Capito and Colleagues Encourage CMS to Appeal District Court Ruling and Pursue Hospital Policy on Low Wage Index

WASHINGTON DC — U.S. Sen. Shelley Moore Capito (RW.Va.) recently joined Richard Shelby (R-Ala.) and Marsha Blackburn (R-Tenn.) in sending a bipartisan letter to Administrator Chiquita Brooks-LaSure of the Centers for Medicare and Medicaid Services (CMS) to encourage the agency to appeal a recent ruling by the U.S. District Court for the District of Columbia and finalize its proposal to continue the low-wage hospital index policy in fiscal year 2023 Inpatient Prospective Payment System (IPPS) to reduce disparity in Medicare reimbursement.

The letter reads in part, “In our states, the flawed AWI methodology has continued to negatively impact Medicare reimbursement. For decades, Medicare reimbursement has not been sufficient to cover the cost of care. The compounded impact of this disparity has created unsustainable financial pressures. Our hospitals have survived on reserves, cost-cutting measures, staff reductions and the elimination of services, but these options have been exhausted. If nothing changes, more hospitals across our states will be forced to make tough decisions about the services and jobs they provide, and some may even close.

In addition to Senators Capito, Shelby and Blackburn, the bipartisan letter was signed by Senators Jim Inhofe (R-Okla.), John Boozman (R-Ark.), Tim Scott (RS.C.), James Lankford (R- Okla.), Tom Cotton (R-Ark.), Roger Marshall (R-Kan.), Bill Hagerty (R. Tenn.), Tommy Tuberville (R-Ala.) and Rafael Warnock (D-Ga.).

The full text of the letter can be found here or below:

Dear Brooks-LaSure Administrator,

On behalf of the hospitals we represent and the patients they serve, we would like to commend you for taking action to reduce the disparity in Medicare reimbursement created by the Medicare Hospital Area Wage Index ( AWI) proposing to continue the low wage index. Policy in the proposed Inpatient Prospective Payment System (IPPS) rule for fiscal year 2023. The continuation of this critical policy will enable our hospitals, many of which are in rural and underserved areas, to recruit and retain the health personnel they desperately need. By continuing this policy for another year, you are putting patients first.

As you know, Congress has given broad discretion to the Secretary of the Department of Health and Human Services (HHS) to develop a hospital reimbursement system that takes into account geographic differences in salaries. The Secretary is required to adjust the “proportion” of Medicare inpatient payment attributable to “salaries and salary-related costs” for “regional differences in hospital salary levels.” HHS has always taken a broad view of its statutory authority when adjusting the AWI through the development of notice-and-comment rules to address the concerns of hospitals in certain states, including creating rural floor imputed to benefit hospitals in states without statewide rural areas. This administrative policy was in effect for nearly a decade before being codified in the American Rescue Plan Act of 2021. The low-wage index hospital policy, which relieves hospitals in the bottom quartile of AWI levels, is consistent with these prior agency policy changes. .

In our states, the AWI’s flawed methodology continued to negatively impact Medicare reimbursement. For decades, Medicare reimbursement was not enough to cover the cost of care. The compounded impact of this disparity has created unsustainable financial pressures. Our hospitals have survived on reserves, cost-cutting measures, staff reductions and the elimination of services, but these options have been exhausted. If nothing changes, more hospitals across our states will be forced to make tough decisions about the services and jobs they provide, and some may even close.

The Centers for Medicare & Medicaid Services (CMS) has recognized the importance of the low-wage hospital policy and the need to ensure that every American has equal access to care and is not disadvantaged for living in a state predominantly rural. The CMS noted during the implementation of this policy that “rural areas have experienced over 100 hospital closures since 2010 and continue to face limited access to specialist care”, noting that this policy adjustment “would help low-wage hospitals attract and retain highly qualified staff”. workforce, which will increase competition and lead to greater choice for patients in rural areas. Abandoning the low-wage hospital policy will ultimately lead to more closures, reducing access to care for the most vulnerable patients.

Additionally, the COVID-19 pandemic has created a skewed labor market that will only further disrupt AWI. In fact, we have not had the opportunity to see the true impact of CMS’s planned low-wage hospital policy due to the market disruptions caused by the pandemic. Continuing the policy in fiscal year 2023 and extending it for years beyond will allow hospitals and the agency to understand the true impact in a slightly more normal environment.

We understand that the United States District Court for the District of Columbia recently ruled that CMS exceeded its statutory authority when it finalized the Hospital Low Wage Index Policy in the IPPS Final Rule for the fiscal year 2020. We strongly disagree with this decision and encourage the agency to appeal and finalize its proposal to continue the policy in fiscal year 2023. There is clear evidence that CMS has the authority to implement the low wage index hospital policy. If this policy were to end, the negative impact on access to health care would be disastrous and would deal a terrible blow to health care.

We look forward to working with you to ensure that hospitals are no longer penalized for being located in rural areas and that patients have access to healthcare no matter where they are.

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