Grassley works to strengthen rural health care system with equity, extensions and exemptions

WASHINGTON --- Senator Chuck Grassley introduced legislation this week to strengthen the health care delivery system in rural America.

Grassley’s Medicare Rural Health Access Improvement Act of 2009 would improve
Medicare payments to rural doctors, ambulances and mid- hospitals. The bill also works to
protect access for rural residents to home medical equipment and supplies, to continue to lend
support to rural hospitals such as critical access hospitals, and to provide additional authority for
physician assistants who provide valuable extended care and hospice services.

“The policy changes in this legislation go directly to the special challenges facing the
health care system in rural America,” Grassley said. “They recognize the high quality of health
care delivered by rural providers, embrace common sense solutions, and seek equitable treatment
from payment systems.”

Grassley’s legislation would give what are known as ‘tweener hospitals in Spencer, Spirit
Lake, Fort Madison, Muscatine, Carroll, Grinnell, Newton and Keokuk, Iowa better treatment by
the Medicare program and put them in a stronger position to provide health care services to
people in their communities and local areas. ‘Tweener hospitals are too large to be designated as
critical access hospitals but too small to be financially viable under the Medicare hospital
prospective payment system which is designed for larger operations.

“These hospitals are part of the backbone of the rural health care system and local rural
economies. There’s no justification for Medicare not recognizing their unique situation and vital
role,” Grassley said. “I’m committed to doing everything I can to make sure they’re treated
fairly and not left in a perilous situation.”

Grassley is a long-time leader in expanding access to health care in rural America. He
was the principal sponsor of the legislation that was enacted in 2003 to create the prescription
drug benefit in Medicare, and the comprehensive proposal contained major improvements for the
rural health care delivery network. Two years later, he won passage of major improvements for
Medicare Dependent Hospitals in legislation that was enacted to reduce the deficit. Grassley has
repeatedly worked to extend temporary provisions for rural health care, including geographic
adjusters to improve physician pay and help keep doctors in rural areas. Last year, he helped win
passage of a measure to protect rural health clinics from having to close by reconciling
inconsistent time frames from the Department of Health and Human Services for certification
requirements. Grassley is the Ranking Member of the Senate Committee on Finance, which is
responsible for Medicare and Medicaid. He has been a member of the Senate’s Rural Health
Caucus for many years.

A summary of the new Grassley legislation is below, along with the text of his floor
statement marking introduction of the bill and a description of the bill by title.

Summary of the Medicare Rural Health Access Improvement Act of 2009

While the bill would benefit different types of rural hospitals, it would especially benefit tweener
hospitals.

Tweener Hospital Improvements

• Most tweener hospitals currently are designated under the Medicare program as Medicare
Dependent Hospitals (MDHs) and Sole Community Hospitals (SCHs)

• The bill would provide temporary and permanent improvements so that payments to these
hospitals would better reflect the cost of providing inpatient and outpatient services

• Provisions assisting tweeners include:

o Improving the ways MDHs are paid for inpatient services
o Temporarily improving the hospital inpatient low-volume adjustment so that more
rural hospitals benefit
o Enabling both MDHs and SCHs to benefit from the same outpatient payment hold
harmless protection and add-on payments
o Temporarily lifting the disproportionate share hospital payment cap for rural
hospitals

• Many of these provisions were recommended by tweener hospitals in Iowa and are
supported by the Iowa Hospital Association and American Hospital Association
Critical Access Hospital Provisions

• For Critical Access Hospitals (CAHs), the Medicare Rural Hospital Flexibility Grant
Program would be extended for a year.

Physician Payment Incentives and Improvements

• The bill would reduce disparities in physician payment that adversely affect physicians in
Iowa and other rural states known as geographic adjustments or GPCIs (“GYPSEES”).

• Iowa physicians provide some of the highest quality health care yet they also receive
some of the lowest Medicare reimbursement due to the GPCI adjustments.

• This is a significant disincentive for physicians who practice in Iowa, and it is
fundamentally unfair.

• I share the goal of Iowa physicians and the Iowa Medical Society to reduce geographic
disparities and establish more equity in Medicare payment.

• Physicians deserve equal pay for equal work, regardless of where they practice.

