Rural Hospitals to Ask for Bigger Medicare Share
Hospital directors and health officials from rural areas complained
that they are being shortchanged by Medicare's calculations of labor costs
in sparsely populated sections of the country. They are preparing to lobby
Congress for new laws to funnel more money to rural hospitals that rely
heavily on Medicare for their operating budgets.
``We have been funding urban medical centers because we are being
penalized,'' said Val Schott, Oklahoma's director of rural health. He
noted that Medicare reimburses hospitals in his state 78 cents for each
dollar they spend on labor costs, while many urban hospitals get $1.10 or
more back for each dollar spent. The partial payment makes up as much 71%
of all Medicare money that goes to hospitals for outpatient care in the
``We are talking about well-run institutions that may not be able to
keep their doors open because of federal payment techniques,'' Schott
The upcoming lobbying effort is the latest in a string of moves by
rural health centers to regain funding that was cut as part of the
Balanced Budget Act passed by Congress in 1997. Lawmakers passed two major
``giveback'' bills since then to restore some payments to hospitals,
health plans, and others who administer or deliver Medicare services.
Rural providers are hoping to capitalize on a Senate Finance Committee
likely to be heavily focused on rural issues. The committee--which has
jurisdiction over Medicare legislation--has a new chairman and new ranking
member, both from heavily rural states.
``It's clearly a very high priority for the committee,'' said Keith
Miller the chief lobbyist for the National Rural Health Association.
Chairman Charles Grassley (R-Iowa) and ranking Democrat Max Baucus
(D-Mont.) ``are strong rural advocates,'' he said.
A study released at the organization's meeting showed that Medicare's
``labor index'' pays rural hospitals 21% less on average for their labor
costs than it pays to urban hospitals. Some of the difference owes to the
fact that wages and other labor related costs are lower at small rural
hospitals than at large city facilities.
But an 18% gap in labor-related reimbursement remained after the
researchers compared equally sized rural and urban hospitals, according to
Rebecca T. Slifkin, director of the North Carolina Rural Health Research
and Policy Analysis Center.
Rural hospitals are hoping to convince lawmakers to reduce the
percentage of their total Medicare reimbursement that comes from labor
costs, arguing that they spend more money than urban hospitals do on
health care equipment and other non-labor items.
``We want them to know that rural health care is not just a scaled down
version of urban care,'' Schott said.
Sen. Baucus told the group that both he and Sen. Grassley would work to
overcome Congress' historic ``failure to understand the special nature of
rural health care.'' Issues including a Medicare prescription drug benefit
and help for people without one could serve as a platform for the
committee to pass amendments that again increase rural hospitals' share of
The committee is awaiting a report on the effect of Medicare policy on
rural health care due out in June from the Medicare Payment Advisory
Commission before deciding how much of an increase in labor reimbursement
to push for, Sen. Baucus told Reuters Health.
``I want to wait and see the data first and then decide,'' he said.