Rural hospitals have been struggling for decades, but the past few years have seen a cascade of closings. According to the National Rural Health Association (NRHA), 58 rural hospitals out of 2,322 have shut their doors since 2010, the latest one Mercy Hospital in Independence Kansas.
Diane Calmus, government affairs and policy manager at NRHA, said there’s not one specific reason for the closings, but rather, a culmination of events. “The rural population tends to be older, sicker and poorer than their urban counterparts and are much more reliant on Medicaid and Medicare. So cuts to those programs, along with regulatory burdens on rural hospitals are hitting these hospitals hard,” she told Healthcare Dive.
The financial hurdles for rural hospitals started back in 1983, according to Kaiser Health News. With the decision to implement a set fee for services versus reimbursement for actual costs, 440 rural hospitals closed from 1983 to 1988, according to NRHA. After the 2008-2009 recession, hospitals were hit with 2% Medicare payment cuts in 2011. Then in 2012, CMS reduced reimbursements by 30% to 35% to hospitals for Medicare patients who can’t cover their out-of-pocket expenses.
Brock Slabach, NRHA’s senior vice president for member services told Kaiser Health News, “That’s an example of how a little policy change that seems insignificant in Washington can have profound effects in the rural areas.”
A big ripple affects the community
When a rural hospital closes, the impact is far-reaching. Calmus said rural hospitals represent as much as 20% of local salaries and wages. “The impact on these communities when hospitals close is huge. The average rural critical access hospital alone creates around 195 jobs and generates about $8.4 million in payroll annually.” She said when a hospital closes, physicians leave the area and don’t return. "Young families won’t move into an area without access to a local emergency room. It can really close down that town.”
Rural families travel twice as far as urban families to get to an ER and the closings will likely make that distance longer. A 2012 study by researchers at the National Bureau of Economic Research concluded travel time greater than 30 minutes to the emergency room was linked to “a substantial increase in long-term mortality rates.”
“Almost 60% of trauma deaths occur in rural America, and only about 20% of Americans live in rural communities,” stated Calmus. “There is a clear disparity there and that disparity will continue to get worse as more hospitals are closing.”
States that opted not to expand Medicaid have higher rates of rural hospital closures. Kansas is one of those states, even though the Kansas Hospital Association warned lawmakers hospitals were struggling, according to Modern Healthcare. Mercy Hospital in Independence Kansas is the 58th rural hospital to close, with an estimated $1.6 million lost in revenue every year because of no Medicaid expansion.
The Kansas Hospital Association estimates Kansas’ hospitals will lose $131.9 million every year starting in 2016 due to reimbursement reductions in Medicare and Medicaid. But, they said Medicaid expansion could provide a net gain of $230.9 million in additional revenues annually, according to Modern Healthcare.
A potential solution
A bill (H.R. 3225) introduced by Reps. Sam Graves (R–Mo,) and Dave Loebsack (D–Iowa) in July aims to provide financial and regulatory relief to rural hospitals. The Save Rural Hospitals Act is “comprehensive legislation that looks at all the problems in two parts,” explained Calmus. The first part is to stabilize the hospitals and stop the closures by stopping Medicare and Medicaid cuts amongst other financial measures and the second part focuses on regulatory relief.
The bill would also create a new classification – Community Outpatient Hospitals – that would include a 24-hour emergency room, coupled with outpatient services and primary care. There would be no inpatient beds, but the hospital would be required to have a transfer agreement with another facility to transfer patients who require a higher level of care, according to Calmus.
Outpatient services would depend on the needs of the community and the bill would offer each facility a lot of flexibility in choosing the appropriate ones. It’s a voluntary option for hospitals that don’t have enough patients to maintain their status as a critical access hospital. The bill would affect critical access hospitals with fewer than 50 beds as of Jan. 1, 2016 or any hospital fitting that description that closed in the past five years.
“It used to be that if you had a heart attack, you would be in the hospital for a week. Now you are given medications and sent home. That’s wonderful that medical technology has made that change. Unfortunately, the way that we pay for healthcare hasn’t made that change, so this [bill] is a step in that direction,” Calmus summarized. The NRHA has endorsed H.R. 3225 and Jodi Schmidt, president, said in a Rural Health Voices blog, “We are calling on Congress to pass this comprehensive legislation to save rural hospitals and patients and to provide a pathway to the future of rural health.”