, including living in communities with disproportionally higher poverty rates, more chronic conditions, and more uninsured or underinsured individuals."

"The Trump administration is committed to addressing inequities in health care, which is why we are proposing historic Medicare payment changes that will help bring stability to rural hospitals and improve patients’ access to quality healthcare," Verma added.

Since low wage hospitals typically can't afford to pay their staffs as much as high wage hospitals pay, these low wage facilities are often caught in "a downward spiral" that exacerbates the gap between high and low wage index hospitals, CMS said. The agency invited comments and suggestions in last year's IPPS rule and said many of those comments cited concerns about disparities related to the existing wage index system.

Under the proposal, hospitals with a wage index below the 25th percentile would see an increase, while hospitals with a wage index above the 75th percentile would see a decrease, according to a CMS fact sheet.

Decreases would be capped at 5% for fiscal year 2020 to mitigate their impact, according to the agency.

The proposal would also affect the so-called "rural floor" calculation, which requires that the IPPS wage index value for urban hospitals be no lower than the value for rural hospitals in the same state.

"It appears that hospitals in a limited number of states have used urban to rural hospital reclassifications to inappropriately influence the rural floor wage index value. To address this, CMS proposes removing urban to rural hospital reclassifications from the calculation of the rural floor wage index value beginning in FY 2020," the agency said in its fact sheet.

Verma mentioned on the call with reporters that some urban hospitals seem to be "gaming the system" through these reclassifications.

No Major Price Transparency Items

Last year's IPPS proposals made news for their price transparency provisions, requiring hospitals to publish their chargemasters online in a machine-readable format. But the IPPS proposed rule for fiscal year 2020 doesn't contain any major price transparency proposals, such as an enforcement mechanism for last year's new provisions.

That's not to say, however, that CMS is backing down from its push for more transparency. There are still more payment rules to come for fiscal year 2020, so stakeholders should "stay tuned," Verma said.

More information on the proposal is available in the CMS announcement, fact sheet, and proposed rule.

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.

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