Sole Community Hospitals (SCH) & Medicare Dependent Hospitals (MDH) Are Often The Only Sources Of Emergency Care In Rural Areas – Centers For Medicare & Medicaid Services (CMS) Recently Revised One Calculation For Funding SCHs, But Has Decided To Go After Hospitals And Retroactively Recoup Funds Based On The New Formula  

Jones Memorial Hospital In Wellsville Recently Received Notice That It Owes $400K & Has 15 Days To Pay – Schumer Says Move Is Completely Unfair & Could Leave Hospitals Like Jones In The Lurch, Or Unable To Provide Critical Patient Services – Senator Calls On CMS To Immediately Reverse Course  

Schumer: Funds Were Used To Ensure Critical Healthcare Access For Rural Communities; CMS Should Not Come After Them After The Fact

During a visit to Allegany County, U.S. Senator Charles E. Schumer today vowed to fight attempts to claw back critical funds that allow small hospitals, like the Jones Memorial Hospital in Wellsville, to provide necessary services to senior citizens as well as underserved populations in rural areas. Schumer explained that Sole Community Hospitals (SCH) and Medicare Dependent Hospitals (MDH) are oftentimes the only sources of emergency care for miles in rural areas.Though these hospitals provide a critical service to the community and, very often, a large senior citizen population, they often suffer from declining patient volumes. As a result, the Centers for Medicare and Medicaid Services (CMS) provides these hospitals with the funding needed to stay afloat.

“Our Sole Community and Medicare Dependent hospitals are critical life lines for rural communities, particularly ones with large senior citizen populations, throughout New York State. These hospitals serve a vital public need, but are often under serious financial pressure because they serve fewer patients than their urban and suburban counterparts and receive a high percentage of Medicare beneficiaries,” saidSenator Schumer. “They deserve our support in their continuous efforts to provide the highest level of care to residents. That’s exactly why I’m demanding CMS immediately reverse course on its attempts to claw back the federal funding it provided to these hospitals years ago so they could stay afloat and ensure critical healthcare access for rural communities and seniors. CMS should not come after these funds, after the fact. So I’m going to be fighting for tooth and nail for the justice our hospitals deserve just as our upstate hospitals fight for their patients every day.”

Recently, CMS decided to change a calculation used to determine certain funding for SCHs and MDHs. However, Schumer said CMS has decided to go after hospitals to try and retroactively recoup funds based on the new formula and not the formula in place when these funding determinations were made. Wellsville, for example, was recently notified that it owes more than $400,000 and has 15 days to pay up. Schumer said this is completely unfair, and is therefore demanding CMS immediately reverse course on this action, which could leave hospitals like Jones Memorial in the lurch and unable to provide the services patients depend upon.

Schumer explained that there are two federal programs, the SCH Program and the MDH Program, that provide hospitals, particularly in rural areas, with the funding they need to continue essential healthcare services in communities that would otherwise not have options. When these hospitals experience a decrease in discharges of more than 5 percent from one cost reporting year to the next they can apply for a Volume Decrease Adjustment (VDA) payment. Schumer explained that, due to this circumstance beyond their control, they receive this adjustment payment to cover some of the costs needed to maintain necessary core staff and services.

Rural hospitals face many challenges to their bottom line due to serving a population that has a high percentage of Medicare beneficiaries, providing care to more isolated communities where it is harder to achieve economies of scale, and attending to a smaller volume of patients compared to urban and suburban hospitals. As a result, these rural hospitals are often financially strained, making it difficult to provide the same, high-quality care as other hospitals and medical centers. Schumer said these VDA payments help make these hospitals viable and capable of providing the emergency services residents in rural areas depend upon.

Schumer explained that CMS recently revised the calculations it uses to determine how much funding hospitals should receive through their VDA payment. Schumer said that while this is something hospitals can account for going forward, CMS has also decided to try and recoup past payments to hospitals based on the new formula. Just this past week, National Government Services (NGS), the Medicare Administrative Contractor for New York on behalf of CMS, began notifying the 16 New York SCHs and MDHs that they must make immediate repayment for funds received in 2013 due to these new calculations. Schumer called going after hospitals – and more than three years later – for funds they received when the funding formula was different is completely unfair. In particular, Jones Memorial Hospital in Wellsville has been told it has 15 days to pay back the $400,138 it received back in 2013.