• The bill makes fundamental changes in the work and practice expense GPCIs to reduce
geographic payment disparities.

• It would eliminate the work GPCI in 2010 by creating a national value of 1.0.

• It would also establish a practice expense floor of 1.0 and reduce the practice expense
GPCI adjustment by 50 percent, as of 2010.

• Iowa physicians deserve fair treatment, and I will continue working to achieve that goal.

Rural Extensions

• The bill would extend the existing payment arrangements which allow independent
laboratories to bill Medicare directly for certain physician pathology services through
2010.

• The bill would extend and increase rural ambulance payments by five percent for 2010.
Improve beneficiary access to health care services.

• It would permanently increase the payment limits for rural health clinics.

• It would also allow physician assistants to order post-hospital extended care services and
to serve hospice patients.

Rural Exemption from Competitive Bidding

• The bill would protect rural areas from being adversely affected by the new Medicare
competitive bidding program for durable medical equipment. Rural areas and
metropolitan statistical areas (MSAs) with a population of 600,000 or less would be
exempt from competitive bidding.

• We must ensure that beneficiaries in rural areas continue to have access to necessary
home medical equipment and supplies.

Statement of Senator Charles E. Grassley
Before the United States Senate
Introduction of the Medicare Rural Health Access Improvement Act of 2009
January 26, 2009

Mr. President, I am pleased to introduce the Medicare Rural Health Access Improvement Act of
2009.

The purpose of this legislation is to continue ongoing efforts to ensure that Americans in rural
areas have access to health care services. Much has been done in the past to improve access to
rural providers such as hospitals and doctors. Much more still needs to be done. And it is even
more important in light of the economic challenges we face.

Mr. President, I hold town meetings in each of the 99 counties in the great state of Iowa every
year. As many know, Iowa is largely a rural state, and a significant concern that I consistently
hear during these meetings is the difficulty my constituents experience in accessing health care
services. As the former Chairman and currently the Ranking Member of the Finance Committee,
it has therefore been a priority for me to improve the availability of health care in rural areas.

In Iowa, as in many rural areas across the country, hospitals are often not only the sole provider
of health care in rural areas, but also employers and purchasers in the community. Moreover, the
presence of a hospital is essential for purposes of economic development because businesses
check to see if a hospital is in the community in which they might set up shop. As you can see, it
is vital that these institutions are able to keep their doors open.

In previous legislation, Congress has been able to improve the financial viability of rural
hospitals. For instance, the creation and subsequent improvements to the Critical Access
Hospital designation have greatly improved the financial health of certain small rural hospitals
and ensured that community residents have access to health care.

However, there are still a group of rural hospitals that need help. I am referring to what are
known as “tweener” hospitals, which are too large to be Critical Access Hospitals, but too small
to be financially viable under the Medicare hospital prospective payment systems. These
facilities are struggling to stay afloat despite their tireless efforts. Like in many communities in
across the country, the staff of tweener hospitals and their community residents take great pride
in the quality of care at these facilities. I have heard countless stories of the exemplary work
tweener hospitals in Iowa perform not only as providers of essential health care, but also as
responsible members of their communities. It is for this reason that many provisions in this bill
are intended to improve the financial health of tweener hospitals and ensure that people have
access to health care.

Mr. President, most tweener hospital are currently designated as Medicare Dependent Hospitals
and Sole Community Hospitals under the Medicare program. There are provisions, both
temporary and permanent, included in this bill that would improve Medicare payments for both
types of hospitals. This includes improvements to the payment methodologies so that inpatient
payments to Medicare Dependent Hospitals would better reflect the costs they incur in providing
care. Improvements are also proposed in this bill to Medicare hospital outpatient payments for
both Medicare Dependent Hospitals and Sole Community Hospitals so they would both share the
benefit of hold harmless payments and add-on payments.

Also, a major driver of the financial difficulties that tweener hospitals face is the fact that many
have relatively low volumes of inpatient admissions. This bill would improve the existing lowvolume
add-on payment for hospitals so that more rural facilities with low volumes would
receive the assistance they desperately need.

Over the years, many have commented that it is simply unfair for many rural hospitals to receive
only a limited amount of Medicare Disproportionate Share Hospital, or DSH, payments while
many urban hospitals are not subject to such a cap. This bill would eliminate the cap for DSH
payments for those rural hospitals for a two-year period.

