President Obama

States decry special deal for Massachusetts hospitals

President Obama
Hospital associations urge President Obama to stop special deal for Massachusetts hospitals
President Obama

The South Carolina Hospital Association (SCHA) is one of 19 state hospital associations to sign a letter urging President Obama to stop a special deal for Massachusetts hospitals that will harm hospitals in other states.

According to the letter, if an obscure provision in the federal laws is not corrected, Massachusetts hospitals will receive an additional $3.5 billion in Medicare payments over the next 10 years, with the funds for the increase coming from  other hospitals across the country already struggling financially.

”Our hospitals understand the serious economic problems our nation faces, and we are more than willing to be part of the solution. But this situation is wrong and must be righted,” explains Thornton Kirby, SCHA president and CEO. “South Carolina hospitals are already facing more than $5 billion dollars in revenue cuts over the next 10 years. If something isn’t done to correct this problem, South Carolina could lose more than $100 million in payments for Medicare patients to help pay for an eight percent increase for Massachusetts hospitals.”

The problem started when Nantucket Cottage Hospital, a 15-bed rural island hospital in Massachusetts that treats about 150 Medicare patients each year, changed its Medicare status from a critical access hospital to a prospective payment system hospital. For the first time, the island hospital’s wages were factored into the state wage index calculations for all Massachusetts hospitals.

Because hospitals in rural areas are expected to pay lower wages than hospitals in urban areas, there is a rule that the wage index for an urban hospital cannot be below the rural wage index for the state. However, wages on rural Nantucket are significantly higher than wages at mainland hospitals. Hence the inclusion of the small, rural hospital is artificially driving the wage index up for all hospitals in Massachusetts.

“CMS had previously issued a rule stipulating that changes in hospital payments resulting from wage index adjustments must be budget neutral within individual state boundaries. However, the PPACA provision requires such adjustments to be budget neutral on a national basis. So when the wage index for one state increases, payments are reduced in other states,” Kirby explained.

The Medicare Payment Advisory Commission recognized this problem last year and in June wrote to then-Medicare Administrator Donald Berwick, “This is a clear example of how the current system of exceptions is not an equitable method of adjusting for input price . .  . A new wage index system is needed."

The  letter to the president was signed by state hospital association leaders in Alabama, Arkansas, Delaware, Georgia, Iowa, Kentucky, Louisiana, Mississippi, Missouri, Ohio, Nebraska, North Carolina, Oklahoma, Oregon, South Carolina, South Dakota, Virginia, West Virginia and Wisconsin.