A new report from the Bipartisan Policy Center concluded that Congress needs to make bold policy decisions quickly to keep more than 400 rural hospitals from closing due to financial burdens caused by the end of federal Covid funding.
The report, The Impact of Covid-19 on the Rural Health Care Landscape, surveyed stakeholders in eight states – Iowa, Minnesota, Montana, Nebraska, Nevada, North Dakota, South Dakota, and Wyoming – to get insights into ongoing challenges facing rural hospitals. The Center also talked to state and federal health policy experts, as well as policy experts from national organizations, provider organizations and academia.
BPC found that of the 2,176 rural hospitals it assessed for financial vulnerability, 441 of them face three or more concurrent financial risk factors putting them at risk of service reduction or closure. Almost half of the hospitals (909), had two or more financial risk factors. Those factors included negative total operating margin, negative operating margin on patient services alone, negative current net assets and negative total net assets.
According to Julia Harris, senior policy analyst at BPC, while rural hospitals were able to keep their doors open with the help of federal Covid funding, many are facing closing now that the public health emergency comes to an end and federal relief funds dry up.
“Hospital closures have been going on over decades,” Harris said. “The anomaly of the 2021 closures dropping to only two hospitals is really a function of this cash infusion that happened. None of the underlying problems of why rural hospitals struggle were fixed. So, given that the cash infusion is coming to an end, we are going to see those hospitals struggling again pretty soon.”
Hospital associations in the eight states all told BPC that at least some of the hospitals in their states had negative total operating margins over three consecutive years. The percentage of hospitals experiencing persistent financial losses ranged from 38% in Wyoming to six percent in Nevada. Researchers found that an even greater share of hospitals experienced losses in patient care alone.
Saving rural hospitals will take action from the federal government, BPC said. The Center made several recommendations for short-term policies that would stabilize rural hospitals and health clinics to serve as a bridge for rural health care systems as they exit the pandemic, and as longer-term reforms can be made.
BPC recommended that Congress and the U.S. Department of Health and Human Service first provide rural hospitals with relief from across-the-board spending reductions, known as sequestration, until two years after the federal public health emergency ends.
Sequestration currently reduces Medicaid payment by one percent, and is scheduled to increase to two percent in June. While one or two percent may not seem like much, it can be the difference between operating in the black and operating in the red, Harris said.
“When you look at the margins (of rural hospitals), we have hospitals who year-over-year have negative margins, so a one percent cut is just going deeper in the hole,” she said. “It is a significant impact when you have a hospital that is not bringing in enough to cover patient care… Even a small percent can have a big impact when you’re year after year operating in the red.”
Among a number of recommendations, the Center said Congress or HHS should permanently authorize the Medicare Dependent Hospital (MDH) program and make rural low-volume payment adjustments permanent. U.S. Representative Tom Reed (R-New York), and U.S. Senators Chuck Grassley (R-Iowa) and Bob Casey (D-Pennsylvania) introduced legislation, the Rural Hospital Support Act (H.R. 1887/S. 4009),” that would not only make those adjustments but would update base reimbursement rates to more accurately reflect current costs.
Under current law, the Center said, the MDH designation will expire at the end of Fiscal Year 2022. The Rural Hospital Support Act would allow MDHs to continue with that designation, as long as they meet current eligibility rules.
The center also recommended that Congress or HHS secure access to virtual care (telehealth) in rural communities.
Prior to the pandemic, Harris said, telehealth was less than one percent of patient care. In March and April 2020, it spiked to between 25 and 30% of the care delivered. Since then, it has stabilized at around 13% to 17% of claims in July 2021, the report said.
“Although rural Americans historically had greater access to telehealth before the pandemic, the new flexibilities improved access to care in rural and frontier areas,” the report said.
Currently, telehealth flexibilities put in place during the federal public health emergency would expire five months after the public health emergency ends. BPC recommended that telehealth services should go for two years after the end of the public health emergency to allow the HHS Secretary time to study the impact of telehealth and audio-only virtual care, health outcomes and cost assessments.