Rural Hospitals Fight for Medicare Reimbursement Rate

Jun 8, 2016

Credit Creative Commons

Virginia’s two U.S. senators are pushing legislation to help rural hospitals across the commonwealth get the same reimbursement rate for Medicare as their urban counterparts. 

Many rural hospitals are facing extinction, that’s in part because of the way they’re paid by the federal government for the Medicare patients they serve.

“The Medicare reimbursement formulas is almost like a dark art, ya know how do you figure it out?”

That’s Virginia Democratic Senator Mark Warner. He’s sponsoring legislation to increase the Medicare reimbursement rate in rural areas.

“There are certain areas where, at least on the surface, it appears hospitals are overly reimbursed—areas like Massachusetts—this would be an evening out and that’s why I think you are seeing a number of senators from both parties join this effort because this is not just a Virginia specific problem.”

The legislation is called the Fair Medicare Hospital Payments Act of 2016. It changes the index for payments to hospitals from a regional one to a national one. Currently hospitals get federal dollars based on a wage index tied to the local economy, but the senators want to set a national index that would benefit rural hospitals. Warner says rural hospitals are currently losing out on millions of dollars that they need to survive.

“We’ve actually seen hospitals in Virginia close because of these fiscal strains and nothing is more key to a whole community than having a hospital that functioning and able to keep its doors open.”

According to the Virginia Hospital Association more than 20 rural hospitals across the commonwealth would benefit from the tweak being proposed by Warner and Virginia’s other Democratic Senator Tim Kaine.

“A lot of rural hospitals, because they can’t buy the volumes that other hospitals do, they don’t get volume discounts, so they’re paying more and get reimbursed less. So this is an effort by a number of us who have seen this problem to fix the funding formula so that rural hospital don’t get inappropriately penalized. Because they are some of the most vulnerable hospitals.”

But Kaine and Warner argue the big thing hurting rural hospitals across the commonwealth is the refusal from Republicans in Richmond to expand Medicaid under Obamacare. Kaine says that keeps more than four hundred thousand Virginians locked out of the healthcare system, thus keeping hospitals from recouping those dollars.

“The refusal of Virginia to take Medicaid expansion has already led to one hospital closing in Lee County, which is in the coal field of Appalachia. They said, look if we had the Medicaid expansions instead of all this uncompensated care for our low income clientele, we would get significant compensation and we would stay open.”

Republicans beg to differ. They say the state would eventually be put on the hook for those new Medicaid patients. They also argue the decision by United Healthcare – the nation’s leading insurer - to pull out of the healthcare exchanges set up by Obamacare shows the entire system is unraveling. Virginia Republican Congressman Rob Wittman says the whole system needs revamping. 

“I think inevitably prices will go up, so the whole idea of the Affordable Health Care Act, I think then, goes out the window. So I do think it has a tremendous effect on how this system of Obamacare is supposed to work—and I think many of the things that we pointed out that would be weaknesses of it are starting to manifest themselves.”

But Senator Warner argues the skittishness from health insurance companies over Obamacare is to be expected.

“Part of that, I think, is due to the fact that we are still in the early stages of a relatively new program.”