There are also other provisions that would continue to help rural hospitals. The rural flexibility
program would be extended for an additional year. This essential program provides valuable
resources for rural hospitals.

This legislation also seeks to improve incentives for physicians located in rural areas and
increase beneficiaries’ access to rural health care providers. It includes provisions designed to
reduce inequitable disparities in physician payment resulting from the Geographic Practice Cost
Indices, or adjusters, known as GPCIs. Medicare payment for physician services varies from one
area to another based on the geographic adjustments for a particular area. Geographic
adjustments are intended to reflect cost differences in a given area compared to a national
average of 1.0 so that an area with costs above the national average would have an index greater
than 1.0, and an area below the national average would have an index less than 1.0. There are
currently three geographic adjustments: for physician work, practice expense, and malpractice
expense.

Unfortunately, the existing geographic adjusters result in significant disparities in physician
reimbursement which penalize, rather than equalize, physician payment in Iowa and other rural
states. These geographic disparities in payment lead to rural states experiencing significant
difficulties in recruiting and retaining physicians and other health care professionals due to their
significantly lower reimbursement rates.

These disparities have perverse effects when it comes to realigning Medicare payment to reward
quality of care. Let me put that into context. Iowa is widely recognized as providing some of
the highest quality health care in the country yet Iowa physicians receive some of the lowest
Medicare reimbursement due to these inequitable geographic adjustments. Medicare
reimbursement for some procedures is at least 30 percent lower in Iowa than payment for those
very procedures in other parts of the country. That is a significant disincentive for Iowa
physicians who are providing some of the best quality care in the country, and it is
fundamentally unfair. Congress needs to reduce these disparities in payment and focus on
rewarding physicians who provide high quality care.

The inequitable geographic payment formulas have also exacerbated the problems that rural
areas face in terms of access to health care. Rural America today has far fewer physicians per
capita than urban areas. The GPCI formulas are a dismal failure in promoting an adequate
supply of physicians in states like Iowa, and more severe physician shortages in rural areas are
predicted in the future.

The legislation I am introducing today makes changes in the GPCI formulas for work and
practice expense to reverse this trend. It recognizes the equality of physician work in all
geographic areas and establishes a national value of 1.0 for the physician work adjustment. It
establishes a practice expense floor of 1.0 floor and revises the calculation of the practice
expense formula to reduce payment differences and more accurately compensate physicians in
rural areas for their true practice costs. These changes are needed to help rural states recruit and
retain more physicians so that beneficiaries will continue to have access to needed health care.

Last year Congress enacted a number of other provisions to improve Medicare payment for
health care professionals and providers in rural areas that will expire at the end of 2009. This bill
extends the existing payment arrangements which allow independent laboratories to bill
Medicare directly for certain physician pathology services through 2010. It extends and
improves the rural ambulance payments enacted in the Medicare Improvements for Providers
and Patients Act of 2008 by increasing payments from three to five percent and extending them
an additional year, through 2010. The bill also includes several new provisions to improve
beneficiary access to health care services. It permanently increases the payment limits for rural
health clinics. It also allows physician assistants to order post-hospital extended care services
and to serve hospice patients.

Finally, the bill would protect rural areas from being adversely affected by the new Medicare
competitive bidding program for durable medical equipment. It would ensure that home medical
equipment suppliers who provide equipment and services in rural areas and small metropolitan
statistical areas (MSAs) with a population of 600,000 or less can continue to serve the Medicare
program by exempting these areas from competitive bidding. We must ensure that rural areas
continue to have medical equipment suppliers available to serve beneficiaries in these areas.

Mr. President, as you can see, we still have much to do when it comes to ensuring access to
health care in rural America. I look forward to working with my colleagues on this important
matter.

Thank you, Mr. President. I yield the floor.

Medicare Rural Health Access Improvement Act of 2009

Title I – Provisions Relating to Medicare Part A

Section 101. Extension of Medicare FLEX Program.

The provision would extend the Medicare Rural Hospital Flexibility Grant Program through
FY2011.

Section 102. Improvements to the Medicare Dependent Hospital (MDH) Program.

