HELENA — Come this fall, several of Montana’s hospitals will start benefitting financially from an obscure provision in the federal health reform bill that ups Medicare payments in “frontier states.”
It’s worth up to $4.5 million a year for some of Montana’s largest hospitals, which for years have been getting paid less for Medicare-covered patients than hospitals in urban areas.
Hospitals in Billings, Missoula and Kalispell are the big beneficiaries.
While the money may not seem like much in Montana’s multibillion-dollar health industry, it’s certainly helpful, hospital executives say — and it’s part of the bill’s overall effort to improve what many believe is an imperfect system of paying for health care.
“If you have payment systems that are highly skewed in creating a bottom line for certain services, it’s natural for doctors, hospitals to invest in those services — whereas people need the whole scope of services,” said Nicholas Wolter, the chief executive officer at Billings Clinic, the state’s largest health care organization.
Better payment for Medicare-covered patients also means those costs won’t have to be picked up by other patients, Wolter said.
The provision, pushed by U.S. Sen. Max Baucus, D-Mont., the lead sponsor of the bill, changes the “wage index” that determines how many hospitals get paid for patients covered by Medicare, the federal health insurance plan for the elderly.
Medicare often accounts for half the revenue at hospitals.
The wage index for Montana hospitals has ranged from 0.83 to 0.9, meaning they get paid anywhere from 83 percent to 90 percent of the full Medicare payment for a given service.
Starting this fall, the bill changes the wage index to 1.0 for hospitals in Montana, Wyoming, the Dakotas and Utah.
The bill also will increase the geographic practice cost indices for Medicare payments to physicians in Montana, so doctors treating patients on Medicare will get a little more as well. In recent years, some Montana doctors have stopped accepting new patients covered by Medicare, because they don’t believe payment is adequate.
Baucus said the changes are meant to improve access for Montana patients.
“I have always fought to protect rural areas like Montana, and this provision will really help provide better care to folks across our state,” the senator said.
Bob Olsen, vice president of MHA, a lobby group representing Montana hospitals, estimates that the wage index change will increase revenue for the affected hospitals by about 5 percent, or $12.7 million a year statewide.
Yet that increase will be offset by reductions in Medicare payments that are contained elsewhere in the reform bill, hospital executives say.
Mary Windecker, director of strategic planning for Community Medical Center in Missoula, said the hospital estimates that it will receive about $3 million less in Medicare revenue over the next 10 years — despite getting a $13.3 million boost from the wage index change.
“It lessens the impact of health care reform,” she said of the wage-index change. “We’re still going to have a reduction in reimbursement. We’re going to have to business a little differently. We’re still working through all the details.”
Some Montana hospitals won’t be affected by the wage index change, such as those designated as “sole community hospitals” or those already being paid based on actual costs.
The biggest single beneficiary likely is Billings Clinic, which is estimating it will receive an additional $4.5 million next year for outpatient and inpatient services, said Kristianne Wilson, vice president of strategic development for the clinic.
Wilson said the clinic and other Montana hospitals have argued for years that the payment system is unfair, essentially paying them less money for services that may cost just as much to provide as hospitals that had a higher index.
“You want a payer (Medicare) that is half your business to be paying accurately and equitable across the country,” she said. “This policy change was made because Medicare realized that we have to compete for staffing and have practice-related expenses (on a national basis).”
St. Vincent Healthcare will also be a beneficiary of the provision. Officials from St. Vincent Healthcare were unavailable for comment on the details of their payments.