Reimbursement News

Rural Hospitals May Get Senate Help with Medicare Reimbursements

Legislators recently introduced the Fair Medicare Hospital Payment Act of 2016 to protect rural hospitals from shrinking Medicare reimbursements.

By Catherine Sampson

- As the healthcare industry shifts from volume to value, hospitals are expected to provide quality care as many could also potentially face lower Medicare reimbursements. At the same time, many hospitals in rural and economically distressed areas have close because they don’t have enough funds to operate. According to Cecil G. Sheps Center for Health Services Research, a total of 71 rural hospitals have closed since 2010.

Rural and economically distressed hospitals can benefit from The Fair Medicare Hospital Payment Act of 2016.

Last week, senators introduced the Fair Medicare Hospital Payment Act of 2016, which would ensure that hospitals are fairly reimbursed by Medicare for their services, The US Senate Committee on Health, Education Labor & Pensions reported in a press release.

The goal of this bipartisan, budget-neutral legislation is to help all types of hospitals stay open and operating, especially those that are located in underserved and poor areas.

“Hospitals in rural areas face unique challenges, and many struggle to stay afloat – challenges that are exacerbated by the federal government’s skewed payment system for services provided to Medicare beneficiaries at these hospitals,” said Senator Mark Wagner.

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    • This bill was originally assigned to a congressional committee in February. It is supposed to correct a formula that has caused disproportionately low Medicare reimbursement payments to hospitals in rural and economically distressed areas.

    A national minimum area wage index of 0.874 would be established because if the Act. This index is based on the relative hospital wage level in the hospital’s geographic area compared to the national average.

    A large percentage of rural and economically disadvantaged hospitals are continue to be at risk for shutting down, so they arguable need federal funding to survive.

    According to North Carolina Rural Health Research Program (NC RHRP), two out of three hospitals that closed between 2006 and 2014 were identified by a financial distress index as being high risk of financial distress in a year before they closed.

    “Financial indicators are strongest drivers of financial distress, particularly total margin, benchmark performance and retained earnings, while hospital size and market poverty rates are the most influential non-financial factors,” NC RHRP found.

    Senators argue that Medicare funds are not dispersed equally among various hospitals.

    “Like many hospitals, Tennessee hospitals are getting less and less from Medicare, while hospitals in other areas of the country get more and more for the same services, because of a flawed formula,” said Lamar Alexander, chairman of the Senate health committee, in the press release. “This bill will protect Tennessee hospitals, and others around the country, from shrinking Medicare reimbursements that make it harder for them to recruit skilled doctors and nurses, make payroll, pay bills and care for patients.”

    “To ensure that seniors on Medicare – especially those in Ohio’s rural and underserved areas – can continue to get the care they need, the hospitals serving them must be fairly reimbursed for the care they give,” said Senator Sherrod Brown. 

    “Under the current system, many hospitals in Ohio are paid less for the same lifesaving care they provide as their counterparts in other states across the country. This legislation will help protect the health and safety of all Ohioans by making sure all hospitals in Ohio receive sufficient reimbursement for the services they perform so they can continue to serve our communities.”

    NC RHRP argues that rural hospitals have the possibility of obtaining more funds because of the Affordable Care Act (ACA). The ACA could impact hospital reimbursement in meaningful ways. Now that more people have access to insurance coverage, rural hospitals can gain a new source of revenue, according to NC RHRP. However, the financial impact of the ACA on rural hospital providers is still currently unknown, NC RHRP said.

    According to a study from NC RHRP, few rural hospitals reported a positive net financial impact as a result of ACA’s expanded insurance coverage. They were under the impression that an increase bad debt, shortfalls between payments and cost of care prevented hospitals from experiencing financial gains.    

    “Even with more people insured, uncompensated care and unreimbursed cost remain an issue for rural hospitals,” NC RHRP said.

    Hopefully, the Fair Medicare Hospital Payment Act of 2016 could help many rural and economically disadvantaged hospitals from shutting their doors.