Regional Medical Center has been getting less than its share of Medicare money for years, hospital officials say. And the evidence of that is visible at the Anniston hospital, for those who know where to look.
There’s the CT or MRI machine that would have been upgraded years ago at a big-city hospital. A lobby with decor that’s clearly not from this decade. A roof that needs to be replaced, but not necessarily this year.
“You pick and choose what things the hospital can do now, and what should wait,” said Mark North, chief financial officer of RMC, which runs both of Anniston’s hospitals.
RMC, its sister hospital Stringfellow and Alabama hospitals have long been on the wrong end of a federal rule that governs how Medicare reimburses medical providers for procedures. Known as the Medicare Wage Index, that rule allows the federal government to pay more for medical procedures in states where wages for medical workers are highest, and less in states where medical workers make less money.
Under the current formula, according to data from RMC, Medicaid would pay $3,627 for a typical hospital stay for pneumonia in Anniston, while the same stay in San Francisco would $6,265 from Medicare. The federal government would pay about $10,000 for a knee replacement in Anniston; the same procedure would bring a $18,000 Medicare reimbursement in San Francisco.
That’s going to change — at least a little — on Oct. 1, thanks to a tweak by Trump administration officials. Hospitals now in the top tier of reimbursements will get less from Medicare, and hospitals in the bottom 25 percent will get more. Every hospital in Alabama is in that bottom 25 percent, hospital advocates say.
“In a way, it’s a huge victory for us,” said Danne Howard, a vice president of the Alabama Hospital Association. “But in the near term, it’s just a slight monetary relief.”
Hospital, heal thyself
Howard said she expects the rule change to bring an additional $38 million per year to Alabama hospitals. And it’s in place only for the next 4 years, unless renewed.
Divided among all the state’s hospitals, the money spreads pretty thin. RMC officials earlier this year said they expected to see an additional $850,000 to the company’s two Anniston hospitals, Regional Medical Center and Stringfellow. The two hospitals have a budget of about $200 million per year.
Last week, RMC officials offered an upgraded estimate. With direct payments from Medicaid and indirect payments from other Medicare recipients, the company might see $2 million per year.
It’s money the hospital can definitely use, administrators say. To see the difference, North said, just go to Georgia, where Medicare payments are higher and facilities are newer.
The lobby and waiting areas at RMC “look like what a hospital used to look like,” North said, because remodeling has been a low-priority expense when money was tight.
The wage index has been a front-burner issue for small town hospitals for years, so why the change now? David Becker, a health care economist at the University of Alabama Birmingham, said growing political pressure over the closure of rural hospitals is the likely reason.
“Rural hospitals play a special role,” Becker said. “Is the emergency room in my town or am I going to ride in an ambulance for 30 or 40 minutes? That’s something voters can see.”
Rural health care was a hot-button issue in last year’s local midterm elections. Some candidates decried the closure of RMC Jacksonville early in the year. Others offered plans to replace the hospital’s services, or promised to study the cost of air ambulance service in northern Calhoun County. Incumbents in both parties pointed to the wage index as an obvious fix for some rural health care problems.
The Jacksonville hospital closure figured largely in those debates — even though RMC Jacksonville wasn’t technically a rural hospital, at least by most government measures of what is rural. (Jacksonville’s a small town but Calhoun County is home to more than 100,000 people.)
Becker said the political geography of the rural hospital crisis may have helped nudge the Trump administration toward a change. States at the bottom end of the wage index tend to be in the red column and states at the higher end are often blue.
But it’s not clear that the change will help the most struggling small-town hospitals. RMC CEO Louis Bass said RMC’s now-closed Jacksonville hospital lost only about $100,000 per year to the wage index problem, and would have closed no matter what. Low patient volume, he said, was the hospital’s problem.
The pay gap trap
There’s a chance the new wage index could itself lead to a money problem for Alabama hospitals down the road. North, the RMC financial officer, said Health and Human Services has told hospitals they expect the new funding to go largely to wage increases for hospital staff.
North said that could help the RMC retain staff, who might be tempted to move to Georgia. At present, starting nurses make $4 to $5 more per hour in Carrollton, North said.
But the new wage index expires in four years, which could leave the hospital committed to higher salaries, even as the extra $2 million per year goes away.
Hospital advocates say the windfall from the wage index change pales in comparison to the biggest item on their wish list. If Alabama expanded Medicaid under the Affordable Care Act, bringing more insured patients online, costs for treating uninsured patients would drop considerably.
“Medicaid expansion would blow away what we’re getting from the wage index,” Bass said.