W&M Committee Majority Highlights Report on Hospital Billing Practices

House Ways & Means Committee Republicans are amplifying a Health Affairs study that shows more urban hospitals are classifying as both rural and urban to secure higher Medicare payments and other benefits they would not otherwise be eligible for, signaling a potential focus on billing abuse. The study reports “a substantial increase in administratively ‘rural’ hospitals in the US, driven by the dual classification of existing hospitals located in urban areas, which rose from 3 in 2017 to 425 in 2023, with prevalence varying by state.”

Dual classification allows geographically urban hospitals to receive Medicare benefits designed for true rural hospitals, lower eligibility standards for participation in the 340B Drug Discount Program, and increased graduate medical education slots and benefits intended for urban hospitals (such as an urban wage index and other Medicare payments).

When sharing the report, Ways and Means Committee Chairman Jason Smith (R-MO) said “The dual classification scheme imposes damaging costs on American taxpayers as well as our rural communities who are at risk of seeing critical resources like affordable doctors and medicines being funneled away to pad the bottom lines of urban hospitals. As the committee with jurisdiction over Medicare hospital payments, we must restore integrity, commonsense, and balance to the system.”