Statement of the Hon. Melvin L. Watt, a Representative in Congress from the State of North Carolina

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

Hearing on Medicare's Geographic Cost Adjustments

July 23, 2002

Madame Chair and Members of the Subcommittee, thank you for holding this hearing and inviting me to speak on the very important topic of geographic factors in the current Medicare payment system and the need for a comprehensive legislative fix.

I represent a district in North Carolina which includes parts of Charlotte, Greensboro and Winston-Salem, as well as parts of suburban and not so rural areas that connect these metropolitan centers.  While my district (like the districts many Members represent) is diverse with a multiplicity of racial, ethnic, demographic, economic and political constituencies, one common bond all these constituencies share is the health care system and, in particular, the network of hospitals that provide critical services to residents in these cities and communities.  The financial condition of these hospitals is, therefore, a topic of vital importance.

The specific issue I have come to address today is the new standards issued by the Office of Management and Budget in December 2000 for defining Metropolitan and Micropolitan Statistical Areas.  Those standards will change the classification of 713 counties around the country and in some cases will be devastating for hospitals in urban, suburban and rural communities and, in turn, devastating for the patients who depend on these hospitals.  Rowan Regional Medical Center is one of those hospitals.

Rowan Regional Medical Center in Salisbury, North Carolina is located in one of the counties that would change from the Metropolitan Statistical Area (MSA) category under the current system to a Micropolitan Statistical Area under the new system.  For good reasons, Rowan County (which I share with Representative Howard Coble) has been included in the Charlotte MSA for decades (as has Iredell County, represented by Representative Cass Ballenger and Cabarrus County, represented by Representative Robin Hayes).  Under the new plan, the Micropolitan Statistical Area in which Rowan County is being placed would continue to be immediately adjacent to the Charlotte Metropolitan Statistical Area.  However, according to PricewaterhouseCoopers, which conducted an independent analysis on behalf of Rowan Regional, the change would reduce Medicare payments for inpatient services to Rowan Regional by $2.9 million per year.  In this case, the differential is simply not justified.

Because of the close proximity and ease of access between Charlotte/Mecklenburg County, Cabarrus County and Rowan County along Interstate 85 and the close proximity and ease of access between Charlotte/Mecklenburg County and Iredell County along Interstate 77, these areas have grown almost seamlessly.  Patients, as well as nurses, doctors, custodians and workers of all kinds regularly live in one area and commute to and from work in another.  Wages and benefits tend, by necessity, to be competitive throughout the area.  Rowan Regional is one of the acute care facilities in the area, employing over 1,200 full and part-time staff and serving over 130,000 people from Rowan County and surrounding areas.  Rowan Regional can’t afford to pay its workers less.  If it does, they’ll simply choose to work in Cabarrus, Mecklenburg or Iredell.

As is the case with many hospitals around the county that are operating with razor-thin margins, the proposed change could dramatically reduce the quantity of services Rowan Regional provides, compromise its exceptional quality of medical care or, quite possibly, even jeopardize its viability and survival.  On the patient level, the people affected most will be those who can afford it least-- the elderly, working poor and home-bound patients.  The services and programs currently provided that could be adversely impacted include:

• Free mammography for low-income citizens;
• Home health and hospice services;
• A free telephone triage service;
• Health education programs for the general public;
• Reduced-cost Hepatitis B shots for school teachers; and
• A Community Care Clinic for the working poor.

While I recognize that the federal government sets different Medicare reimbursement rates because hospitals operate in different market environments, Rowan Regional should be reimbursed at the same level as Charlotte-region hospitals because the two areas are closely connected and part of the same market.  The new standards assume that hospitals in smaller communities pay lower wages and, therefore, do not require reimbursements comparable to those hospitals in more urban areas.  As I indicated above, however, this is simply not the case for Rowan Regional Medical Center. 

Clearly, there are many of us who have hospitals in our districts which will be negatively impacted by MSA reclassifications and lower Medicare payments for inpatient services.  But this is not a problem that should be fixed one hospital at a time in the current budget environment.  Our hospitals and, more importantly, our patients should not be subject to such a zero-sum game.  Congress needs to address the underlying geographic factors in the current Medicare payment system with a comprehensive legislative fix.

Thank you for giving me the opportunity to testify before the Subcommittee today and I welcome any questions you may have.