[Congressional Record Volume 152, Number 125 (Friday, September 29, 2006)]
[Senate]
[Pages S10693-S10694]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SPECTER (for himself and Mr. Santorum):
  S. 4017. A bill to provide for an appeals process for hospital wage 
index classification under the Medicare program, and for other 
purposes; to the Committee on Finance.
  Mr. SPECTER. Mr. President, I have sought recognition today to 
introduce with Senator Santorum the Hospital Payment Improvement and 
Equity Act, which will provide an increased reimbursement for acute 
care hospitals and inpatient rehabilitation facilities that are 
disadvantaged by Medicare payments under the Medicare area wage index 
reclassification system.
  For a considerable period of time, there have been a number of 
counties in Pennsylvania that have been suffering from low Medicare 
reimbursements, which has caused them great disadvantage because their 
nurses, and other medical personnel are moving to surrounding areas. I 
refer specifically to Luzerne County, Lackawanna County, Wyoming 
County, Lycoming County, and Columbia County in northeastern 
Pennsylvania. Those counties are surrounded by MSAs, metropolitan 
statistical areas, in Newport, NY, to the north; in Allentown to the 
southeast; and the Harrisburg MSA to the southwest. As these counties 
are surrounded by MSAs with higher Medicare reimbursements, a flight of 
very necessary medical personnel has occurred. More recently, western 
Pennsylvania has been faced with Medicare reimbursement that has not 
kept pace with the rising cost of healthcare placing a tremendous 
burden on these facilities to provide good jobs at competitive wages.
  It has also come to my attention that inpatient rehabilitation 
facilities are not provided an opportunity to obtain equitable Medicare 
reimbursement. Inpatient rehabilitation facilities receive adjustments 
in their Medicare reimbursement due to geographic disadvantages within 
the Medicare inpatient prospective payment system. This is based on 
information gathered from other acute care facilities in the MSA, not 
from their own wage information. Inpatient Rehabilitation Facilities, 
further, cannot apply for reclassification to another MSA that reflects 
their labor costs. This has prevented those facilities from being 
eligible for increased funding to assist with wages like acute care 
facilities, while being forced to compete for employees with those 
facilities that have had access to increased funding.
  I have worked to find a solution to this problem for a number of 
years. During the conference for the fiscal year 2002 Labor, Health and 
Human Services, and Education Appropriations bill, the conferees agreed 
that there should be relief for these areas in Pennsylvania that were 
surrounded by areas that had higher MSA ratings. However, at the last 
minute, there was an objection to including language in the conference 
report.
  To correct this problem I, with Representatives Sherwood and English, 
brought the matter forward in the Fiscal Year 2002 Supplemental 
Appropriations bill. They worked to include language in the House 
version of the bill and I filed an amendment to the Senate bill. During 
conference negotiations my amendment was defeated and the provisions 
were not included.
  As part the Fiscal Year 2004 Labor, Health and Human Services, and 
Education Appropriations, I provided $7 million for hospitals in 
Northeast Pennsylvania that continued to be disadvantaged by the 
Medicare area wage index reclassification. This was provided as 
temporary assistance for those facilities.
  During the consideration of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003, I met with Finance Chairman 
Grassley and Ranking Member Baucus about the bill provisions, including 
the need for a solution to the Medicare area wage index 
reclassification problem in Pennsylvania. As a result, Section 508 was 
included in the bill, which provides increased funding for hospitals 
nationally to be reclassified to locations with higher Medicare 
reimbursement rates for three years at $300 million per year. The 
temporary program, which began in April 2004 and will expire April 
2007, has and will provide Pennsylvania hospitals $69 million over that 
time, $23 million per year.
  Most recently, as part of the Senate Fiscal Year 2007 Labor, Health 
and Human Services, and Education Appropriations bill, I provided $4.3 
million for hospitals in the Scranton/Wilkes-Barre and Williamsport 
areas that have been harmed by the ongoing wage index problem. Further, 
on June 14, 2006, 20 other Senators joined me in sending a letter to 
Finance Chairman Grassley and Ranking Member Baucus in support of 
Senate action to extend Section 508.
  As the Section 508 program is scheduled to expire on March 31, 2007, 
and the low Medicare area wage index reimbursement is still being 
unfairly placed on many Pennsylvania hospitals, the legislation I am 
introducing would extend the current Section 508 benefit to those who 
are currently receiving funding and to those who deserved funds under 
the previous competition for this funding.

  The legislation builds on the Section 508 Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003, by providing hospitals who 
continue to be disadvantaged by low Medicare reimbursement an increase 
in funding. The bill would allow both acute care hospitals and not-for-
profit inpatient rehabilitation facilities apply for funding in a 
similar manner as set up under Section 508. Facilities that meet 
specific wage and geographic criteria will receive a three year 
reclassification.
  Under the Section 508, program a number of hospitals meet the 
necessary criteria to receive reclassification, however, inadequate 
funding of $300 million per year for the program was provided. As a 
result, 154 additional hospitals did not receive this vital funding. 
Under this legislation, sufficient funds would be provided to allow all 
facilities that meet wage and geographic criteria to receive 
reclassification funding.
  To remedy the under-funding of impatient rehabilitation facilities, 
not for profit facilities will be eligible for funding through this 
program. If all acute care hospitals in an MSA apply for and receive 
funding through this program, or have sole community hospital status, 
or have reclassified to another MSA through another mechanism, then 
non-profit inpatient rehabilitation facilities in that MSA are 
eligible. Those rehabilitation facilities will be reclassified to the 
MSA where a majority of other hospitals from the same MSA have been 
reclassified.
  For those hospitals who received funding under the current Section 
508; they will have received the benefit of a higher wage index for 
three years, April 1 , 2004-March 1, 2007. These higher wages will be 
included in the hospitals' cost reports and be reflected in the data 
used to calculate a future wage index. It has always been the hope that 
this increased funding would enable these hospitals to pay higher wages 
and subsequently see an increase in the area wage index.
  The problem with the wage index system is the use of three year-old 
audited cost report data for the calculation of the wage index. 
Therefore, a full year of Section 508 money from fiscal year 2004 will 
first be seen in the fiscal year 2008 wage index calculation. For 
hospitals that end their fiscal year on June 30, that wage data will 
not be included in their wage index calculation until fiscal year 2009. 
To reclassify, three years of data is needed to show the proper 
evidence for eligibility. Thus, the full effect of the Section 508 
funding will flow through the wage index system by fiscal year 2011. 
For this reason, additional funding is needed for the next three years 
in order for these disadvantaged hospitals to continue paying 
competitive salaries to their employees.
  Under Section 508, 121 hospitals have and will receive $900 million 
in assistance, while this is a significant amount of funding, it did 
not fix the problem of low Medicare wage reimbursement. A long term 
solution to this problem is needed, however the current Section 508 
funding will expire on March 31, 2007 and additional funding is needed 
for these facilities while we work to find that solution. The loss of 
hospitals and jobs due to unfair CMS reimbursement is unacceptable.
  The hospitals which face this low Medicare reimbursement are in great 
financial distress. These are hospitals which are serving an aging 
population

[[Page S10694]]

in northeastern Pennsylvania and across the nation. This legislation 
provides Medicare reimbursement assistance for those facilities and 
ensures Medicare beneficiaries' access to care. I encourage my 
colleagues to work with Senator Santorum and me to move this 
legislation forward promptly.
                                 ______