[imgcontainer] [img:cahmap.gif] Reductions contained in the health care reform law could result in the closure of many rural hospitals. The map above shows Critical Access Hospitals — hospitals with 25 or fewer beds that are 35 miles or more from another hospital (or were designated as critical by their governors). All CAHs are in areas that were rural when the hospital was first designated. Provisions in the health care reform law would end a special Medicare payment for services performed in these hospitals. [/imgcontainer]

What will happen regarding rural health care in Washington as the current session of Congress winds down and departing members clean out their desks? 

Some small rural hospitals may find chains hanging on their front doors instead of tinsel, and docs will be watching to see if Senator Santa swaps the coal in their stockings for apples.

Let me explain.

A lot of small rural hospitals are called Critical Access Hospitals, or “CAH’s.” They have fewer than twenty-five beds. They get paid whatever it costs, plus 1%, to take care of their Medicare patients in the hospital, in their emergency room and in their clinics.  

Most other hospitals only get paid what Medicare thinks it should cost, and lose a little money on each Medicare patient. So there’s an advantage in being a CAH.

The CAH designation originally kept hospitals open in remote places where otherwise there would be none. Thirty-five miles from another hospital was arbitrarily chosen as the near limit to qualify as a CAH, but no figure captured all the possible problems that 35 miles can present in a rural area — roads closed by snow or high water, towns that are flooded with tourists part of the year and ghostly at other times.  

Congress finally gave state governors the discretion to declare any rural hospital with fewer than 25 beds critically necessary for access to care.  Most governors obliged, designating as “critically necessary” any small rural hospital that was in danger of going broke.   

Now about a quarter of all the hospitals in the U.S. are CAHs.

Targeting CAHs

The president’s budget proposes to revoke CAH status and special payments for any such hospital within ten miles of another hospital, and to cut the extra one percent payment for all of the critical access hospitals. 

This will have enormous consequences. Of the hospitals that lose CAH designation probably most will close or merge with another hospital. I’ve seen no estimates of numbers.  

There are more than a few congressional budget hawks in both parties who would like to eliminate the special payments to Critical Access Hospitals entirely. If these small hospitals dodge the bullet during the lame duck session, they’ll continue to be targets in the next Congress.  

If Congress is successful in reducing payments to CAHs, the net effect will be to move health care capacity and jobs from smaller to larger towns.

Rural Lacks Clout

The issue is complex. With only sixteen percent of the population, rural areas no longer have the political clout they once had. Lots of rural people drive past the small local hospital to use larger urban facilities, even for ordinary care.  

But people who use critical access hospitals rate their experiences as highly as do users of large urban facilities. 

Quality outcomes tend not to look as good as those of large hospitals, but there are issues that make at least some of the measures suspect. Some of elderly patients have decided that they will stay where they know the nurses and their family members can visit a couple times per day, rather than be transferred to a strange, distant facility even if it would up their chances of survival a couple of percentage points.

Occasionally local people say, “What we really need are the emergency room and the clinics and doctors’ offices. We don’t use the hospital part very much.”  To which Medicare and Congress have replied, “Sorry. You’ve got to be a hospital or we can’t help you.”

Fitting Rural Hospitals Into Medicare

A long list of arcane, special funding arrangements has accumulated to try to fit small rural hospitals into a Medicare payment system designed for large city hospitals. These programs give extra money to hospitals that take care of poor people, to big hospitals in small towns that serve as regional medical centers, to hospitals whose Medicare patients can’t pay their required shares. The list is long.  

The largest of these programs is the “Disproportionate Share Program,” generally referred to as DISH. It distributes $15 billion per year to the states to be handed on to hospitals that take care of lots of poor and uninsured people.  

DISH is being phased out between 2014 and 2020.  Several others of these programs are ending with the savings to be used in health care reform, officially known as the Patient Protection and Affordable Care Act. 

Hardest hit by the loss of these programs will be hospitals in states whose governors are refusing federal funding to expand Medicaid insurance coverage to poor people. Hospitals in those states will lose the old help and gain fewer newly insured patients than anticipated.  

Rural hospital beneficiaries of these vanishing programs will be trying to get them renewed. I think they will hear from a Democratic Senate, “Sorry, we’ve committed that money.  Go talk to your governor.” 

The legislative issue is immediate but the hospital distress will be spread over the next few years.

And Then There’s the ‘Doc Fix’

Perhaps the noisiest issue will be “The doc fix.”

Fifteen years ago the Congress legislated that each year Medicare could increase total payments to doctors by no more than by what the economy was expected to grow.  That was called the “sustainable growth rate.”  

If the number of physicians grew faster than the economy, pay per doc would shrink.  If the amount of care provided by docs increased faster than the economy grew, pay per unit of care would shrink.  

Since 1997 has Congress has never obeyed its own law.  

The problem is that under “pay as you go” (“paygo”) rules adopted by Congress, legislators have had to find the money to make up the difference between what the sustainable growth law calls for, projecting from 1997, and what accumulated medical inflation has demanded over the years. The difference has now grown to a 26% gap as each year more doctors get paid more for each thing they do, and they do more things.  

It costs a bit over $20 billion to “fix” this problem for 2013. Congress would like to buy a permanent fix a decade into the future by repealing the law, but that would cost more “paygo dollars” than Congress can possibly find.  

This annually recurring fiasco has to be dealt with before the end of this calendar year or in 2013 docs will get enough from Medicare to pay their rent and their staffs but have little left for themselves. The House will probably try to raid the Affordable Care Act’s “Prevention and Public Health Fund,” disregarding the fact that preventing a dollar’s worth of disease treatment costs about eighteen cents. 

It’s just another expensive way to kick the proverbial can down the road.   

Over The Fiscal Cliff

Finally, the sequestration requirement — which would hold back money that would ordinarily be spent — will be triggered unless Congress reaches an agreement to reduce our deficit before the end of the year.  

If no deal is made during this lame duck, there will be a mandatory two percent reduction in all health care spending, including Medicare. That doesn’t sound like much, but a lot of rural hospitals, which are supporting most rural docs, have very narrow margins.

It’s all on the table, this week in Congress.

Dr. Myers is a retired medical educator who has been involved with rural hospitals most of the last forty years.  He directed the Federal Office of Rural Health Policy in the late 1990s and was president of the National Rural Health Association in 2003.  He also writes for the Rural Monitor. He and his wife, JoAnn, raise endangered breeds of livestock in Waldoboro, Maine. 

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