Issue
California hospitals face a potential $55 million reduction in Medicare payments because of a budget neutrality factor related to the rural wage index. Budget neutrality was achieved in the past through a national adjustment by which about 2,500 providers shared in “funding” neutrality. Now the potential reduction will be made on a state specific basis. Approximately 100 urban California hospitals, known as Rural Floor Recipients (RFRs) are paid, or will be paid, based on the rural wage index that is higher than their urban area (CBSA) index. This creates the need for a budget neutrality factor. Budget neutrality is “California only” and is “funded” by $39 million from non RFR urban providers, $1 million from rural providers and the remainder from the RFRs. An average increase of RFR wage rates of $1.50/hour would eliminate the California specific budget neutrality adjustment. (more…)