United States Senators Lamar Alexander (R-Tenn.) and Mark Warner (D-Va.) introduced legislation that will ensure rural hospitals can keep up with the cost of providing care and curb the trend of hospital closures by boosting their Medicare payments.
“Last year, the Trump Administration updated the formula that determines how much Medicare will reimburse hospitals for patient care, taking into account, among other things, the cost of labor in that geographic area – called the Medicare Area Wage Index. And because of this change, Alan Levine, who leads Ballad, announced a $10 million investment in pay increases to nurses. However, these changes are temporary and will expire in three years, and many hospitals are concerned that hospital reimbursements could revert to the lower rates,” Alexander said.
“Given COVID-19 impacts on rural hospitals, any changes that lower reimbursement would have significant impact. Tennessee has the second highest rate of hospitals closures in the country, with 13 hospitals having closed since 2010, and this is, in large part, due to lower reimbursements. This legislation will help keep up with the cost of providing care and help curb the trend of Tennessee rural hospital closures by setting an appropriate national minimum for the Medicare Area Wage Index.”
“The current payment policy has long placed some of Virginia’s most rural hospitals at a disadvantage and made it more difficult to provide quality care in communities that need it most,” Warner said. “The COVID-19 public health emergency has made it more important than ever to do everything we can to support our rural hospitals and this legislation is absolutely critical in doing that.”
The legislation the senators introduced today, along with Senators John Cornyn (R-Texas), Doug Jones (D-Ala.), Marsha Blackburn (R-Tenn.), Tim Kaine (D-Va.), David Perdue (R-Ga.) and Richard Shelby (R-Ala.) would:
- Establish an appropriate national minimum (0.85) for the Medicare Area Wage Index (AWI)
- Ensure rural hospitals are paid for the care they provide while preserving the existing reimbursements for urban hospitals
- Ensure fairness in reimbursements for hospitals across the country, including many hospitals that are facing closure in rural areas
- Fix severe and disproportionate disadvantages that unfairly penalize hundreds of communities and hospitals across the United States
The Medicare Area Wage Index, which is a formula Medicare uses to reimburse hospitals, is much lower for states like Tennessee and Virginia because the formula is based labor costs, which vary across the country. Medicare accounts for about 43% of reimbursements for hospitals nationally, according to the American Hospital Association.