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Congressman Diane Black

Representing the 6th District of Tennessee

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Black Reintroduces Bipartisan Legislation to Ensure Fair Reimbursement for Tennessee Hospitals

February 17, 2017
Press Release

Washington, D.C. – Congressman Diane Black (R-TN-06), a nurse of more than 45 years and member of the Ways and Means Health Subcommittee, introduced H.R. 1130, the Fair Medicare Hospital Payments Act of 2017, alongside Congresswoman Terri Sewell (D-AL-07) and 13 other cosponsors, including every member of Tennessee’s Congressional delegation. The bipartisan bill would establish a national minimum Area Wage Index (AWI) of 0.874 for Medicare reimbursement of both inpatient and outpatient services, in turn correcting a flawed formula that results in disproportionately low reimbursement payments to rural hospitals like those in Tennessee and Alabama. Black released the following statement:

“As a registered nurse, I know that protecting our quality of life and public health in Tennessee goes hand-in-hand with ensuring that our hospitals get a fair deal from Washington. The current area wage index formula unfairly tilts the scales against rural hospitals like those across my district while letting hospitals in the wealthiest neighborhoods of California and Massachusetts cash in on this flawed payment model. Tennessee’s healthcare providers bring lifesaving care to neighbors across the state every day. It isn’t asking too much to insist that they receive a proper reimbursement for the services they perform. I am grateful for the strong, bipartisan showing of support for this legislation from my colleagues and will urge swift passage of this bill to ensure fairness and stability for every Tennessee hospital,” said Congressman Diane Black.

Background:

The Centers for Medicare and Medicaid Services (CMS) bases a portion of each hospital’s reimbursement for Medicare services on the Area Wage Index for Hospitals (AWI). The AWI is based upon the relative hospital wage level in the hospital’s geographic area compared to the national average. A number of legislative and administrative “fixes” over the past thirty years along with flaws of the existing formula have resulted in significant distortions in the AWI system. For example, as it stands today, hospitals in the community of Oakland, California are reimbursed based on an AWI of 1.74 while, for example, Cumberland Medical Center in Crossville and St. Thomas Dekalb Hospital in Smithville are reimbursed based on an AWI of .72.

In fact, while the AWI was originally designed so that the average AWI is 1.0, there is not a single hospital in any of the following states that is reimbursed based on an AWI of 1.0 or greater: Alabama, Tennessee, Georgia, Ohio, Texas, South Carolina, Louisiana, Kentucky, Arkansas, Iowa, Kansas, Missouri, and Utah.

Under the current system, hospitals that choose to enter rural and underserved areas with lower average wages are slapped with disproportionately lower reimbursement rates and thinner profit margins. By establishing a floor AWI of 0.874 for Medicare reimbursement, the Fair Medicare Hospital Payments Act of 2017 will help address this disparity.

 

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Congressman Diane Black represents Tennessee’s 6th Congressional District. A nurse for more than 45 years, she serves as Chairman of the House Budget Committee and a member of the Ways and Means Committee.

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