Connecticut hospitals are the latest winners under rural-floor rule
Connecticut hospitals would win big under the CMS’ latest update of its controversial rural- floor policy. The latest agency calculations project hospitals in the state will see a $75 million boost in fiscal 2014, compared with $16.7 million in the current fiscal year, because of a Medicare payment modifier based on rural and urban hospital categorizations in each state.
The pay increase, included in a CMS payment rule, would affect 27 of Connecticut’s hospitals. The additional funds stem from a federal law that requires the CMS to provide a wage index for urban hospitals at least equivalent to the wage index for rural hospitals in the same state.
The calculation must be budget neutral, and the Patient Protection and Affordable Care Act required national budget neutrality, which resulted in large increases or decreases for some hospitals in certain states.
The recent CMS rule did not provide reasons for the major year-to-year swing in Connecticut hospitals’ payments, but a congressional source said it stemmed from the state’s hospitals submitting incomplete or inaccurate information last year, which the CMS used to calculate the fiscal 2013 rates. Stephen Frayne, senior vice president of health policy at the Connecticut Hospital Association, blamed “bad data” for the relatively low fiscal 2013 rural floor-based payments.
The increase for Massachusetts and Connecticut powered a 4.4% overall Medicare boost for New England urban hospitals under the rule, which dwarfed the 0.8% proposed increase for all acutecare hospitals next year. The statutorily required national budget neutrality means 434 hospitals— mostly clustered in the Northeast—would garner extra cash, while 2,970 other hospitals would face cuts, according to the proposed rule.
The boost for Connecticut hospitals was dwarfed by $169.1 million extra that 60 Massachusetts hospitals are expected to receive in the next fiscal year because of the rural-floor provision. Although that is a drop from the $188 million the commonwealth’s hospitals
garnered in the current fiscal year, it still would boost the hospitals’ overall Medicare rates by 5.6%.
The Massachusetts hospitals’ increase is the focus of intense criticism of the policy from hospitals on the losing side of it.
“It is unfair to manipulate the Medicare payment system to benefit one state’s hospitals at the expense of all other states’ hospitals,” Sen. Tom Coburn (R-Okla.) said in a Senate floor speech in March.
The regional splits have led a 20-state coalition of hospitals to push legislation to eliminate the statutory requirement for national budget neutrality. That measure, sponsored by Sen. Claire McCaskill (D-Mo.), has yet to advance but a nonbinding budget amendment supporting such a move garnered broad bipartisan support in March.
“This should give Congress further impetus to address this issue,” said Dan Boston, a lobbyist leading the hospital coalition against the rural floor provision.
Supporters of the current policy have defended it as needed to correct previous reg- ulatory changes that disproportionately reduced hospital payments to many of the hospitals now benefitting.
Instead, some hospital advocates have supported a comprehensive overhaul of the hospital wage index, which could include a resolution to the rural-floor issue.
The American Hospital Association is officially neutral on the rural-floor issue, according to an official. The industry group established a task force in 2011 to look comprehensively at wage index issues and it was originally planning to issue a report last fall.
But in an April interview, Joanna Kim, vice president for payment policy at AHA, said that there is now no timeframe for such a recommendation. “We’re still working those recommendations through the field to reach consensus,” she said.