Fourteen rural state senators are calling on the Centers for Medicare & Medicaid Services (CMS) to extend a payment policy that increases payments to hospitals in areas with lower overall wages, which is set to expire at the end of the government’s 2023 fiscal year.
The Low Wage Index Hospital Policy (also referred to as the Lowest Quartile Adjustment Policy) was finalized in 2019 and has benefited more than 800 hospitals across 23 states since going into effect in fiscal year 2020, the bipartisan group of senators wrote.
The policy increases payments for hospitals falling below the 25th percentile of the Medicare inpatient hospital wage index, which is an existing adjustment to inpatient payment rates that accounts for differences in labor wages demanded within hospitals’ local markets. Prior to implementation, critics had argued that the Medicare inpatient hospital wage index perpetuated disparities between hospitals operating in high-wage and low-wage areas, the latter of which tend to be rural.
Upon finalizing the Low Wage Index Hospital Policy in 2019, then-Administrator Seema Verma said the adjustment was “long overdue and improve[s] the way Medicare pays hospitals, which will help many rural hospitals maintain their healthcare labor force, to ensure that patients have access to high-quality, affordable healthcare.”
In the letter (PDF) sent Thursday to CMS Administrator Chiquita Brooks-LaSure, senators said the program has been “a valuable lifeline” for low-wage hospitals but acknowledged that “disruptions in the marketplace caused by the COVID-19 pandemic” have made it impossible to quantify the program’s full impact in just four years.
“Extending the Low Wage Index Hospital Policy for four additional years will allow hospitals and the agency to better understand the policy’s true impact in a more normal environment,” they wrote.
Without action, the policy and its extra payments for low-wage hospitals are set to expire Sept. 30.
The hospital industry on the whole has faced increased financial pressure in 2022 due to rising costs, particularly those related to staffing facilities amid a healthcare workforce shortage. Of note, industry analyses have found rural hospitals to be in greater financial jeopardy than their peers and at greater risk of closure in 2023 as pandemic relief programs are coming to a close.
“The continuation of this critical policy will allow hospitals to recruit and retain healthcare staff and protect access to care for millions of Americans,” the senators wrote.
The senators who signed the letter were Mark Warner, D-Virginia; Marsha Blackburn, R-Tennessee; Tim Kaine, D-Virginia; Tommy Tuberville, R-Alabama; Joe Manchin, D-West Virginia; John Boozman, R-Arkansas; Shelly Moore Capito, R-West Virginia; Bill Hagerty, R-Tennessee; James Lankford, R-Oklahoma; Roger Wicker, R-Mississippi; Cindy Hyde-Smith, R-Mississippi; Tim Scott, R-South Carolina; Tom Cotton, R-Arkansas; and Katie Boyd Britt, R-Alabama.
Rural hospitals picked up a policy win at the end of 2022 when lawmakers included a two-year extension to a pair of rural hospital Medicare payment adjustments—the Medicare-Dependent Hospital program and the Low-Volume Hospital program—as part of December’s $1.7 trillion omnibus spending package.
Rural hospitals also have the option this year to convert to the new Rural Emergency Hospital designation, which comes with a 5% bump in outpatient care reimbursement so long as certain services such as an emergency room are maintained. However, ending inpatient services and giving up participation in other support programs means that only a fraction of facilities are likely to benefit from switching over, the Chartis Group found in a recent analysis.