Good morning. I hope this note finds everyone well.

I wanted to share a brief update on where things stand with our effort to expand the Medicare wage index geographic reclassification proximity rule from 35 miles to 50 miles.

Our proposal was not included in the recent FY27 IPPS proposed rule, but we remain confident in the path forward.

The call we held in March with CMS program experts and staff from Senator Hyde-Smith’s office was substantive and helped advance the conversation — it simply came too late in the rulemaking process to be reflected in this cycle.

We have worked tirelessly since that call to continue to raise awareness of our efforts and to gather the information that CMS told us they will need to advance this issue.

Further CMS Engagement

On April 9, we had an encouraging conversation with CMS Deputy Director Dan Brillman, who oversees Medicaid and CHIP services. Director Brillman works directly with Administrator Oz, as well as policymakers in the Trump Administration. That meeting came through a coalition member in North Carolina (hat tip, ECU Health), and it proved to be a meaningful step forward.

Deputy Director Brillman was receptive to our proposal, recognized the practicality of the change, and expressed a genuine willingness to help advance it. Although he was direct in noting that the window to add our proposal to the FY27 IPPS rule had likely passed by the date of our call, he mentioned that there were other viable paths forward to take public comment on the proposal or simply enact the change, if the Trump Administration directs HHS to do so.

He observed that this issue sits at the intersection of sound policy and political incentive, insight which frames our work well going forward.

Increased Legislative Activity

Our team was in Washington the week of April 20 to continue engaging on the legislative side. As many of you are aware, there has been renewed activity around wage index legislation, including the reintroduction of the Save Our Hospitals Act.

While that bill has historically faced headwinds, its continued reintroduction keeps the underlying structural problems in front of policymakers. In our view, sustained legislative pressure — even when it falls short — strengthens the case for a regulatory solution.

We also are confident that recent discussions by powerful members of the House Ways and Means Committee regarding the abuse of the dual reclassification methodology will help our efforts gain even more traction, as will anticipated legislation in the Senate regarding states utilizing an imputed rural floor.

The bottom line is that the more Congressional discussion and stalled legislation around any issue involving the area wage index or the rural floor supports our position that a small, legally sound regulatory change is a more achievable path forward in the current climate.

However, we are not focusing solely on the regulatory fix.

At a meeting spearheaded by another coalition member last week (hat tip, Mississippi Healthcare Collaborative), the Appropriations Director for Senator Shelley Moore Capito, who chairs the Senate Appropriations Committee, indicated that their office was vetting language to include in the Senate Appropriations bill regarding the area wage index.

Likewise, the office of Congressman Robert Aderholt, Vice-Chairman of the House Appropriations Committee, last week stated a willingness to include similar language in the House Appropriations bill.

So, while we continue to believe that regulatory change is the most efficient and timely way to address this problem, we are simultaneously pursuing legislative remedies.

Pressure Continues to Build

The pressure for one side to act on the wage index issue is building at a rapid pace.

At a recent House Ways and Means Committee hearing, HHS Secretary Kennedy pointed directly to the wage area index as the primary area in need of reform to fix reimbursement disparities, stating that “[we] need [Congress’s] help on the area wage index to really correct those disparities.”

Then, in a Senate budget hearing last week, Secretary Kennedy acknowledged that the current AWI formula disadvantages hospitals in low-wage states and indicated that the administration is willing to work with Congress to find a budget-neutral solution to provide relief to states with low AWIs.

That kind of high-level acknowledgment by both Congress and the Administration reinforces that our effort is both timely and consistent with the broader policy direction in Washington. We intend to continue to advocate in Congress for a legislative fix while also demonstrating to the Administration that HHS and CMS do, in fact, have the ability to make this change unilaterally if Congress fails to act.

Legal Cover for HHS

To that end, our outside legal counsel is nearing completion of a white paper that directly addresses what has been Secretary Kennedy’s primary concern — the authority of CMS to act on this issue in light of recent court decisions, specifically the D.C. Circuit Court’s ruling on the low wage index policy.

Early feedback from the firm, specifically from former Trump Administration attorneys who have insight into the thought process of the Administration on matters such as this, has been very encouraging. Their view is that CMS not only has the authority to implement our proposed change, but that the enabling statute clearly supports the targeted adjustment we are seeking.

Importantly, they were able to uncover that the 35-mile radius has previously been challenged and upheld as well within the Secretary’s discretion.

The law firm we engaged has high-level connections inside the White House Domestic Policy Council and will be vital in getting this message to the best people in DPC and HHS.

Coalition Expansion

This coalition continues to be one of our greatest assets. We cannot overstate the benefit of having hospitals and health systems in key districts engaged in this fight.

As mentioned above, two coalition members were pivotal in helping achieve milestones in the past few weeks. Other coalition members have been incredibly helpful in leveraging long-term relationships with Congressional staff into raising awareness of our efforts with those offices.

We continue to expand our coalition and hope to have more key players engaged in the next 60 days.

We will be in touch in the coming weeks about submitting comments from your respective institutions during the IPPS comment period.

We are also considering giving our next update via a virtual meeting to allow for questions and feedback. We know that everyone is extremely busy, and we do not want to add unnecessary events to your calendars, but if that would be helpful please respond to this email and let us know.

Path Forward

We will continue pressing forward on all fronts.

Thank you, and please do not hesitate to reach out with any questions.

Jeremiah Mosely, 

Advice & Advocacy

The Fideo Group