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Medicare change addresses reimbursement imbalance

By WILL WHATLEY, Alabama Daily News

MONTGOMERY, Ala. – The federal Centers for Medicare & Medicaid Services (CMS) on Tuesday proposed a payment change to address a disparity in how hospitals in states like Alabama are paid as compared to states with higher average wages.

The agency announced proposed changes under the Inpatient Prospective Payment System (IPPS) that would raise the Medicare Area Wage Index. First implemented in 1983, the Wage Index was created to account for geographical differences in wages. Hospitals in states with higher average wages like California received higher reimbursement rates for services covered by the IPPS, while states like Alabama received lower rates.

“The Medicare Wage Index has negatively affected Alabama hospitals for over 20 years,” said Sen. Richard Shelby. “After two decades of working to address a problem that significantly contributes to heightened hospital closures throughout our state, I am glad to see Administrator [Seema] Verma and CMS taking steps to solve this dire issue. I look forward to continuing my work with the agency to make sure that this sort of careless imbalance is eliminated moving forward.”

U.S. Rep. Terri Sewell, a member of the Ways & Means Subcommittee on Health, praised the decision and contributed it to a bipartisan effort of Alabama’s delegation.

“Since coming to Congress, I have worked with my colleagues in the Alabama delegation, Alabama’s hospitals and the Alabama Hospital Association to address disparities in the area wage index formula and increase Medicare reimbursements for Alabama’s hospitals,” Sewell said. “Today’s proposed change to ensure Alabama hospitals receive their fair share in Medicare reimbursement dollars is proof positive that CMS heard us loud and clear.”

According to Verma, one in five Americans live in rural areas that will be affected by the proposed changes.

“Rural Americans face many obstacles as the result of our fragmented healthcare system, including living in communities with disproportionally higher poverty rates, more chronic conditions, and more uninsured or underinsured individuals,” said Verma. “The Trump administration is committed to addressing inequities in health care, which is why we are proposing historic Medicare payment changes that will help bring stability to rural hospitals and improve patients’ access to quality healthcare.”

The proposed changes are expected to be finalized later this summer with them going into effect Oct. 1, 2019.

Danne Howard, executive vice president and chief policy officer for the Alabama Hospital Association, said the rule change could mean up to $34 million for Alabama’s rural hospitals.

“We could not be more grateful to CMS Administrator Seema Verma and her staff for listening to our concerns and taking action,” Howard said.

“Alabama has been penalized for decades by this flawed formula, which has resulted in some states being paid three times as much as Alabama’s hospitals for the exact same procedure.  Alabama’s entire congressional delegation worked tirelessly in a non-partisan manner to make this happen, and we specifically would like to acknowledge Sens. Richard Shelby and Doug Jones and Rep. Bradley Byrne for leading the charge.”

Byrne said he and other delegation members have been working with federal officials for years.

“Immediately after President Trump was took office, I began working with his Administration and CMS Administrator Seema Verma to address these disparities,” Byrne said.

“I’m proud to have played a part in making today’s announcement possible because it is a major step in the right direction to help save our rural hospitals.”

Jones also praised the decision saying it was a “great first step” to alleviating the financial issues facing Alabama hospitals. Jones supports expanding Medicaid, which Alabama hospitals say would help keep some rural facilities operating.

“After meeting with Administrator Verma, Senator Shelby, and Congresswoman Sewell last September about this issue, I was very hopeful about the prospects of getting this long-overdue change made,” Jones said.

“I look forward to continuing to work with CMS to make sure that its final rule reflects what is in the best interests of Alabama, as well as advocating for Alabama to take the next step by finally expanding Medicaid.”

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