A bill co-authored by a Tennessean and co-sponsored by another could – if passed by Congress – bring help to many Tennessee hospitals.
The bill was co-authored and introduced in the House by U.S. Representative (R-TN) Diane Black, a nurse of more than 40 years and a member of the Ways and Means Health Subcommittee. It was introduced in the Senate by Lamar Alexander (R-TN) along with senators from Ohio, Virginia and Alabama.
The bipartisan bill, the Fair Medicare Hospital Payments Act of 2016, proposes establishing a national minimum Area Wage Index (AWI) of 0.874 for Medicare reimbursement of both inpatient and outpatient services. According to a news release from Black’s office, the bill would correct “a flawed formula that results in disproportionately low reimbursement payments to rural hospitals (such as) those in Tennessee.”
Currently, the factor used for determining Medicare reimbursements for hospitals is based on the cost to provide patient care in each particular geographical area.
“Like many, Tennessee hospitals are getting less and less from Medicare, while hospitals in other areas of the country get more and more for the same services, because of a flawed formula,” Alexander said in a statement. “This bill will protect Tennessee hospitals, and others around the country, from shrinking Medicare reimbursements that make it harder for them to recruit skilled doctors and nurses, make payroll, pay bills and care for patients.”
According to the Centers for Medicare and Medicaid Services (CMS), the AWI was created “for area differences in hospital wage levels by a factor reflecting the relative hospital wage level in the geographic area of the hospital compared to the national average hospital wage level.”
The wage is reviewed annually through surveys and uses information such as hospital payroll records to create an hourly wage for each labor market, and a national average hourly wage.
In West Tennessee, multiple rural hospitals have closed, including Gibson General Hospital in Trenton, Haywood Park Community Hospital in Brownsville, McNairy Regional Hospital in Selmer and Humboldt General Hospital. The AWI disproportionately hurts rural hospitals such as these by its low reimbursement rates.
Smaller hospitals lack the negotiating power of larger hospital systems to push back on Medicare for higher reimbursements.
“Small hospitals are faced with a take-it-or-leave-it (scenario),” said Tennessee Hospital Association President Craig Becker.
Becker explained that not only does the AWI impact rural hospitals and their communities, but the ripple effect also hurts urban hospitals. As the rural hospitals close, patients from surrounding areas travel to a city for care, increasing the number of Medicare patients at urban hospitals.
“Tennessee hospitals have seen the rate go down,” he said. “We’ve been good stewards.”
California, a more densely populated state, is receiving much higher reimbursement rates than Tennessee for performing the same level of care. For example, Congressman Black’s release states the AWI in Watsonville, California, is 1.72, while Clarksville, Tennessee, is .7439. The national average AWI should be 1.0, but no hospital in Tennessee is reimbursed at 1.0 AWI or greater.
The bill was introduced to the House in February and referred to the Subcommittee on Health. In the Senate, the bill was introduced in late April and is being evaluated by Senate Finance before it moves to the Committee on Health, Education, Labor and Pensions, which Alexander chairs.
In addition to the disadvantage hospitals in Tennessee face with the low AWI rates, the failure to expand Medicare coverage through TennCare is also hurting smaller health systems. Patients are in need of care, there are shortages in emergency rooms, but medical costs are rising and hospitals are struggling to make ends meet with low Medicare reimbursement rates.
Becker cites New Mexico, a state that recently expanded Medicare and is now seeing “historic lows” in the rate of uninsured citizens, as an example of the positive change expanding coverage generates. He says New Mexico’s rural hospitals are experiencing better financial health, and the U.S. Department of Health and Human Services reports that now only 10.2 percent of the state population has no insurance coverage, down from 15 percent last year.
The CMS estimates that expansion of Medicare and Marketplace coverage helped save $7.4 billion in uncompensated care costs nationwide in 2014.
Becker said Medicaid expansion “would go a long way to ensuring health in the future.”
The CMS was contacted for this story, but declined to comment on the Fair Medicare Hospital Payments Act or reimbursement rates for Tennessee hospitals.
RELATED LINKS:
Fair Medicare Hospital Payments Act
Tennessee Hospital Association
Centers for Medicare and Medicaid Services
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