Crit­i­cal de­bate

Pro­posal to strip crit­i­cal-ac­cess sta­tus for some of those hos­pi­tals called a death knell for many

Modern Healthcare - - COVER STORY - Joe Carl­son

Ap­proached from the south, Colum­bus Com­mu­nity Hos­pi­tal ap­pears to pop out of a farm field on the out­skirts of a small city in south-cen­tral Wis­con­sin. Like a thou­sand other crit­i­cal-ac­cess hos­pi­tals, Colum­bus Com­mu­nity has re­ceived mil­lions of dollars in spe­cial Medi­care pay­ments dur­ing the past decade—money that was ear­marked for fa­cil­i­ties in re­mote ar­eas to en­sure lo­cal res­i­dents had ac­cess to acute-care ser­vices. Yet five other hos­pi­tals op­er­ate within a 30-mile ra­dius of the boom­ing satel­lite com­mu­nity of Colum­bus, which is only a halfhour drive from the state cap­i­tal of Madi­son.

In an age when peo­ple are com­mut­ing farther than ever to work, this 25-bed not­for-profit fa­cil­ity boasted a 6% sur­plus in its most re­cent fis­cal year. Pop­u­la­tion in its ser­vice ter­ri­tory has grown more than 10% in the past decade.

Colum­bus Com­mu­nity Hos­pi­tal, in other words, does not fit the pro­file of the re­mote health­care out­post that was en­vi­sioned when the orig­i­nal Medi­care crit­i­cal-ac­cess pro­gram was cre­ated in 1997. While it may be lo­cated next to farms and have low pa­tient vol­ume, it would not have been ad­mit­ted into the orig­i­nal pro­gram.

A study last week found that Colum­bus is not alone: Two-thirds of crit­i­cal-ac­cess hos­pi­tals in the U.S. would be barred from get­ting the en­hanced pay­ments if the pro­gram ad­hered to its orig­i­nal stan­dards.

Like many of the 1,328 crit­i­cal-ac­cess hos­pi­tals in the U.S., Colum­bus Com­mu­nity was given that sta­tus un­der a loop­hole that ex­isted un­til 2006, which al­lowed state gov­er­nors to des­ig­nate any small hos­pi­tal as el­i­gi­ble for the fed­eral pro­gram. The re­sult is a pro­gram that now costs Medi­care more than $2 bil­lion a year.

But with fed­eral of­fi­cials look­ing for new ways to cut costs, the Obama ad­min­is­tra­tion and sev­eral fed­eral agen­cies have pro­posed rein­ing in the pro­gram. That has trig­gered wide­spread out­rage and fear among crit­i­cal- ac­cess hos­pi­tal of­fi­cials and their trade-in­dus­try spokes­peo­ple.

They say the ex­tra fund­ing is cru­cial to main­tain­ing ser­vices in their com­mu­ni­ties. Cut­ting back or elim­i­nat­ing the pay­ment will lead to wide­spread clo­sures in com­mu­ni­ties with high in­ci­dences of poverty and chronic ill­nesses, they say. And, it could wind up cost­ing Medi­care money, since it will force those pa­tients to larger, more costly hos­pi­tals in nearby cities and towns.

But crit­ics say the pro­gram has grown well

“From a purely mone­tary stand­point, forc­ing those hos­pi­tals to close could rob Peter to pay Paul.”

—Sen. Chuck Grass­ley (R-Iowa)

be­yond its orig­i­nal in­tent of pro­tect­ing health­care op­tions in dis­tant com­mu­ni­ties. And un­less some­thing is done to pare back the ex­pense, con­tin­ued in­sis­tence on an ex­panded pro­gram could wind up jeop­ar­diz­ing the ex­tra fund­ing for those fa­cil­i­ties that truly need help in pro­vid­ing crit­i­cally needed ac­cess.

“The gov­er­nors, some of them just fig­ured there’s a good chance to open the piggy bank, and they did,” said Dr. Wayne My­ers, a re­tired pe­di­a­tri­cian and for­mer di­rec­tor of HHS’ Of­fice of Ru­ral Health Pol­icy. “I worry that if those of us that are sup­port­ive of lo­cally avail­able care lay down across the tracks and wrap our­selves in the flag, we could lose the whole des­ig­na­tion rather than just los­ing the des­ig­na­tions that are not truly im­por­tant for health­care.”

