WASHINGTON – U.S. Sens. Mark R. Warner (D-VA) and Lamar Alexander (R-TN) introduced bipartisan legislation to ensure rural hospitals in Virginia can keep up with the cost of providing care amid the novel coronavirus (COVID-19) outbreak. The Fair Medicare Hospital Payments Act would help curb the trend of hospital closures in rural areas by making sure hospitals are fairly reimbursed for their services by the federal government. This legislation comes at a crucial time as hospitals in Virginia continue to lose needed revenue despite playing an essential role in serving their communities and providing lifesaving care during the biggest public health crisis in a century.

“The current payment policy has long placed some of Virginia’s most rural hospitals at a disadvantage and made it more difficult to provide quality care in communities that need it most,” said Sen. Warner. “The COVID-19 public health emergency has made it more important than ever to do everything we can to support our rural hospitals and this legislation is absolutely critical in doing that.” 

“Last year, the Trump Administration updated the formula that determines how much Medicare will reimburse hospitals for patient care, taking into account, among other things, the cost of labor in that geographic area – called the Medicare Area Wage Index. And because of this change, Alan Levine, who leads Ballad, announced a $10 million investment in pay increases to nurses. However, these changes are temporary and will expire in three years, and many hospitals are concerned that hospital reimbursements could revert to the lower rates,” said Sen. Alexander. “Given COVID-19 impacts on rural hospitals, any changes that lower reimbursement would have significant impact. Tennessee has the second highest rate of hospitals closures in the country, with 13 hospitals having closed since 2010, and this is, in large part, due to lower reimbursements. This legislation will help keep up with the cost of providing care and help curb the trend of Tennessee rural hospital closures by setting an appropriate national minimum for the Medicare Area Wage Index.” 

The Medicare Area Wage Index, a formula used by Medicare to reimburse hospitals, is much lower for states like Virginia and Tennessee, due to the fact that the formula is based on labor costs, which vary across the country. This flawed formula often results in disproportionately low Medicare reimbursement payments to hospitals in rural and low-wage areas.

Specifically, the legislation would establish an appropriate national minimum (0.85) for the Medicare Area Wage Index and ensure that rural hospitals are paid for the care they provide, while preserving the existing reimbursements for urban hospitals. This legislation would also help ensure fairness in reimbursements for hospitals across the country – including the many hospitals that are facing closures in rural areas – and fix severe and disproportionate disadvantages that unfairly penalize hundreds of communities and hospitals across the United States.

At a minimum, 14 Virginia hospitals would benefit from this legislation, with the number of beneficiaries growing in future years. The 14 hospitals that would immediately benefit include:

According to the American Hospital Association, Medicare accounts for about 43 percent of reimbursements for hospitals nationally, underscoring the role that Medicare payments play in keeping hospitals open and functioning – particularly in Virginia’s underserved and economically-struggling regions.

In addition to Sens. Warner and Alexander, the legislation was introduced by Sens. John Cornyn (R-TX), Doug Jones (D-AL), Marsha Blackburn (R-TN), Tim Kaine (D-VA), David Perdue (R-GA) and Richard Shelby (R-AL).

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