United States: CMS Proposal To Implement New Metropolitan Areas Would Affect Medicare Payments For Most Hospitals

The Centers for Medicare & Medicaid Services (CMS) recently issued the federal Fiscal Year 2015 Medicare Inpatient Prospective Payment System Proposed Rule, which contains a proposal to implement new metropolitan areas announced by the U.S. Office of Management and Budget in February 2013. If CMS's proposal is adopted, the changes would profoundly affect many aspects of Medicare program payments. Therefore, all hospitals are advised to carefully examine the proposal and prepare for its effects.

On April 30, 2014, the Centers for Medicare & Medicaid Services (CMS) issued the federal Fiscal Year (FY) 2015 Medicare Inpatient Prospective Payment System Proposed Rule. This release contains a proposal by CMS to implement new metropolitan areas announced by the U.S. Office of Management and Budget (OMB) in February 2013, based on 2010 census data. If this proposal is adopted, the changes would profoundly affect many aspects of Medicare hospital payments and certain physician referral arrangements. All hospitals are advised to carefully examine CMS's proposal and prepare for its effects.

New Metropolitan Areas

OMB identifies metropolitan areas around the United States using a set of criteria based largely on population density and commuting patterns. Every 10 years, in anticipation of the next decennial census, OMB reviews and occasionally revises the criteria it uses to define metropolitan areas, then issues new designations using those criteria and updated census data.

On June 28, 2010, OMB announced the new criteria it would use to identify metropolitan areas using data from the 2010 census (75 Fed. Reg. 37,246 et seq.) On February 28, 2013, it announced the revised metropolitan area designations developed using the new criteria and census 2010 data (OMB Bulletin 13-0l). Click here to view the bulletin, and click here for a U.S. map illustrating the new areas.

Medicare Implications

The metropolitan area designations are used by a wide variety of federal programs. CMS uses the delineations to classify counties and the providers in those counties into urban and rural areas, because Medicare payment and many Medicare programs for a wide array of providers (not just hospitals) are based on location within an urban or rural area.

CMS typically adopts the revised metropolitan area classifications every 10 years as OMB publishes the updates. As expected, as part of the federal FY 2015 Medicare Inpatient Prospective Payment System Proposed Rule, CMS announced plans to adopt the new Metropolitan Statistical Area (MSA) definitions. If the Proposed Rule is finalized, the new MSAs would be effective for Medicare payment purposes beginning October 1, 2015.

Under the new delineations, 37 urban counties become rural, 105 rural counties become urban, and 46 counties move from one MSA to another. If CMS adopts the new designations, many aspects of provider payments and regulation could be affected.

Wage Index

Most significantly, if the proposal to adopt the new MSAs is finalized, many hospitals will be reassigned to a new wage index area. Under the Medicare inpatient hospital prospective payment systems, payments are geographically adjusted by a wage index, which is intended to adjust payments to reflect labor cost variations between localities. CMS uses the MSA designations to identify labor markets and calculate and assign wage index values for providers. CMS calculates a distinct wage index for each MSA and one wage index per state for the areas that lie outside of MSAs. Therefore, a hospital that is reclassified from urban to rural, rural to urban, or from one urban MSA to another can see a significant increase or decrease in Medicare payments.

In order to reduce any negative effects of changes in hospital wage indices due to the proposed adoption of the new MSAs, CMS proposes to provide for some limited transition periods. Hospitals that have not voluntarily reclassified to another MSA and that would move from an urban MSA to a rural area would continue to be paid as if in an urban MSA for a period of three years. Similarly, hospitals that were deemed urban but would lose such status under the new MSAs would be provided a three-year transition period. All other hospitals that would experience a decrease in wage index as a result of the new MSAs would be given a one-year transition period during which they would receive a 50/50 blended payment based on the new and old MSA wage indices.

A hospital that voluntarily reclassified into an MSA that would be reconfigured under the new MSAs would be assigned to an MSA that would contain the most proximate county that is located outside of the hospital's proposed FY 2015 geographic labor market area and is part of the original FY 2014 MSA to which the hospital is currently reclassified. Hospitals that are reclassified are urged to review the tables posted by CMS to verify their area assignment and associated wage index, and to confirm that the areas to which they are proposed to be reclassified for FY 2015 would continue to provide a higher wage index than their otherwise applicable geographic area wage index. Reclassified hospitals that wish to be reassigned to an alternate MSA (other than the MSA to which their reclassification is proposed to be reassigned) must request such reassignment within 45 days of the publication of the Proposed Rule. In addition, reclassified hospitals that would be reassigned to an MSA in which they are geographically located will have their reclassification terminated unless notice is provided to CMS at wageindex@cms.hhs.gov within 45 days of the publication of the Proposed Rule.

Rural Hospital Designation Eligibility

The new area designations also affect hospitals with special payment status that may be dependent on being located in a rural area, such as Sole Community Hospital (SCH), Rural Referral Center (RRC), Medicare-dependent hospital (MDH) and Critical Access Hospital (CAH) status. A CAH that finds itself in an urban area as a result of these changes will retain its rural status and CAH designation for two years, during which time it can seek an urban-to-rural redesignation under 42 CFR § 412.103, if it can meet the qualification criteria.

CMS does not propose a transition for Prospective Payment System hospitals with designations dependent on being in a rural area, such as SCHs and MDHs. As a result, if the Proposed Rule is implemented, hospitals with SCH or MDH status, where that status is dependent upon being located in a rural area, could lose their status effective October 1, 2014. Hospitals in this situation could seek an urban-to-rural redesignation under 42 CFR § 412.103, but that redesignation is not available to all hospitals. RRC status is less likely to be affected by these changes because of a statutory grandfather provision enacted in 1997.

Physician Self-Referral (Stark) Law

Although the matter is not discussed in the Proposed Rule, CMS adoption of the new MSAs for hospital payment purposes also could affect the availability of certain exceptions under the federal physician self-referral law (known as the Stark Law), because the definition of "rural" under the Stark Law is tied to the designation of MSAs for inpatient hospital payment purposes. Special exceptions to the bar on physician self-referral under the Stark Law are available to physicians with ownership interests in non-hospital rural providers and certain intra-family rural referrals. In addition, the requirements of the recruitment exception are less stringent for recruitments to rural areas. Physicians and entities that are currently involved in arrangements that involve a Stark Law exception dependent on rural location should review the list of redesignated areas in the Proposed Rule to evaluate the potential effects of the changes to such arrangements.

The Proposed Rule includes numerous changes beyond those described here. Hospitals are encouraged to review the Proposed Rule thoroughly to evaluate all changes that could be of relevance. CMS is accepting comments on the Proposed Rule through June 30, 2014.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.