Medicare-Medicaid agency hikes payments to rural hospitals

The Centers for Medicare and Medicare Services said Friday that it will adjust its Medicare payment formula, starting in October, in a way that will boost payments to rural hospitals, which "have complained that this measure has unfairly disadvantaged some of them because wages are lower in their communities," Dan Diamond reports for the Politico Pulse newsletter.

"The index is based on how much a hospital pays its staff, so hospitals in areas with high living costs get higher reimbursements than areas that have low cost of living -- for the same services," Kentucky Health News reported. "A labor market's wage index is the ratio of its average hourly wage to the national average hourly wage, according to CMS."

The proposed rule will reduce the disparity in reimbursements by increasing the wage index for hospitals in the bottom fourth of payments and reducing the index of those in the top fourth, creating a budget-neutral shift of funds, a CMS news release in April said.

"After the rule's release, the American Hospital Association said it supports improving the wage index values for rural hospitals, but that CMS shouldn't have done so in a budget-neutral manner," Diamond writes. "The National Rural Health Association — which last week pointed to a new investigation on rural hospitals' financial difficulties — had previously praised CMS' proposed version of the rule."