Medicare payments for hospitals are undergoing a lot of changes that can completely revamp the way the hospitals interact with Medicare. One of the big changes is the shift from focusing on the number of patients seen to the quality that they are given. A new bipartisan, budget-neutral legislation could bring huge changes to the medical industry.
One interesting aspect of this legislation relates to rural hospitals, because they could be looking at lower reimbursements as the payment formula changes. The solution to this potential problem came from new legislation, the Fair Medicare Hospital Payment Act of 2016. As the name implies, the act will ensure that every hospital will be fairly reimbursed by Medicare. The goal of the new legislation is to assist smaller hospitals to keep their doors open, especially those that are helping in lower income areas.
Several senators sponsored the bill, including Senators Johnny Isakson of Georgia, Lamar Alexander of Tennessee, Mark Warner from Virginia, and Sherrod Brown from Ohio. Senator Mark Warner explained some of the reasons behind the new act, “Hospitals in rural areas face unique challenges, and many struggle to stay afloat – challenges that are exacerbated by the federal government’s skewed payment system for services provided to Medicare beneficiaries at these hospitals.” Senator Warner’s comments reflect a problem with the way that reimbursement is currently handled. With the current formula, rural hospitals are receiving much lower payments, which is causing added stress on their financial stability. If any of these hospitals were to close, it would cause catastrophic problems for people that live in these areas, especially poor communities.
The new bill will create a national minimum wage index of .0874 that would decide hospitals that fall under certain criteria for an at-risk hospital. The area wage index will be based on the average hospital wage level in the geographic area compared to the national average. While many Medicare enrollees may not know it, many hospitals are fearful of having financial problems or even closing their doors. According to the North Carolina Rural Health Research Program, 2/3 of hospitals that closed in 2006 to 2014 were identified as being a high risk of financial distress the year before they shut down.
Once the act takes place, it will even out the reimbursement payments from Medicare to hospitals instead of certain hospitals receiving much more than another hospital for the same services. Because rural hospitals don’t see as many patients as other hospitals, they are slowly losing money as their services start costing more, which in turn puts a financial strain on patients.
While it may not seem like it, dozens of hospitals will benefit from the act. For instance, five hospitals in Virginia will benefit from the new rule because of their surrounding area. If there wasn’t any change in the reimbursement formula, then these five hospitals could be struggling to stay open within a few years.
Only time will tell what kind of impact the Fair Medicare Hospital Payment Act of 2016 will have on rural hospitals and patients. Hopefully, smaller hospitals will be able to have more financial success by gaining more from Medicare reimbursement. The act should significantly improve the compensation instead of seeing some hospitals receive much more than others for the same services. Through this act, hopefully, it can save a few hospitals from closing, as well as save patients money as well.
MedicareWallet.com is an unbiased, online resource for individuals turning 65 or already on Medicare. Our utmost goal is to provide information in a way that is user-focused, informative and ethical. With a combined 40 years of experience in the Medicare market, we can answer any questions about Medicare and Medigap insurance. Feel free to reach out to us at 800.376.0824 or by email at [email protected]