More on Reimbursement

CMS increases wage index for rural hospitals

The rule increases new technology add-on payment from 50 to 65% for cases with high costs involving eligible new technologies.

Susan Morse, Managing Editor

The Centers for Medicare and Medicaid Services has increased wage index payments to rural hospitals that addresses concerns over the disparity between hospital payments in high-wage areas versus low-wage areas, which tend to be rural. CMS is redistributing funds by decreasing payments for all hospitals.


Hospitals located in areas with wages below the national average receive a lower Medicare payment rate than hospitals in areas with above-average wages.

HIMSS20 Digital

Learn on-demand, earn credit, find products and solutions. Get Started >>

For instance, a hospital in a rural community could receive a Medicare payment of about $4,000 for treating a beneficiary admitted for pneumonia, while a hospital in an urban community could receive nearly $6,000 for the same case, due to wage index differences.

The wage index is updated annually based on wage data reported by hospitals. The final rule improves the accuracy of the Medicare payments to low wage hospitals. This enables them to increase what they pay their workers, raising their wage index.


Rural areas have experienced more than 100 hospital closures since 2010 and continue to face limited access to specialty care.

Changes made to the hospital wage index is helping many rural and other low-wage hospitals attract and maintain a skilled workforce, CMS said.

The updated payment policies are being made under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) for fiscal year 2020.


In last year's proposed rule, CMS invited comments on changes to the Medicare inpatient hospital wage index, which is an adjustment to inpatient payment rates to account for local differences in wages that hospitals face in their respective labor markets.


The final rule enacts several payment changes to enable faster access to new medical technology.

It increases new technology add-on payment (NTAP) from 50 to 65% for cases with high costs involving eligible new technologies.


CMS is also modernizing payment policies for medical devices that meet the FDA's Breakthrough Devices designation for expedited FDA approval or clearance.

Under an expedited timeframe, it can be challenging for innovators to gather evidence of the device's "substantial clinical improvement" which is required to qualify for Medicare new technology add-on payments.

To address this issue, CMS finalized an alternative NTAP pathway in which Breakthrough Devices would no longer be required to demonstrate evidence of  "substantial clinical improvement" to qualify for new technology add-on payments.

CMS is also finalizing changes to clarify its general policies on "substantial clinical improvement" to qualify for new technology add-on payments.


CMS is also finalizing policies to remove barriers for new antimicrobial therapies, which treat drug-resistant infections, and are currently in short supply. Drug-resistant infections affect more than 2 million Americans each year, resulting in thousands of deaths annually, with the majority of new diagnoses and subsequent fatalities attributed to Medicare beneficiaries.

To encourage the development of antimicrobials, CMS has also created an alternative NTAP pathway, which would no longer require new antimicrobial drugs to meet the "substantial clinical improvement" criteria and would also increase the NTAP from 50% to 75%. Importantly, the drugs eligible for this pathway will be new antimicrobials which have received a Qualified Infectious Disease Products designation from the FDA.


"The Trump Administration is providing relief to rural communities and addressing payment policies that have disadvantaged rural hospitals, making it harder for them to stay open and provide care to the one in five Americans living in rural areas," said CMS Administrator Seema Verma. "President Trump is strengthening Medicare by clearing the way for Medicare beneficiaries to access the same transformative technologies and treatment options emerging in the private market.

Twitter: @SusanJMorse
Email the writer: