Medicare Rural Hospital Payment Equity Act of 1987

Medicare Rural Hospital Payment Equity Act of 1987 - Amends title XVIII (Medicare) of the Social Security Act to direct the Secretary of Health and Human Services and the Prospective Payment Assessment Commission to recommend a methodology to the Congress by April 1, 1988, that provides for a graduated reduction of the differences in the prospective payment rates applicable to urban and rural hospitals during the 36-month period beginning October 1, 1988, and the complete elimination of such differences on or after October 1, 1990. Requires the Secretary to promulgate final regulations by August 30, 1988, to implement such recommendations. Provides that payment rates shall be determined in accordance with such regulations unless the Congress enacts legislation before October 1, 1988, with respect to such rates.

Directs the Secretary and the Commission to each report to the Congress by April 1, 1989, on the manner in which urban and rural hospital payment rates should be adjusted to reflect legitimate differences in the operating costs of inpatient hospital services for urban and rural hospitals. Requires the Secretary to promulgate final regulations by August 30, 1990, to implement such adjustments. Provides that such adjustments shall be made in accordance with the Secretary's regulations unless the Congress enacts legislation before October 1, 1990, with respect to such adjustments.

Provides for a greater increase in FY 1988 payments for inpatient hospital services furnished in rural areas than for those furnished in urban areas.

Directs the Congressional Budget Office to study and report to the Congress within 180 days of this Act's enactment regarding the feasibility and effect of making certain changes in the method of calculating the amounts to be paid to hospitals to cover their wage-related costs. Requires the Secretary to conduct a survey at least once every 36 months of hospital wage-related costs for use in updating the wage index used in reimbursing hospitals for such costs.

Permits sole community hospitals to choose one of two payment formulas which differ in that one considers hospital costs on a national basis while the other is more hospital-specific. Makes it clear that the payment adjustment for sole community hospitals experiencing a decline in patient volume of more than five percent over the preceding cost reporting period due to circumstances beyond their control shall be inapplicable to actions taken by a hospital to reduce capacity or case load. Directs the Secretary to: (1) issue instructions before October 1, 1987, clarifying the criteria used in granting such adjustment and simplifying the process of applying for such adjustment; and (2) report to the Congress by October 1, 1987, on the feasibility and appropriateness of making sole community hospital payment adjustments on the basis of the average increase in costs incurred by similar hospitals experiencing declines in patient volume.

Requires that amounts set aside for making payments to hospitals for unusually long or costly cases (outlier payments) be based on actual outlier payments made during the second previous fiscal year. Directs the Secretary to include in the annual Medicare report to the Congress a comparison of outlier payments made to rural hospitals with those made to urban hospitals.