On Friday, Alabama’s congressional delegation hailed an announcement by the Centers for Medicare and Medicaid Services (CMS) that it will update the Medicare Wage Index reimbursement formula, contributing an estimated $43 million to Alabama hospitals in the first year.

Last fall, U.S. Sen. Doug Jones, D-AL, alongside Rep. Terri Sewell, D-AL, and Sen. Richard Shelby, R-AL, met with CMS Administrator Seema Verna to discuss the damaging impact the reimbursement rate was having on Alabama hospitals – according to Jones, 88 percent of Alabama hospitals are operating in the red and 13 hospitals, seven in rural areas, have closed since 2011.

The final decision by CMS would increase the wage index for hospitals with a wage index value below the 25th percentile, meaning that most Alabama hospitals will see an increase in Medicare reimbursement rates.

“For years, I’ve been working with Alabama’s hospitals and the delegation to advocate for increased Medicare reimbursements for Alabama’s hospitals, which are currently reimbursed at the lowest rates in the country,” Sewell said “[Friday’s] announcement is great news for Alabama’s hospitals, especially those in rural areas of the state where every dollar counts.”

Likewise, Jones celebrated the change as a victory for Alabama hospitals.

“For two decades, Alabama has been fighting the unfair Medicare reimbursements and today receives a rate that is just 67 percent of the national average,” Jones said. “[Friday’s] final rule will provide much-needed relief for Alabamas struggling hospitals by fixing the Medicare Wage Index formula.”

Similarly, Shelby said the adjustment would “bring balance to Medicare reimbursement for Alabama, particularly our rural hospitals, and hospitals across the country,” while U.S. Rep. Bradley Byrne, R-AL, called the change “welcome news.”

In a press release, Sewell noted that the current reimbursement formula considers the area wage index when formulating reimbursement rates, which means that hospitals with lower wages receive a lower reimbursement rate, while hospitals in the “healthiest and wealthiest parts of the country” receive higher rates.

To Vaughan Regional Medical Center (VRMC) CEO David McCormack, that is one part of the problem that’s not adequately being addressed.

“Basically, this is just a band-aid,” McCormack said of the formula update. “This is not a fix at all.”

While McCormack noted that the change is a step in the right direction, he bemoaned the fact that, without systematic change, poor and rural hospitals will continue to suffer.

According to McCormack, VRMC would see an influx of about $300,000 as a result of the rule change – in order for employees to get a 2-percent pay raise, which they have not received in four years, it would cost around $600,000.

“They’ve got to fix the whole system,” McCormack said. “The way the system works is broken.”

McCormack noted that, under the current system, struggling hospitals are unable to give their employees raises, which keeps the wage index low, which keeps reimbursement rates low, which keeps hospitals from being able to give their employees raises.

“It’s kind of a vicious cycle,” McCormack said, noting that Alabama hospitals are suffering from a one-two punch as a result of the reimbursement rate and the refusal of the state to expand Medicaid, a decision that keeps hospital waiting rooms flooded with people unable to pay for the care they need.

For now, McCormack says the $300,000 that VRMC is expecting to see from the rule change will be used for infrastructure needs, such as new roofing and air-conditioning units, “the things that nobody sees until they’re broken.”

“We’re still waiting on something good to happen,” McCormack said.