HJAR May/Jun 2022

HEALTHCARE JOURNAL OF ARKANSAS I  MAY / JUN 2022 11 Critical Access Hospitals were converting to IPPS status, apparently to raise the State’s rural wage index to a level whereby all urban hospitals in the State would receive the rural floor.” The legislative and regulatory changes as outlined above all added up to gaming the program and the best/worst case occurred in Massachusetts. BAY STATE BOONDOGGLE As the Affordable Care Act was wind- ing its way through Congress, a backroom deal allowed every hospital in Massachu- setts to benefit from the labor rates paid by tiny, 19-bed Nantucket Cottage Hospital. The sweetheart deal came at the expense of nearly every other hospital in the U.S. Known to many as the “Bay State Boon- doggle,”the sleight of hand resulted in more than a billion dollars in additional payments to Massachusetts hospitals. At the heart of the issue is Section 3141 of the ACA. The provision allowed Massachu- setts hospitals to gerrymander the arcane Medicare wage index system to their advan- tage by using an extremely remote, low- volume hospital located on an extremely high-cost-of-living island as the floor for all wages statewide. The increase benefited Massachusetts significantly and a few other states marginally. It disadvantaged the vast majority. CMS quickly criticized the ACA policy as a “manipulation,” yet they are required by law to enforce it. Ultimately, tiny Nan- tucket Cottage Hospital treats only about 150 inpatients a year, yet it influences pay- ments nationally. Any formula that allows for these types of gamesmanship should not be part of the formula for a hospital payment system. Karma did work in a strange way in 2017, when the hospital’s consultants misreported wages, which lowered the reimbursement to Massachusetts hospitals by $160million. RECENT DEVELOPMENTS CMS made a policy change in 2019 that was extremely helpful; under this change, hospitals with a wage index value below the lowest quartile would temporarily receive a wage index adjustment of 50% of the differ- ence between the standard wage index value for the hospital and the 25th percentile wage index value. In short, those hospitals on the bottom got a raise, and those on the top got a reduction. However, CMS also adjusted other hospi- tals’payments downward to make the policy budget neutral. The hospitals that lost sig- nificant dollars filed a lawsuit arguing that CMS did not have the authority to make such a rule change. (Although, in 2005, CMS used rule-making authority to make the same type of adjustments.) The court granted the hospitals’ motion for summary judgment on March 2, and CMS is currently contemplating whether to appeal the ruling. Should the ruling stand, Median Area Wage Index by State, FFY 2022