Proposed new health policies could push some rural hospitals over the edge

By:  The Wenatchee World - K.C. Mehaffey
Source: The Wenatchee World

As healthcare providers across the country prepare for fast-changing policies under the Affordable Care Act, there’s growing concern that one group may get left out in the cold — rural health.

Along with making sure most people have health insurance, goals of the sweeping new law are to lower costs and improve quality. The way to do that, healthcare officials say, is to focus on what works in urban areas.

But what works in a big-city hospital won’t necessarily work in rural ones.

The question becomes, how are you going to take care of rural health? We haven’t seen anything along that line,” said Bud Hufnagel, CEO at Three Rivers Hospital in Brewster.

Recently, the Centers for Medicare & Medicaid Services proposed cuts and changes to what are known as critical access hospitals. The seven critical access hospitals in North Central Washington are all closely watching these proposals, and some — like Brewster — worry the changes could force them to cut services, or even close.

The critical access program allows small hospitals to receive cost-based reimbursements, including Medicare payments equaling 101 percent of what other hospitals receive. That’s because with a smaller volume — and often a higher percentage of lower-reimbursing Medicare and Medicaid patients — the higher reimbursements are seen as necessary for hospitals that serve a critical need in rural areas.

Now, the federal government has proposed cutting reimbursements from 101 to 100 percent — which can amount to a lot for a small hospital that serves many older patients and is already operating on the financial edge. The agency may also remove the critical access designation to those with another hospital within 10 miles. A previous proposal would have eliminated the program for hospitals within 35 miles of another hospital, but for now, that proposal was reduced to 10 miles. In addition, the agency wants to require direct physician supervision for services that currently can be done by mid-level practitioners, such as a nurse.

The changes would not affect Central Washington Hospital, but they would impact hospitals in Leavenworth, Chelan, Ephrata, Quincy, Brewster, Omak and Tonasket.

If enacted, these changes would be a serious financial blow to critical access hospitals throughout the state, said Beth Zborowski, spokeswoman for the Washington State Hospital Association.

If a critical access hospital closes, she said, it threatens the ability of the doctors who work there to make a living in those areas. “We need to figure out a better way of doing things before pulling the rug out,” she said.

Hufnagel worries the Brewster hospital may not be able to survive the changes. “This is a very, very big deal,” he said. “There is just no way we can survive with the volume of charity care and uncompensated care that we have, and have our reimbursements cut,” he said. “We are, on our best days, probably breaking even. And on a monthly basis, we make a little. But then they’re going to come in and do something like this to us?”

Hufnagel added that cutting funding to critical access hospitals makes no sense. “If they eliminate all these hospitals, it works out to a miniscule amount of money relative to the overall Medicare and Social Security budget. It’s nothing but pencil dust.”

According to the Hospital Association, critical access hospitals cost less than 5 percent of Medicare’s hospital budget, yet they offer some of the most cost effective care in the state.

The issue has gotten the attention not only of the state association, but also state and federal lawmakers.

Sen. Maria Cantwell was one of 19 senators who signed a letter earlier this month expressing concerns about the cuts aimed at critical access hospitals in the 2014 budget. “These hospitals are safety nets for hundreds of thousands of Americans, providing inpatient and outpatient services as well as 24-hour care,” the letter states. “We strongly support smart, targeted Medicare reforms that will reduce costs and maintain high quality of care. This proposal does not qualify. The estimated savings from the CAH (Critical Access Hospital) 10-mile designation are about one-hundredth of one-percent of 10-year Medicare spending.”

According to the hospital association, Washington has 39 critical access hospitals, and about one-third of them employ all of the primary care doctors in their areas. Across the state, critical access hospitals employ more than 9,000 people, and have a total payroll of more than $550 million, the association said. They provide almost 3,000 nursing jobs, and spend more than $150 million on supplies, many purchased locally. Yet 16 of them operate at margins close to zero, meaning there’s just no room in their budgets for more cuts.

Ben Lindekugel, director of member services for the Association of Washington Public Hospital Districts, said it’s hard to predict which of those may be pushed over the edge with the proposed changes. But the impact could be significant.

A study they conducted last year showed that eliminating cost-based reimbursement at critical access hospitals would eliminate between 10 and 15 hospitals in the state. “The ones you’d lose would often be the ones serving an important need,” he said.

Still, not all critical access hospitals feel threatened, at least not yet.

Kevin Abel, CEO of the Lake Chelan Community Hospital, said reducing Medicare reimbursements to 100 percent of cost would cost his hospital about $75,000 a year. “It certainly is a very active time legislatively, it seems. But I believe the Lake Chelan Community Hospital is in a strong or solid enough financial position that we can weather some minor changes,” he said. And losing critical access status altogether “would have a financial impact, and we would have to adjust our operations for a period of time.” He added, “If they all came to about at once, it would be a concern. But right now, it hasn’t actually passed.”