Starting for discharges on October 1, 2009 until October 1, 2011, MDH payments would not be
adjusted for area wages unless it would result in improved payments, and MDHs would have
their payments based on 85 percent of their hospital specific costs instead of 75 percent.

Section 103. Temporary Improvements to the Medicare Inpatient Hospital Payment
Adjustment for Low-volume Hospitals.

In FY2010 and FY2011 hospitals that are located more than 15 road miles from another
comparable hospital and have 2,000 discharges of individuals entitled to or enrolled for Medicare
Part A benefits would receive a low-volume payment adjustment for Medicare inpatient hospital
services. The Secretary would determine the applicable percentage increase using a linear
sliding scale ranging from 25% for low-volume hospitals below a certain threshold to no
adjustment for hospitals with greater than 2,000 discharges of individuals with Medicare Part A
benefits.

Section 104. Temporarily Lifting the Disproportionate (DSH) Adjustment Cap for Rural
Hospitals.

The provision would eliminate the DSH adjustment cap for rural hospitals for discharges
occurring in FY2010 and FY2011.

Title II – Provisions Relating to Medicare Part B

Section 201. Extension and Expansion of the Medicare Hospital Outpatient Department
Hold Harmless Provision for Small Rural Hospitals.

The provision would establish that in CY 2010, small rural hospitals, including Medicare
Dependent Hospitals and Sole Community Hospitals, would receive 100% of the difference
between payments made under the Medicare Hospital Outpatient Prospective Payment System
and those made under the prior reimbursement system.

Section 202. Expansion of the Medicare Hospital Outpatient Department Add-on Payment
for Rural Sole Community Hospitals (SCHs).

Both SCHs and Medicare Dependent Hospitals (MDHs) in rural areas would receive a 7.1%
increase in payments for covered hospital outpatient services starting January 1, 2010. The
Secretary would be able to revise this percentage starting for services furnished after January 1,
2011 through promulgation of a regulation. The increased payments as they relate to SCHs and
MDHs would not be implemented in a budget-neutral manner.

Section 203. Revisions to the Work Geographic Adjustment Under the Medicare Physician
Fee Schedule.

The provision would eliminate the work adjustment and establish a national value of 1.0,
effective January 1, 2010.

Section 204. Revisions to the Practice Expense Geographic Adjustment Under the
Medicare Physician Fee Schedule.

The provision would establish a practice expense floor of 1.0 and reduce the geographic
adjustment for practice expense to 50 percent of the current adjustment, effective January 1,
2010.

Section 205. Extension of Treatment of Certain Physician Pathology Services Under
Medicare.

The provision extends for an additional year the provision that allows independent laboratories to
continue to bill Medicare directly for the technical component of certain physician pathology
services provided to hospitals as authorized by the Balanced Budget Act of 1997 through
December 31, 2010

Section 206. Extension of Increased Medicare Payments for Rural Ground Ambulance
Services.

The provision would provide for an increase in the rates otherwise established for ground
ambulance services of 5 % in rural areas for 2010.

Section 207. Rural Health Clinic Improvements.

The provision would establish the RHC upper payment limit at $92 per visit in 2010. The limit
would be increased in subsequent years by the percentage increase in the MEI applicable to
primary care services.

Section 208. Exemption for suppliers in small MSAs and rural areas.

The provision would require the Secretary to exempt rural areas and small MSAs with a
population of 600,000 or less from the Medicare competitive bidding program. Competitively
bid prices would not apply to rural and small MSAs exempted under this section. The provision
would be effective as if included in the MMA, other than for contracts entered into pursuant to
implementation of competitive bidding prior to September 1, 2008.

Section 209. Permitting Physician Assistants to Order Post-Hospital Extended Care
Services and to Provide for Recognition of Attending Physician Assistants as Attending
Physicians to Serve Hospice Patients.

The provision would allow a physician assistant who does not have a direct or indirect
employment relationship with a SNF, but who is working in collaboration with a physician, to
order post-hospital extended care services. For purposes of a hospice written plan of care, the
provision would recognize attending physician assistants as attending physicians to serve hospice
patients. It would continue to exclude physician assistants from the authority to certify an
individual as terminally ill. The provisions would apply to items and services furnished on or
after January 1, 2010.

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