Hospitals fight for Medicare money

Altoona Regional Health System and other hospitals in western Pennsylvania are working with lawmakers to cure Medicare reimbursement inequities through national health care reform.

The alleged inequities in the Medicare wage index have cost the hospitals hundreds of millions of dollars collectively since 1997, with Altoona Regional Health System and Nason Hospital, Roaring Spring among the losers according to the Hospital Council of Western Pennsylvania.

Federal lawmakers with regional connections support the reform effort, but may not have political medicine strong enough to make a difference, the council said.

One potential opportunity has already died with closeout of amendments after the House passed its version of health care reform Nov. 7.

But Sen. Arlen Specter has placed a provision to help rectify the problem into a Senate Finance Committee contribution to the reform proposal.

The wage index reflects the level of hospital worker pay in a region and is proportional to the reimbursement Medicare pays for those wages, as part of its overall reimbursement for medical services to patients.

The wage index for hospitals in the Altoona, Johnstown and Pittsburgh areas have declined 13.9 percent over the past eight years.

During that time, the index has increased in most other areas.

The decrease in the region has created a "death spiral" in which low wages result in a low index, providing less money for wages, resulting in a further reduction of the index, and so on, council president A.J. Harper said.

It's not that the wages have gone down per se: They've increased 21 percent regionally since 2001.

But they've gone down relative to wages nationally, where there's been a 40-percent increase.

Several factors contribute to the problem, the council said.

The region has one dominant private insurer, Highmark Blue Cross Blue Shield, which has little competition and can dictate low reimbursements for treatments when negotiating contracts with hospitals, which then can't pay workers as much as they could otherwise.

The region has a hospital work force that tends not to move much, so hospitals haven't had to pay as much to keep and attract help - especially nurses, who are in greater demand elsewhere.

The region gets low reimbursement for Medicaid compared to the rest of Pennsylvania and nationally - as Pennsylvania pays the third lowest reimbursement rates in the country - which reduces income and depresses wages.

And hospitals here continue to employ workers in lower-paying departments like dietary and housekeeping - where hospitals in other area now contract for services - helping keep overall pay low.

"These are our hypotheses," Harper said.

Highmark Blue Cross Blue Shield contests the implication of the hospital council that it's got a virtual monopoly in the region.

In the Altoona market, it competes against Health America and Geisinger Health Plan, said Highmark spokesman Michael Weinstein.

As for reimbursements that aren't high enough to suit hospitals: The company negotiates them with the needs of its policyholders in mind, well aware of the mounting concern about rising medical costs, he said.

It seeks a middle ground, so its premiums are affordable for customers, while reimbursements are good enough to allow hospitals to provide quality care, he said.

Hospitals can't expect Highmark to make up for low reimbursements from Medicare and Medicaid, he said.

The hospitals have complained for years, but they've also done what they can in recent years within the system, "scrubbing" data to make sure it's "pristine," then appealing to the Center for Medicare & Medicaid Services for higher numbers, Harper said.

That has helped, bringing in $16 million for Pittsburgh hospitals one year and $2 million for Altoona one year.

It's worked so well the hospitals have committed to doing it every year.

But it's still not enough.

To get the kind of relief they really need, the hospitals are asking lawmakers to incorporate one long-term and two short-term solutions into the controversial health care reform legislation that has occupied Congress' and the administration's attention for months.

The long-term solution calls for a broader survey of wages on which to base the index.

Instead of taking account only of hospital workers' wages, it would consider the wages of all health care employees in an area.

The shift would add $67.7 million annually to reimbursements for western Pennsylvania and $88 million for the state as a whole - although hospitals in Philadelphia might take a cut.

The very size of the hypothetical adjustment shows that "obviously something is wrong," Harper said.

The change would provide an additional $103 million to Ohio and also benefit Virginia and Michigan.

New York and California would lose.

Specter's office is optimistic the reform will end up as part of health care reform law.

Because the change wouldn't go into effect until 2012, however, the council is recommending short-term fixes too.

One is a "floor" to prevent the wage index falling more than 10 percent below the level set by the 1997 Balanced Budget Act. In past years, that floor would have halted declines that eventually dragged Pittsburgh hospitals to negative 14 percent and Altoona to negative 12.5 percent.

Another short-term fix is relaxation of "reclassification" rules to allow hospitals to get reimbursements under the indexes of neighboring statistical areas more easily. The resulting blended numbers wouldn't reduce payments to the host-area hospitals.

U.S. Rep. Bill Shuster's office initially agreed to push for the short-term fixes on the House of Representatives side through amendments to the health care reform bill, if the opportunity arose.

It didn't arise, however, because of strict limits put on amendment-making for Republicans at the time of the bill's passage, Shuster spokesman Jeff Urbanchuk said.

There may be opportunity for change when a conference committee reconciles the House and Senate reform bills, but even that doesn't appear likely, Urbanchuk said.

Sen. Robert Casey likewise has agreed to push for short-term solutions on the Senate side, according to the council.

But the matter is "very much in flux and impossible to predict at this point," Casey press secretary Stephanie Zarecky said.

Mirror Staff Writer William Kibler is at 949-7038.