A study pub­lished last week by HHS’ fis­cal watch­dog, the Of­fice of In­spec­tor Gen­eral, found that 849, or two-thirds, of the na­tion’s crit­i­cal-ac­cess hos­pi­tals do not meet the ba­sic def­i­ni­tions in the law, in­clud­ing the re­quire­ment that they be at least 35 miles from the near­est hos­pi­tal and in ru­ral com­mu­ni­ties. The OIG joined Pres­i­dent Barack Obama and the Medi­care Pay­ment Ad­vi­sory Com­mis­sion in say­ing that the pro­gram should be reined in be­cause some of the hos­pi­tals given the spe­cial des­ig­na­tion did not de­serve it.

Obama’s pro­posed fed­eral bud­get for 2014 would cut Medi­care spend­ing by $40 mil­lion by re­mov­ing about 70 hos­pi­tals from the pro­gram that are less than 10 miles from the near­est hos­pi­tal. The OIG re­port found that the sav­ings would jump to more than $268 mil­lion a year if the cut­off was in­creased to 15 miles.

Such talk is jar­ring to ad­vo­cates for ru­ral health­care be­cause the crit­i­cal-ac­cess pro­gram was first es­tab­lished specif­i­cally to halt the wide­spread hos­pi­tal clo­sures that were oc­cur­ring in ru­ral ar­eas in 1990s. The switch to the prospec­tive pay­ment sys­tem, which paid hos­pi­tals based on set prices for ser­vices rather than each fa­cil­ity’s unique costs of care, hit ru­ral hos­pi­tals hard. Small hos­pi­tals typ­i­cally don’t have enough pa­tients on pri­vate in­sur­ance to make up for the losses in Medi­care, which pays about 91% on aver­age of what it costs to take care of its pa­tients. Un­der the pro­gram, crit­i­cal-ac­cess hos­pi­tals bill Medi­care for 101% of their ac­tual costs, which trans­lates into an aver­age of $860,000 in ex­tra Medi­care re­im­burse­ments for ev­ery hos­pi­tal in the pro­gram. In ad­di­tion to lim­it­ing ge­o­graphic el­i­gi­bil­ity, the pres­i­dent’s 2014 bud­get pro­posed trim­ming the pay­ment to 100% of costs.

Pro­po­nents say kick­ing some crit­i­cal-ac­cess hos­pi­tals out of the pro­gram and mov­ing them back to prospec­tive pay­ment would trig­ger an­other wave of clo­sures—and likely the same kind of po­lit­i­cal out­cry that led to the pro­gram’s cre­ation.

“We went through a pe­riod of time where th­ese fa­cil­i­ties just couldn’t make it. They would die a slow cash-flow death,” said John Rus­sell, CEO of Colum­bus Com­mu­nity. “This fa­cil­ity would lose money with­out crit­i­cal ac­cess. Then what do we do to break even, to sur­vive? … If you lose money, you have to pull back and de­cide what you can keep.”

Many small hos­pi­tals sup­port other health­care op­tions that lose money in their commu-

ni­ties, such as nurs­ing homes, home-health agen­cies and am­bu­lance ser­vices. They also pro­vide child­hood obe­sity pro­grams and health-screen­ing clin­ics, which also pro­vide jobs. “You lose a ru­ral com­mu­nity hos­pi­tal, and you lose a com­mu­nity,” Rus­sell said. “It is a dev­as­tat­ing im­pact.”

Yet ear­lier this year, Medi­care of­fi­cials qui­etly di­rected state in­spec­tors to be­gin re­cer­ti­fy­ing all crit­i­cal-ac­cess hos­pi­tals to make sure that they meet the dis­tance re­quire­ments. There was a catch, though. The in­spec­tors lack statu­tory au­thor­ity to in­ves­ti­gate that is­sue for hos­pi­tals that were granted the sta­tus by state gov­ern­ments— and those hos­pi­tals make up three-quar­ters of the en­tire group.

Last week, OIG of­fi­cials urged HHS to lobby Congress for the power to jet­ti­son the state rules and craft uni­form stan­dards that could be evenly ap­plied to avoid ben­e­fit­ting hos­pi­tals that are too close to com­peti­tors or large cities where health­care ac­cess is not an is­sue.

Law­mak­ers in both cham­bers of Congress re­main skep­ti­cal of any changes that would re­move hos­pi­tals from the crit­i­cal-ac­cess pro­gram.

“If the hos­pi­tals are re­clas­si­fied, they are al­most sure to close. That could mean hard­ship for pa­tients who rely on those hos­pi­tals,” said Repub­li­can Sen. Chuck Grass­ley, whose home state of Iowa in­cludes 59 hos­pi­tals with 25 beds or fewer.

