Rule change expected to give struggling hospitals another lifeline

Updated: Aug. 6, 2019 at 2:43 PM CDT
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MONTGOMERY, Ala. (WSFA) - Hospitals across the state are struggling financially to stay open. 13 Alabama hospitals have closed within the last eight years, with seven of those closures in rural Alabama.

A new rule change announced this month is expected to help financially struggling hospitals. The Centers for Medicare & Medicaid Services, or CMS, finalized a change to the Medicare wage index that would help give Alabama hospitals better reimbursement rates.

Alabama Hospital Association President Dr. Donald Williamson said modifying the wage index is one step in the right direction.

“It’s a lifeline,” Williamson explained. “For some of our hospitals it buys a little more time. It doesn’t solve the problem."

This wage index determines the reimbursement rate for hospitals. The amount reimbursed can vary from state to state depending on regional labor costs.

Ivy Creek Healthcare has two hospitals in Alabama. They said the index change will help.

“Any assistance that will help in terms of reimbursement will breathe a little more life into both of our hospitals,” a spokesperson for the company said. “There are so many services that we do not even break even on, and this makes covering overhead extremely difficult. We are grateful for any movement that allows for better reimbursement.”

“Alabama hospitals have suffered the negative effects of the Medicare wage index for over two decades,” said U.S. Sen. Richard Shelby, R-Alabama, who praised the change.

Alabama currently has the lowest wage index in the nation, according to the Alabama Hospital Association. Alabama lawmakers believed the previous formula was flawed.

"For two decades, Alabama has been fighting the unfair Medicare reimbursements, and today receives a rate that is just 67 percent of the national average,” said U.S. Sen. Doug Jones, D-Alabama, who applauded the change.

The Office of Inspector General, or OIG, said in 2018, wage indexes are not accurate to reflect local labor prices. The office suggested making changes.

OIG created a report outlining solutions to reduce fraud, waste, and abuse in the U.S. Department of Health and Human Services. Out of a list of 25, changing the wage index was ranked fifth.

The new changes go into effect in 2020.

Williamson said medicaid expansion is the next step to keep rural hospitals alive. The association will continue to advocate the expansion.

Ivy Creek Healthcare said other areas of need include more grants or better reimbursements to help pay to keep certain drugs stocked in rural areas. The spokesperson said certain drugs have a short shelf life but are needed for patients.

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