Coalition of state hospital associations target Massachusetts Medicare reimbursements

WASHINGTON—A coalition of 20 state hospital associations submitted a letter to President Obama this week asking him to remedy a provision in the national health reform law that allows Massachusetts hospitals to reap an annual bonus of between $256.6 million and $367 million in Medicare reimbursements at the expense of most other states.

A lobbyist for the coalition hand delivered the letter to the White House, along with a copy of a Boston Globe story published on Sunday about Nantucket Cottage Hospital’s outsized impact on national Medicare reimbursements.

The coalition, which also includes the National Rural Health Association, targeted an obscure Medicare reimbursement rule that allows Nantucket Cottage, Massachusetts’ sole rural hospital, to set the floor for how much the government reimburses the state’s 81 other hospitals.

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Under Medicare regulations, a state’s urban hospitals must be reimbursed for wages at least as much as rural hospitals. And because wages on Nantucket are high due to its remote location and expensive cost of living, it inflates the amount the rest of Massachusetts hospitals are paid.

An amendment to the federal health reform law that was cosponsored by Senator John Kerry, a Bay State Democrat, and Senator Robert Menendez, a New Jersey Democrat, required that Medicare reimbursements for hospital wages come from a national pool of money rather than a state pool. That means any gains for Massachusetts results in a decrease for other states.

Eight other states also benefit under the current system, but none nearly as much as Massachusetts.

“If this action is not stopped, there is the potential for more states to further redistribute hospital payments based not on patient or community need, but on a manipulation of the Medicare program,” the letter said.

The coalition requested that Obama address the problem in his FY2014 budget submission to Congress.

The Massachusetts Hospital Association and the state’s congressional delegation have argued that the Kerry and Menendez legislation simply corrects previous Medicare rule changes that cost Massachusetts hospitals hundreds of millions of dollars.

The hospital association has said it is not opposed to reform, but the entire reimbursement system needs to be fixed—not just this one issue.

The letter outlining the coalition’s grievances was also submitted to the Centers for Medicare and Medicaid Services on Wednesday. Dan Boston, a health care lobbyist representing the coalition who delivered the letters, said he has yet to receive a response from anyone in the Obama administration.

A spokeswoman for the Centers for Medicare and Medicaid Services has not responded to a Globe request for comment.