On top of this, Schumer said this revision could call additional years of VDA payments into question and lead to more letters of remand from CMS to hospitals. Schumer said this attempt to claw back money from 2013 could eventually lead CMS to try and collect on years following, and therefore lead to even more financial strain and bureaucratic hurdles for these hospitals. Most importantly, Schumer said CMS’ continued pursuit of hospitals like Jones could impact their ability to provide the quality care residents in the region rely on. Schumer said this is unconscionable, as the funds provided to this hospital two years ago were already used to ensure critical healthcare access for rural communities. Schumer therefore urged CMS to immediately reverse course on going after small, rural hospitals in order to remand these funds.

Schumer was joined by Jones Memorial Hospital CEO Eva Benedict and hospital staff, Chairman of the Allegany County Legislature Curt Crandall, Allegany County Administrator Tim Boyd, Wellsville Town Supervisor Donald LaForge, and Village of Wellsville Mayor Judy Lynch.

“As a small, rural hospital, Jones Memorial has significant financial challenges as an organization. Recently the federal agency that runs the Medicare program told us they want us to repay a significant amount of funding – monies that its own contractors have previously approved and awarded to Jones Memorial Hospital. The repayment of these funds would cause a significant financial burden and impact our ability to move forward with much needed medical equipment, while compromising the financial stability Jones Memorial and the University of Rochester are working hard to achieve. The federal government should not force a retroactive repayment on Medicare funds it had previously approved. We appreciate Senator Schumer’s efforts with this issue – he continues to be one of the strongest advocates for rural healthcare,” said Eva Benedict, CEO FACHE, Jones Memorial Hospital.

Bea Grause, President of the Healthcare Association of New York State (HANYS), explained, "Senator Schumer understands the complexities and challenges of providing quality health care in small communities like Wellsville, as he fights to protect Jones Memorial Hospital and almost 20 other hospital across Upstate, from facing deep, retrospective Medicare cuts. We are grateful for his steadfast support for New York hospitals and the communities they serve."

A copy of Schumer’s letter to CMS appears below:

Dear Mr. Slavitt:

I am writing today to request your attention to an immediate issue for many Sole Community Hospitals (SCHs) and Medicare Dependent Hospitals (MDHs) in New York. National Government Services (NGS), the Medicare Administrative Contractor (MAC), for New York, is recouping millions of dollars from New York’s SCHs and MDHs based on recalculation of prior year Volume Decrease Adjustments (VDAs).  NGS informed the hospitals that they were required to revise all VDA calculations made since 2013 based on new guidance and instructions from CMS. While we acknowledge CMS’ authority to issue revised guidance on such calculations, we believe the CMS reinterpretation of the VDA rules should only be applied to future calculations and should not be applied retroactively. 

The NGS letters notified these hospitals of revised calculations of VDAs that were initially awarded in 2013 for volume decreases experienced in 2011. NGS also indicated that further recoupments are expected for subsequent years.  Hospitals were told they had 15 days to repay the difference between the initial VDA awards and the revised amounts or else the amount would be withheld from future payments.  While the letter indicated hospitals could request an extended repayment schedule, it also imposes an extremely high 9.625% interest rate on any payments received after 30 days.  This created an immediate dilemma for many hospitals with limited financial resources.

The retroactive recalculations affect 16 New York SCHs and MDHs with repayments that could total $15-20 million.  This imposes a devastating financial burden on these rural providers that are already suffering from declining patient volumes.  The retroactive recoupment of vitally needed funds could threaten their ability to continue to provide necessary services to isolated rural populations, endangering access for Medicare beneficiaries.

I understand the original NGS calculations were based on the Provider Reimbursement Manual (PRM) instructions that were effective in 2013; and the recalculations and recoupments are tied to a recent Medicare Administrator ruling. While this change may reduce the support that NY rural hospitals can receive in the future, applying the rules retroactively also has immediate major fiscal consequences in NY. In many instances, the VDA funding was issued to hospitals and is now required to be paid back—putting a cash strain on hospitals; in other instances, the funding was presumed to be approved and booked, but only now are hospitals being made aware that this funding will not be realized; other hospitals had anticipated accessing the VDA relief, but are now precluded from such pursuits.

I believe the retroactive recoupment of these VDA funds is inappropriate based on several reasons: 1) the lack of clarity in the Provider Reimbursement Manual; 2) the Medicare Administrative Contractor approval of calculations based on the PRM and CMS’ retroactive reinterpretation of the rules; and 3) CMS inappropriate application of the 36-month lookback period. 

Since this issue is having negative financial impact on these hospitals I am requesting that you look into and resolve this issue in a timely manner. Thank you for your attention. Please do not hesitate to contact my office should you have any questions or concerns. 


Charles E. Schumer

United States Senator


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