A re­cent study in the Jour­nal of Ru­ral Health found that about 44% of all crit­i­calac­cess hos­pi­tals would be­come money-los­ing ven­tures if the pro­gram were elim­i­nated, com­pared to the 28% that post neg­a­tive mar­gins to­day. “You can’t have a neg­a­tive op­er­at­ing mar­gin for­ever, and so a good num­ber of them would close,” said Ira Moscov­ice, di­rec­tor of the Univer­sity of Min­nesota’s Ru­ral Health Re­search Cen­ter.

How­ever, no one is talk­ing about elim­i­nat­ing the pro­gram. The study did not ad­dress the is­sue of what would hap­pen to mar­gins at hos­pi­tals in ex­ur­ban ar­eas if the orig­i­nal 35mile ge­o­graphic limit were reim­posed or a less strin­gent limit of 15 miles were cre­ated, as the OIG sug­gested.

De­fend­ers also ques­tion the pur­ported sav­ings to Medi­care that would come from de­cer­ti­fy­ing crit­i­cal-ac­cess hos­pi­tals, be­cause many pa­tients with­out a lo­cal provider would cre­ate costs else­where in the sys­tem. They would ei­ther go to more ex­pen­sive ur­ban hos­pi­tals or de­lay care un­til the sit­u­a­tion re­quired costly emer­gency treat­ments. “From a purely mone­tary stand­point,” Grass­ley wrote, “forc­ing those hos­pi­tals to close could rob Peter to pay Paul.”

Hos­pi­tals booted out of the crit­i­cal-ac­cess pro­gram would see other hits to their topline rev­enue. Medi­care out­pa­tient co­pay­ments, which are based on charges for care at crit­i­cal-ac­cess hos­pi­tals, would de­cline. And many would cease to be el­i­gi­ble for the 340B pro­gram, which gives smaller hos­pi­tals the abil­ity to get dis­counts of up to 50% on pre­scrip­tion drug prices.

Alan Mor­gan, CEO of the National Ru­ral Health As­so­ci­a­tion, char­ac­ter­ized the in­spec­tor gen­eral’s pro­posal as “purely cost-cut­ting, noth­ing more, noth­ing less.”

The pol­i­tics fac­ing those who would cut back the pro­gram are daunt­ing. Ru­ral health­care has al­ways had strong bi­par­ti­san sup­port be­cause there are crit­i­cal-ac­cess hos­pi­tals in ev­ery state. The Se­nate has tra­di­tion­ally been a bul­wark of sup­port for spe­cial pro­grams that ben­e­fit ru­ral ar­eas.

Yet ru­ral providers now find them­selves caught up in the same cost-con­scious en­vi­ron­ment that is dom­i­nat­ing so many other Wash­ing­ton pol­icy dis­cus­sions. For in­stance, Obama’s bud­get pro­pos­als for both fis­cal 2013 and 2014 called for the re­duc­tion in cost-based re­im­burse­ment to 100% from 101% for crit­i­cal-ac­cess hos­pi­tals, as well as the elim­i­na­tion of that sta­tus if an­other fa­cil­ity is lo­cated within 10 miles.

And that has ex­ec­u­tives at ru­ral providers wor­ried their po­lit­i­cal im­mu­nity from cost- cut­ting may be fad­ing.

Leah Os­bahr, CEO of the county-owned Wash­ing­ton County Me­mo­rial Hos­pi­tal in Po­tosi, Mo., said her 25-bed hos­pi­tal has been deal­ing with a se­ries of cuts that have made stay­ing open a chal­lenge. This year her hos­pi­tal weath­ered 2% across-the-board cuts in Medi­care (cost­ing her hos­pi­tal at least $150,000), a drop in Mis­souri’s Med­i­caid rates for ra­di­ol­ogy ser­vices ($500,000 in cuts), and the im­pend­ing loss of Medi­care dis­pro­por­tion­ate-share pay­ments.

Mean­while, Wash­ing­ton County Me­mo­rial is writ­ing off more than $400,000 a month in bad debt for pa­tients with­out any in­sur­ance as it clocks in 15,000 vis­its a year to its emer­gency depart­ment. “It’s scary when you’re deal­ing with peo­ple’s health­care and jobs in a small com­mu­nity,” she said.

Wash­ing­ton County Me­mo­rial is about 23 miles from the near­est hos­pi­tal, which means it does not qual­ify for crit­i­cal-ac­cess sta­tus un­der the tra­di­tional rules, but would re­main in the pro­gram un­der the pres­i­dent’s bud­get pro­posal. Os­bahr said the com­mu­nity has no mass tran­sit, and since it’s the sec­ond-poor­est county in Mis­souri, many peo­ple would lack trans­porta­tion op­tions to get to the next-clos­est hos­pi­tal in Farm­ing­ton.

“We’re just try­ing to fig­ure out what will hap­pen in the fu­ture and brace our­selves,” she said.

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