Statement of the Hon. Christopher Shays, a Representative in Congress from the State of Connecticut

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

Hearing on Medicare's Geographic Cost Adjustments

July 23, 2002

Chairwoman Johnson, Ranking Member Stark and Members of the Subcommittee, thank you for the opportunity to testify in favor of reclassification of the hospitals in Connecticut's Fairfield County into the New York City Metropolitan Statistical Area (MSA).

Fairfield County borders the New York state line and is only 30 miles from Manhattan. There are six hospitals in the county, four of which have been periodically reclassified on a temporary basis into the New York MSA. The hospitals included would be Greenwich Hospital, Stamford Hospital, Norwalk Hospital, Bridgeport Hospital and St. Vincent's Hospital from my congressional district. Danbury Hospital, which resides in Connecticut's new fifth congressional district, would also be reclassified.

I am very aware of what hospitals Congress was trying to help when it created the system were the hospitals found in my district. Back in 1997, I helped write the Balanced Budget Act. In that bill, we created the current geographic reclassification system. In 2000, I worked with the Ways and Means Committee to make the length of one reclassification three years, which gave hospitals greater long-term financial security.

Despite paying wages which are only 10 percent less than the wages paid by hospitals in the New York MSA, Fairfield County's wage index is 17 percent less than the New York MSA. The Fairfield County hospitals need to be on a level playing field with the New York hospitals to be able to attract and retain highly-skilled clinical staff.

Fairfield County is widely recognized as being part of the New York Metropolitan Area geographically, economically and socially. In fact, the Census Bureau counts Fairfield County in the same Consolidated Metropolitan Statistical Area (CMSA) as New York City. This determination is based on population figures, commuting patterns, employment data, and the overall economic and social integration of the surrounding areas with the City. In fact, fully 11 percent of Stamford Hospital's labor pool resides in New York.

In addition, the Federal Reserve Bank, the Department of Labor, and the Bureau of Transportation Statistics all include Fairfield County with New York City for statistical purposes. A letter, from Rae Rosen of the Federal Reserve Bank of New York, which I have included in my testimony, states, "A significant portion of Fairfield County commutes to New York City where a significant portion of the county's income is earned."

The National Association of Realtors groups Fairfield County housing prices with other New York metropolitan area housing prices because the markets are similar in many ways and provide the housing for the greater New York metropolitan area labor market.

By not reclassifying these hospitals, they are being penalized for efficiency. They have gone to great lengths to control costs, especially personnel costs by revamping their labor skill mix. However, rather than be rewarded for these cost-containment measures, Stamford, Norwalk and Bridgeport are penalized by the Medicare reclassification thresholds.

H.R. 4954, the Medicare Modernization and Prescription Drug Act, helps in the reclassification battle. Currently, to be reclassified, hospitals have to qualify under the standardized amount and the wage index. The standardized amount is a fixed dollar amount which is divided into two classifications: the urban area standardized amount and the "other area" standardized amount.

Section 303 eliminates the "other area" standardized amount, leaving only the urban area standardized amount. If H.R. 4954 is enacted into law, hospitals should no longer have to qualify under standardized amount provisions, which should bring some relief to many hospitals, particularly those in my district.

In this matter, I would only request that the subcommittee work with the Department of Health and Human Services to ensure that hospitals no longer have to qualify for reclassification under the standardized amount. I would be more than willing to help in any way I can.

In closing, I'd like to thank you for allowing me to testify in support of the reclassification needed for these six hospitals in Fairfield County are the type of hospital that Congress intended to help when it created the geographic reclassification process.