CMS proposes wage index hike for rural hospitals

CMS published the FY 2020 Inpatient Prospective Payment System (IPPS) proposed rule on April 23, and the rule’s proposal significantly alters rural health payments.

In an effort to address wage index disparities and support quality healthcare in rural areas, CMS is proposing a new methodology for wage index calculation. Under the current wage index system, a hospital in a rural community with low wages may receive $4,000 in Medicare payments for a given treatment while a hospital in an urban community with higher wages would receive $6,000 in Medicare payments for that same treatment.

Because the rural communities tend to face more financial obstacles due to communities with higher poverty rates, beneficiaries with more chronic conditions, and more uninsured or underinsured beneficiaries, CMS is proposing to increase the wage index for hospitals below the 25th percentile of the wage index value and decrease the wage index for hospitals above the 75th percentile of the wage index value.

CMS will limit the reductions to higher wage index hospitals by proposing a 5% cap on any decrease in a hospital’s wage index from its final wage index for FY 2019.

Since low wage hospitals typically can't afford to pay their staffs as much as high wage hospitals pay, these low wage facilities are often caught in "a downward spiral" that exacerbates the gap between high and low wage index hospitals, CMS said. The agency invited comments and suggestions in last year's IPPS rule and said many of those comments cited concerns about disparities related to the existing wage index system.

Source: Revenue Cycle Advisor