"21 states take aim at Mass. hospitals’ Medicare windfall; Nantucket’s tiny hospital that funnels hundreds of millions to other institutions" by Tracy Jan |
Globe Staff, January 13, 2013
WASHINGTON — Nantucket
Cottage Hospital is a national symbol of
inequity and political machinations in the way the federal government
reimburses hospitals for treating Medicare patients.
Under an arcane hospital payment system, Nantucket Cottage’s rural
designation has allowed the state’s 81 other hospitals to collectively
reap between a $256.6 million and $367 million annual bonus for the last
two years — at the expense of other states. An Institute of Medicine
report released in July referred politely to the bonanza as the
“Nantucket effect.”
Now a coalition of 21 states is seeking to reverse the windfall,
calling it the “Bay State boondoggle,” the product of “Yankee ingenuity”
— the artful manipulation of obscure payment formulas.
“The entire way the payment system is now calculated has become so
complex and so susceptible to gaming and manipulation that you’d play
the game yourself if you were running a hospital, to make sure your
reimbursements continue to go up,” said Dr. Donald Berwick, President
Obama’s former administrator of the Centers for Medicare and Medicaid
Services and a health policy lecturer at Harvard Medical School. “It’s a
zero sum game. What Massachusetts gets comes from everybody else.”
Massachusetts comes out a winner due to a Medicare rule that says a
state’s urban hospitals must be reimbursed for wages paid to doctors and
staff at least as much as rural hospitals.
Since Massachusetts has only one rural hospital, Nantucket Cottage
sets the floor for wage reimbursements. Typically, rural hospitals have
lower wages than urban ones.
But wages on Nantucket are high because of its remote location and
high cost of living. Thus, the rural wage floor established on Nantucket
has become a boon for hospitals in the rest of the state.
Massachusetts, Connecticut, New Hampshire, and Rhode Island are among
only nine states that win under the current system, negotiated in part
by Senator John Kerry as part of the national health reform law.
Massachusetts is by far the largest beneficiary, followed by California,
which receives half as much money.
See: Missouri Mad at Massachusetts
Who can blame them?
But those days could be numbered. The issue is expected to resurface
in Congress in February, with entitlement reform as a backdrop during
the debt ceiling negotiations. Proposed legislation has already been
discussed by Republicans.
And Kerry is leaving the Senate.
The American Hospital Association has also embarked on a study of the
contentious system, which the organization has deemed “greatly flawed.”
And the Centers for Medicare and Medicaid Services has recommended
reforms for the wage reimbursement system that could eliminate the
provision that benefits Massachusetts.
“Here you have a small hospital on an island in the Atlantic Ocean
basically setting the payments for all the hospitals in Massachusetts,
and as a result, reducing the payments for hospitals all across the
country,” said Herb Kuhn, president of the Missouri Hospital
Association. “It’s unfair and unjustified.”
As a result, Kuhn said, Missouri hospitals lose $15.6 million a year.
That's why they are mad.
According to the most recent federal data available, states like Texas,
New York, Michigan, Florida, and Illinois are the biggest losers,
forfeiting tens of millions of dollars each year under the current
system.
The dispute with Massachusetts began in 2011 after Medicare
implemented legislation cosponsored by Kerry, a Bay State Democrat, and
Senator Robert Menendez, a New Jersey Democrat. The amendment to the
federal health reform law required that Medicare reimbursements for
hospital wages come from a national pool of money instead of from each
state’s allocation. As a result, any increase for Massachusetts meant a decrease for other states....
Nantucket Cottage entered into the rural hospital payment system in
2008 after it was acquired by Boston-based Partners HealthCare. The
Nantucket hospital previously had been paid under a different formula,
but made the switch to the rural hospital payment system to help the
rest of Massachusetts hospitals reap a financial reward even though its
own Medicare reimbursement would decrease as a result. Partners had
ensured that Nantucket Cottage would be made whole financially because
the rest of its hospitals would benefit greatly.
The state’s largest hospital network had estimated that it would
receive an extra $40-50 million a year as a result of the shift in the
payment system.
More money for Partners to play with, huh?
A Nantucket hospital official declined to comment, calling the
issue a “political hot button.” The hospital spokesman deferred to
Partners, which referred a reporter to the state hospital association.
“These are what the rules are, and Massachusetts hospitals are
following the rules,” said Tim Gens, executive vice president of the
Massachusetts Hospitals Association. “Many hospitals in all states make
adjustments within the rules. We’re doing the same thing.”
Massachusetts lawmakers are girding themselves for a renewed
onslaught of criticism. The state’s congressional delegation defends the
measure as a corrective to previous rule changes that hurt
Massachusetts hospitals....
Broad reform, which industry leaders all agree is necessary, is
unlikely to come any time soon. In the meantime, other states will try
to get back the money that they lost, said Dan Boston, a health care
lobbyist representing the coalition of 21 hospital associations.
If Massachusetts lost the money, many hospitals across the state
would operate in the red or close to it, Gens said, potentially costing
jobs and leading to reductions in community benefits and medical
services.
Meanwhile, proposed legislation to undo what opponents have coined
the “Massachusetts fix” is under discussion in Congress. Potential
scenarios include a “claw back,” taking back the money Massachusetts has
received in the last two years, or trimming future collections, Boston
said.
Alan Sager, a health policy and management professor at Boston
University School of Public Health, said Massachusetts won by
“exploiting the rural hospital provision” and that it “can’t count on
being floated by revenue that is skimmed from other states.”
“That’s how wars used to start: One country would grab a province
from another and the country that was hurt would nurse its grievance and
fight back, maybe in alliance with other countries,” Sager said.
“That’s not a recipe for peace in health care.”
Used to?
--more--"
UPDATE:
Mass. hospital coalition targets Medicare reimbursements
A coalition of 20 state hospital associations submitted a letter to
President Obama this week asking him to remedy a provision in the
national health reform law that allows Massachusetts hospitals to reap
an annual bonus of between $256.6 million and $367 million in Medicare
reimbursements at the expense of most other states. A lobbyist for the coalition hand delivered the letter to the White House, along with a copy of a Boston Globe story published on Sunday about Nantucket Cottage Hospital’s outsized impact on national Medicare reimbursements.
