Rural hospitals keep closing. What can be done?

When the hospital in Newton, Mississippi, closed in December, Wendy Bailey felt as though she had lost a lifeline — literally.

“One of my biggest fears is one morning getting up and finding my daughter on the floor from a seizure, not breathing, not responding … and not being able to get help quick enough to know what to do,” said Bailey, whose daughter suffers from grand mal seizures. Rather than a short drive to the emergency room at Pioneer Community Hospital of Newton, Bailey must now drive an hour to get care.

It’s a story heard in communities across rural America. Since 2010, 71 hospitals have closed, fueled by congressional spending measures that cut Medicare payments and by the ACA, which favors hospitals that do a high-volume of business. One of the latest closings came this month in Ellington, MO. The pace is escalating: Last year, the rate of closures was six times greater than in 2010.

According to the National Rural Health Association, another 683 rural hospitals are at risk of closing — taking with them, should that occur, 700,000 patient encounters, 36,000 healthcare jobs, 50,000 community jobs and $10.6 billion in U.S. revenues. Overall, 35% of rural hospitals operate at a financial loss.

Cuts in reimbursement for bad debt have been particularly hard on rural hospitals, which often operate at the narrowest of margins, said Maggie Elehwany, vice president of government relations at the NRHA. Not only do rural hospitals experience lower volume of patients than their urban counterparts, their patients tend to be older, poorer, and sicker. Elehwany said it’s probably not coincidental that most of the closures have occurred in states that have not expanded their Medicaid programs.

Rural hospitals’ struggles aren’t new. They began back in 1983 when the government moved to a prospective payment system that rewards volume versus actual costs. Over the next five years, more than 400 rural hospitals closed. Congress eventually stepped in with a series of unique payment models aimed at helping rural hospitals stay open — among them, the Medicare-Dependent Hospital, Low-Volume Hospital and Critical Access Hospital, the smallest of hospitals, which receive slightly enhanced cost-based Medicare reimbursement to remain solvent, Elehwany said.

Then came the 2008-2009 recession, followed by 2% Medicare payment cuts in 2011, a 30% to 35% reduction in reimbursement for Medicare patients who can’t cover their out-of-pocket expenses in 2012, and the 2013 across-the-board 2% budget sequestration. Rural hospitals have been fighting to stay alive ever since.

When a hospital closes

When a rural hospital closes, the impact is far-reaching. Not only do people lose access to critical care, they often lose access to primary care as well, as most physicians are hospital-based, said Elehwany. “If the hospital closes, you also lose the physicians, the nurses, the physician assistants. We’re getting these complete medical deserts forming.”

When a hospital closes, the community also loses a major source of jobs and income that help to sustain local shops and restaurants. It’s harder to attract new businesses and families to an area that doesn’t have a local emergency room, said Becky McIntire, director of hospital marketing at Pioneer Health Services.

Residents in Newton, MS, now face up to a 90-minute drive to have their blood drawn or visit a hospitalized family member, McIntire said. The hospital closure — which resulted from CMS’ reinterpretation of its CAH distance requirement — has also put a strain on ambulance services, which saw turnaround time increase from 20 minutes to an hour with the longer distances to treatment facilities. As a result, patients have had to rely on surrounding counties’ ambulance services to get to and from hospitals.

A helpful legal hand 

Legislation introduced by Reps. Sam Graves (R-MO) and Dave Loebsack (D-IA) last July would provide some relief for rural hospitals by eliminating Medicare sequestration and reversing bad debt reimbursement cuts. The bill, H.R. 3225, would also permanently extend the current LD and MDH payment levels and reinstate Sole Community Hospital “hold harmless” payments, said Jonathan Mason, senior legislative assistant to Graves.

The bill would also create a new classification — Community Outpatient Hospital — that provides 24-hour ER services, outpatient services and primary care. The hospital would have no inpatient beds, but would be required to have an agreement with another facility allowing it to transfer patients who required hospitalization.

That could be a life saver for CAHs that have too little volume to make ends meet, said Elehwany. “It offers a way to keep that 24-7 emergency room open” and maintain patient access to primary care. COHs would be able to tailor their outpatient services to the needs of the community.

The Save Rural Hospitals Act has not yet advanced in the House Ways & Means Committee, but Graves “continues to seek cosponsors” for the bill, Mason said. The measure currently has 31 cosponsors.

A number of other bills have been introduced in the House dealing with various aspects of the rural health dilemma, Mason noted. In the Senate, Sen. Chuck Grassley (R-IA) introduced legislation last summer that would also create a Community Outpatient Hospital.

States' efforts

Some states are trying to reverse the tide, too. California has been making headway with a bipartisan funding plan to save five rural hospitals. And a proposal by a committee convened by Georgia Gov. Nathan Deal (R) would use large regional hospital as communication hubs to direct rural patients to appropriate care sites, according to Modern Healthcare.

“I think the states are trying to think creatively, especially when it comes to keeping emergency rooms open,” said Elehwany. “North Carolina, South Carolina, Georgia, and Texas have a tremendously high number of closures and number of rural hospitals at risk.”

For now, though, the number one priority is stopping Medicare cuts, she said. “As important as the new [COH] model is, at the rate hospitals are closing, we aren’t going to have any left to turn into that new model. It’s absolutely critical that we stabilize the rural healthcare system before we can even think about looking to a new model.”

Filed Under: Finance Policy & Regulation