Thursday, April 3rd 2003

The Honorable Phil English
United States House of Representatives
1410 Longworth House Office Building
Washington, DC 20515

Dear Congressman English:

On behalf of the American Hospital Association's (AHA) more than 5,000 member hospitals, health care systems, networks and other providers of care, I am writing to express our strong support for The Medicare Area Wage Index and Standardized Rate Act, H.R.1580.  The AHA applauds your continued leadership in addressing Medicare payment inequities for rural and small metropolitan hospitals so they may pay competitive wages to attract and retain quality health care personnel.

The severe shortage of certain types of hospital workers, especially nurses, has driven wages higher, increased competition for these workers, and created an increasingly "national" market for hospital labor.  As a result, historically lower labor costs in rural and smaller urban areas have significantly risen.

Your legislation makes permanent the increase in the Medicare inpatient prospective payment system (PPS) base payment amount for certain rural and urban hospitals (an increase temporarily established in P.L. 108-7, the 2003 Consolidated Appropriations Resolution).  A significant portion of this base amount is intended to cover hospitals' labor costs.  Since today's tight labor market has reduced the disparity in wages between large urban areas and rural and small urban areas, Medicare should retain one base payment amount for the inpatient PPS.

Your bill also lowers the labor-related portion of the base payment amount to which the Area Wage Index (AWI) is applied.  The 2003 AWI is based on data from 1999 and does not reflect current operational realities of historically low-wage hospitals.  Lowering the labor share for hospitals with AWIs below the national average—while holding other hospitals harmless—more accurately reflects the current labor costs of these hospitals.
We commend you for addressing these two important issues.  Your legislation will help ensure that rural and smaller metropolitan hospitals can attract and retain the personnel they need to provide the highest quality of care for Medicare beneficiaries.  We strongly support H.R.1580 and look forward to working with you and your colleagues to ensure its enactment.


Rick Pollack
Executive Vice President

This letter was also sent to Rep. John Tanner, who introduced the legislation with Rep. English

About AHA


Member Constituency Sections

Key Relationships

News Center

Performance Improvement

Advocacy Issues

Products & Services


Research & Trends


155 N. Wacker Dr.
Chicago, Illinois 60606

800 10th Street, N.W.
Two CityCenter, Suite 400
Washington, DC 20001-4956