August 2, 2019
Washington, D.C. – The Centers for Medicare & Medicaid Services (CMS) announced today it has finalized changes under the Inpatient Prospective Payment System (IPPS) to increase Medicare reimbursement rates for Alabama’s hospitals by addressing longstanding disparities in the Medicare Area Wage Index formula. U.S. Rep. Terri Sewell (AL-07), who has worked for years to ensure Alabama’s hospitals receive their fair share of Medicare reimbursement dollars by sponsoring legislation to fix this problem and meeting with CMS to urge rulemaking changes, praised the new policy.
“For years, I’ve been working with Alabama’s hospitals and the delegation to advocate for increased Medicare reimbursements for Alabama’s hospitals, which are currently reimbursed at the lowest rates in the country. Today’s announcement is great news for Alabama’s hospitals, especially those in rural areas of the state where every dollar counts,” Sewell said. “With over 88 percent of rural Alabama hospitals operating in the red, it is critical that we do everything we can to help our hospitals provide the services needed to keep Alabamians healthy. Recalculating the way Medicare reimburses Alabama hospitals is a crucial step in achieving that goal.”
“The fight to improve Alabama’s health care system is far from over,” Sewell continued. “Governor Ivey and the state legislature must put Alabamians first and partisan politics aside by expanding Medicaid to help shore Alabama’s rural hospitals and improve health care affordability, access and quality across the state. Study after study shows Medicaid expansion is a life or death issue. Just last week, we learned that more than 15,000 deaths could have been prevented if all states had expanded Medicaid. Earlier this week, further analysis highlighted that rural hospitals in non-expansion states are disproportionately operating in the red and the most likely to close. These are trends we can no longer afford to ignore. Seeing as Alabama’s hospitals have the second lowest margin of profitability in the country, our Governor and legislature must act.”
Currently, the CMS reimbursement formula considers the area wage index for hospitals when formulating reimbursement rates, skewing reimbursement rates to favor hospitals serving the healthiest and wealthiest parts of the country. These disproportionate reimbursement rates have contributed to some hospitals’ inability to keep their doors open. CMS released a rule today to increase the wage index for hospitals with a wage index value below the 25th percentile, which will increase Medicare reimbursement rates for many Alabama hospitals.
Early estimates indicate that Alabama hospitals could gain over $43 million under the new rule in the first year of implementation alone, $9.5 million of which would go to hospitals in Alabama’s 7th District.
Last year, Sewell and Sens. Richard Shelby and Doug Jones sat down with CMS Administrator Seema Verma to discuss the ever-growing challenges our medical providers, especially Alabama’s rural hospitals, face due to low reimbursement rates and urged her to address the Wage Index Formula.
In March, Sewell and the entire Alabama delegation sent a letter to Verma urging CMS to provide hospitals relief from the increasing reimbursement disparities created by the Medicare area wage index.
And the past two Congresses, Sewell introduced the Fair Medicare Hospital Payments Act, legislation that would have an effect similar to CMS’ proposal by raising the wage index and rate at which hospitals are reimbursed by Medicaid and Medicare.