CQ Roll Call
December 06, 2012

Senators Want to Revive Medicare Programs for Rural Hospitals

Thirty-one senators are pushing to reinstate expired programs that increased Medicare payment for some rural hospitals as part of legislation that would block scheduled year-end cuts to Medicare physicians.

The bipartisan group asked leaders of the Senate Finance Committee to continue the programs, which expired Sept. 30, through the end of fiscal 2013.

“Rural hospitals face a wide array of financial difficulties and operational challenges under the current Medicare Prospective Payment System,” the group wrote in a letter to Senate Finance Chairman Max Baucus, D-Mont., and ranking Republican Orrin G. Hatch of Utah. “The network of health providers that serves rural Americans is fragile and more dependent on Medicare revenue because of the high percentage of Medicare beneficiaries who live in rural areas.”

As negotiations continue on how to avoid the fiscal cliff, lawmakers are pushing to ensure several expiring Medicare payment programs are not overshadowed. Many of those “extenders” are likely to be wrapped up in a measure that would also stop a 27 percent cut in payments to Medicare physicians at the end of this year.

One of the programs, created in 1987, would provide a funding adjustment for small rural hospitals for which Medicare beneficiaries make up a significant percentage of their patients. Approximately 200 small, rural hospitals across the country qualify as “Medicare dependent” and received an additional payment based on the amount that the cost of their discharging patients exceeds the set Medicare prospective payment system rate.

The second program would provide additional financial assistance for rural hospitals with low-patient volume. In fiscal 2011, the Centers for Medicare and Medicaid Services adjusted the eligibility criteria for the program, because previously, only two or three hospitals qualified.

“The recently improved low-volume adjustment better accounts for the relationship between cost and volume and helps level the playing field for low-volume providers,” the lawmakers said in the letter.

The American Hospital Association has said that hospitals, particularly those in small or isolated communities, can’t control factors such as patient volume. Although Medicare tries to pay providers based on the cost of providing services, such low-volume hospitals can’t operate on the same scale and save money in the way that larger ones can, the group said in a letter supporting the program’s extension.

New York Democrat Sen. Charles E. Schumer and Iowa Republican Sen. Charles E. Grassleysigned the letter, along with 29 of their colleagues. Schumer is sponsor of a bipartisan bill (S 2620) that would extend both the programs through the end of fiscal 2013.

Along with the American Hospital Association, the Federation of American Hospitals and the National Rural Health Association support the legislation.