The proposed Save Struggling Hospitals Act would help make sure rural hospitals are fairly reimbursed for their services by the federal government, according to U.S. Sen. Mark Warner and other of the bill’s proponents.
Low patient volumes and significant financial strain are often the primary factors in rural hospital closures, with more than 40% of rural hospitals operating in the red. In most of these cases, financial strain for rural hospitals is compounded by the flawed Medicare Area Wage Index that has disproportionately harmed rural hospitals. The Medicare Area Wage Index formula is based on outdated assumptions for labor costs and fails to account for hospitals increasingly competing for workers in national labor markets.
Many hospitals in rural areas lack the resources available to those in more populated areas and struggle to offer competitive salaries. Due to those salary differences, rural hospitals receive lower reimbursements from the federal government, which contributes to their lack of resources and perpetuates a harmful staffing crisis.
“Rural hospitals are struggling to recruit and retain talented health care professionals, and too many are closing at an alarming rate,” said Warner, D-Alexandria. “I am proud to introduce this bipartisan legislation to help keep rural hospitals open and serving their communities, so every American can access quality care.”
“Rural hospitals are closing at an alarming rate due to significant financial strain compounded by the flawed Medicare Area Wage Index that results in rural hospitals receiving lower reimbursement,” said Sen. Marsha Blackburn, R-TN. “Our Save Struggling Hospitals Act would strengthen rural health care by ensuring that hospitals in rural and low wage areas receive fair payment for the essential services they provide.”
The Save Struggling Hospitals Act would codify the Centers for Medicare & Medicaid Services’ low-wage index hospital policy (LWIHP) that increased Medicare wage index values for hospitals with wage indexes in the bottom 25th percentile from FY2020 to FY2024. The LWIHP allowed hospitals in rural areas to compete for, and retain, high-quality staff by increasing reimbursements to hospitals in rural areas with lower overall wages, resulting in higher Medicare payouts for rural hospitals. Following a July 2024 court ruling in Bridgeport Hospital v. Becerra declaring it unlawful, CMS removed the policy for FY2025 and finalized its termination for FY2026. HHS Secretary Kennedy has expressed a willingness to work on the policy, but CMS requires legislative action to go beyond the Bridgeport ruling.
Nearly 20 Virginia hospitals used to be in the low-wage first quartile and received higher payments during CMS’s temporary policy. The policy worked—these hospitals were able to pay the higher wages needed to attract talented health care professionals to work in rural areas. But these hospitals are right at the cusp of the lowest wage indexes, codifying this policy into law would help make sure these hospitals don’t re-enter the death spiral.
The Alabama Hospital Association, Ballad Health, Community Health Systems, Lifepoint Health, National Association of Rural Health Clinics, National Rural Health Association, Tennessee Hospital Association, University of Memphis Medical Center, and the Virginia Hospital & Healthcare Association have endorsed the Save Struggling Hospitals Act.
