Proposed changes to Medicare's Wage Index

Wiregrass Hospital in Geneva is just one of many rural hospitals in Alabama and across the nation that would benefit from proposed changes to Medicare's Wage Index.

Though $200,000 may not be a large sum in relation to a hospital’s budget, Vernon Johnson sees several benefits the money might provide.

“Any amount we get is a benefit,” the Dale Medical Center CEO/administrator said. “I can give employees a raise, buy a major piece of equipment, or even fix a roof that’s leaking.”

Johnson projects the Ozark hospital will receive between $185,000 and $200,000 per year if a plan from President Donald Trump’s administration to adjust Medicare’s Wage Index gets finalized. The Wage Index is a formula – that includes a variety of wage and other related factors – that determines the rate Medicare pays hospitals in various states, Johnson said.

For example, California’s hospitals receive 120 percent of Medicare-allowed reimbursement funding for procedures, while Alabama receives just 66 percent, Johnson said. Alabama receives the lowest rate of Medicare funding in the nation, he added.

The disparity creates some stark differences, officials say.

“A hospital in rural Alabama can receive a Medicare payment of $4,000. A hospital in a high-wage area could receive a payment of $6,000 for the same case,” said Seema Verma, the Centers for Medicare and Medicaid Services administrator, in a recent Modern Healthcare article.

“We’re using the same protocols, same treatments,” Jeff Brannon, CEO of Wiregrass Medical Center in Geneva, added. “For the same services we provide for common diseases, we don’t get paid as much as hospitals in larger areas like New York or Los Angeles.”

Officials adjust the index periodically, and changes throughout the years have increasingly punished rural hospitals like those in Alabama, some officials argue. In another Modern Healthcare article, the magazine reported the Department of Health and Human Services’ Office of Inspector General discovered overpayments to 272 hospitals totaling at least $140.5 million from 2014 to 2017.

“It has gotten out of balance over the years,” Brannon said.

Brannon, who also served as Medical Center Enterprise’s CEO from 2002 to 2013, said Alabama hospital officials have lobbied for changes to the Wage Index for two decades. In a column sent to media Monday, U.S. Rep. Bradley Byrne (R-Mobile) said he joined forces with Rep. Terri Sewell (D-Selma) and 45 other U.S. House members to petition the Trump administration for changes.

It appears those could be on the horizon. Johnson said that from his understanding, the changes include raising the minimum reimbursement level to 74 percent – resulting in increased benefits to hospitals in rural states.

It would provide some much-needed help, Brannon said. Eighty-eight percent of Alabama’s rural hospitals operate in a deficit –including Wiregrass Medical Center last year.

“We’re here. Every day is a struggle,” he said, noting WMC is operating in the black this year. “We’re making progress.”

More than 10 rural hospitals in the state have closed in recent years, Johnson said. While Medicaid expansion is also needed to ensure Alabama’s rural hospitals become healthy, the proposed changes to the Medicare Wage Index provide a good start, he added.

“The Medicare Wage Index is a pretty significant factor,” Johnson said. “If we don’t correct (the index), we will wake up without hospitals in areas where we have chronic diseases and chronic problems.”

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