CMS Announces Changes to the Wage Index for Some Low-Wage Index Hospitals under Medicare
In an announcement on its website on August 2, the federal Centers for Medicare & Medicaid Services (CMS) made public on Friday policy changes that will increase the wage index for certain low-wage index hospitals, including many rural hospitals. As the announcement noted, “[T]he Centers for Medicare & Medicaid Services (CMS) finalized policy changes to spur competition and innovation that will help deliver improved care and outcomes at a better value to patients. The final rule updates Medicare payment policies for hospitals under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) for fiscal year 2020 and advances two key CMS priorities—'Rethinking Rural Health’ and ‘Unleashing Innovation’—by making historic changes to how Medicare pays hospitals.”
CMS Administrator Seema Verma stated that “The Trump Administration is providing relief to rural communities and addressing payment policies that have disadvantaged rural hospitals, making it harder for them to stay open and provide care to the one in five Americans living in rural areas. The changes we’re finalizing in today’s rule are long overdue and improve the way Medicare pays hospitals, which will help many rural hospitals maintain their healthcare labor force, to ensure that patients have access to high-quality, affordable healthcare,” she said.
The announcement went on to note that, “In last year’s proposed rule, CMS invited comments on changes to the Medicare inpatient hospital wage index, which is an adjustment to inpatient payment rates to account for local differences in wages that hospitals face in their respective labor markets. A common concern from the public was that the current wage index system worsens wage index disparities between hospitals in high-wage areas and low-wage areas, which tend to be rural. Rural areas have experienced more than 100 hospital closures since 2010 and continue to face limited access to specialty care.”
And, the announcement added, “This final rule addresses these disparities by increasing the wage index for certain low-wage index hospitals, including many rural hospitals, and ensures rural Americans have access to needed care. The wage index is intended to measure differences in hospital wage levels across geographic regions and is updated annually based on wage data reported by hospitals. Hospitals located in areas with wages below the national average receive a lower Medicare payment rate than hospitals in areas with above-average wages. For example, a hospital in a low-wage rural community could receive a Medicare payment of about $4,000 for treating a beneficiary admitted for pneumonia, while a hospital in a high-wage area (many urban communities) could receive a Medicare payment of nearly $6,000 for the same case due to wage index differences. With the changes made to the hospital wage index, CMS is helping many rural and other low-wage hospitals attract and maintain a highly skilled workforce, which will strengthen competition and lead to greater choice for patients in rural areas. This final rule also ensures Medicare beneficiaries will have access to a world-class healthcare system by unleashing medical innovation, removing barriers to competition, and enabling faster access to new medical technology through several payment changes.”
