Statement of the Hon. Sue W. Kelly, a Representative in Congress from the State of New York

Testimony Before the Subcommittee on Health
of the House Committee on Ways and Means

Hearing on Medicare's Geographic Cost Adjustments

July 23, 2002

Good morning. Thank you Chairman Johnson, Congressman Stark and members of the Health Subcommittee for providing me this opportunity to testify today. Geographic cost adjustment in Medicare is an important issue for hospitals across the country and I am pleased the Subcommittee is focusing on this situation.

I have been acquainted with the issue for many years due the unique situation of hospitals in my district which are located in commutable distance to New York City. Since hospitals in the New York City Metropolitan Statistical Area (MSA) receive higher Medicare payments, hospitals in my district are forced to compete for labor with larger facilities that can offer more attractive salaries and benefit packages. Nurses and other health care workers can easily take positions at New York City hospitals in order to earn more money, leaving hospitals in my district with a diminished hiring pool of health professionals.

Lately, we have all heard about the deteriorating financial situation of our nation's hospitals. It is certainly disturbing to hear about hospitals operating in the red and having to cut services, and regional variance in Medicare reimbursement only compounds this problem. Not only does it effect hospitals' budgets, more importantly, it impacts patient care. I believe it is very important to level the playing field so that hospitals in similar labor market areas are reimbursed at the same level. This will help ensure that all hospitals are adequately staffed and can accommodate patients.

Although Medicare has an administrative reclassification process designed to provide geographic payment parity, often one hospital will qualify while others nearby narrowly miss. This can create yet another payment discrepancy between hospitals that are just a few miles apart and further disadvantage nearby facilities that do not meet the standards for reclassification.

Issues surrounding Medicare geographic cost adjustment certainly warrant further discussion. A large-scale solution may be necessary to remedy existing disparity. However, in the meantime, we can not ignore the problems that loom large for hospitals today. Congress must address this problem in places where it is particularly acute, where it has the potential to close community hospitals. That is why I am fighting to get hospitals in Orange County and Dutchess County, NY and those in the neighboring counties of Sullivan and Ulster, reclassified into the New York City MSA. There is an urgent need to ensure that hospitals in these areas can continue to provide quality care to residents of the Hudson Valley.

I thank the Subcommittee for providing a discussion forum for this important issue. I look forward to working with this panel to maintain the viability of hospitals in my district and nationwide.