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Rural Floor Budget Neutrality Appeals
In 1997 Congress passed the Balanced Budget Act of 1997 establishing a budget neutral state by state "floor" for urban wage indexes. The floor for each state is the rural wage index for that state, so no urban hospital can be paid a lesser amount than the state's rural floor.

CMS erroneously implemented the budget neutrality provision that effectively understates the standardized amount and systematically understates payment to all inpatient prospective payment system hospitals (urban and rural). This understatement begins in Federal Fiscal Year (FFY) 1999 and compounds each year through FFY 2007. By FFY 2007 BHC estimates that Medicare payment is understated by $431 million of .4012%.

Working with two law firms over 1,000 BHC client hospitals have appealed this understatement to the Provider Reimbursement Review Board. For FFY 2008, the Centers for Medicare and Medicaid Services (CMS) implemented a partial correction to stop the compounding effect of the error, but did not restore the $431 million cumulative understatement of the standardized amount for FFY 2008. Therefore BHC client hospitals are appealing FFY 2008 and adding prior year appeals, when possible, for FFY 1999 through 2006.