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Reinstating TOPs for small, rural hospitals

July 12, 2013

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The AHA and rural hospital leaders are calling on legislators to support a recently introduced House bill that would reinstate so-called “hold harmless” transitional outpatient payments (TOP) through 2013 for certain eligible sole community hospitals (SCH) and rural hospitals with up to 100 beds.

Rep. Bruce Braley, D-IA, on June 28 introduced the “Rural Hospital Fairness Act,” H.R.

2578, to restore these payment adjustments for certain rural hospitals. TOPs expired on Dec.

31 for rural hospitals and SCHs with no more than 100 beds, and expired March 1, 2012 for SCHs with more than 100 beds.

Saranac Lake, NY-based Adirondack Health, which operates 271-bed SCH Adirondack Medical Center, may be forced to scale back on outpatient care unless the payments are restored, said CEO Chandler Ralph. She urges Congress to pass the TOP legislation “to provide much needed and long overdue relief to rural health systems like

The TOP cuts occurred as “health care is undergoing seismic changes,” Ralph observes. “A strong and fiscally sound health care system is needed to fully implement reform of the delivery system, and to ensure the most vulnerable members of our community continue to receive the care they need, when they need it.”

That’s a formidable task when rural hospitals are denied payments that recognize the special challenges they face in delivering health care services, she says. Without TOPs, these hospitals are paid an average of 75% of their Medicare costs.

To help protect rural hospitals from steep Medicare payment reductions when the outpatient prospective payment system (PPS) took effect in 2000, Congress provided for transitional hold harmless payments to hospitals with no more than 100 beds. The TOP provision was later extended to SCHs – regardless of their size. SCHs provide care in some of the nation’s most rurally isolated areas.

Under the legislation, modified in recent years, hospitals receive 85% of the difference between outpatient PPS payments and the payments they would have received under their previous cost-based system. These amounts are determined by using their 1996 Medicare cost reports; hospitals annually file cost reports with their Medicare contractor after the end of each fiscal year.

In a June 28 letter of support for H.R. 2578, AHA Executive Vice President Rick Pollack noted that hospitals receiving TOPs “had Medicare payments that were well below their Medicare costs, with payments averaging about 83% of costs.” He said TOP-eligible hospitals experienced an 11% payment cut when the provision expired last year. “With such a large gap between payments and costs, it will be difficult for these vulnerable hospitals to continue to provide access to critical outpatient services, such as emergency department services and chemotherapy.”

For more on the AHA’s letter, click on: http://tinyurl.com/lqen98b.

The TOPs are one of several expired or soon-to-expire Medicare reimbursement policies that support mostly small and rural hospitals. The AHA has called on Congress to extend these policies and, in some cases, make them permanent.