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CEO Message

Area Wage Index Battle Presses On

In a little more than a month, the Centers for Medicare & Medicaid Services (CMS) will issue a final rule of significant importance for California’s hospitals: a decision that could alter the way Medicare adjusts hospital payments for geographic differences in labor costs (known as the Area Wage Index).

Their proposal? Take money from hospitals in California with high wages to give to hospitals in states with lower wages. CMS suggests this is an effort to address longstanding inequities in the wage index and to help rural hospitals.  

Not so in California. This proposal means Medicare payment cuts for many California rural hospitals. And shifting resources from high-cost areas does not reduce the demand for health care services or the very real disparities in the cost of doing business in places like San Francisco, Los Angeles, or San Diego compared to other cities in the U.S.

As California has the highest nurse salaries in the nation, this proposed rule is not only detrimental to the care you provide, but also sets a chilling precedent: that CMS can choose to rob Peter to pay Paul – this time to the tune of hundreds of millions of dollars – and ignore the significant differences in wages paid by hospitals across the country.

What might they do next time?

Our advocacy for you continues:

  • This week, CHA submitted comments on this flawed Area Wage Index proposal as part of our broader comments on CMS’ 2020 inpatient prospective payment system proposed rule.  
  • California’s congressional representatives are with us. In a strong showing of bipartisan support, 48 members of California’s congressional delegation signed a letter calling for a policy that does not penalize one group of hospitals for the benefit of another.
  • And we’ll be meeting directly with CMS leaders to reiterate the shortcomings of this proposal and its outsized impact on California and to make sure they hear directly from California hospital leaders. 

But until August, the ultimate outcome is unknown.

What is clear is that we can’t – and won’t – let up in fending off an ill-conceived proposal and a dangerous precedent. There are other ways to address the needs of rural hospitals in America, and they should be addressed. Just not at the expense of other hospitals when we are all losing money on every Medicare patient we treat.

– Carmela