No signs of re­lief: Ru­ral providers on edge over ACA’s un­cer­tain fu­ture

Modern Healthcare - - NEWS - By Steven Ross John­son

Roger Knak has made some es­pe­cially tough de­ci­sions in the past few years.

Knak, CEO of Fairview (Okla.) Re­gional Med­i­cal Cen­ter in the north­west part of the state, had to lay off one of the cen­ter’s three staff physi­cians. The rest of the em­ploy­ees haven’t got­ten a raise in three years.

But the past month has been es­pe­cially hard. As Se­nate GOP law­mak­ers worked to­ward pass­ing a bill to re­place the Af­ford­able Care Act that would have se­verely cut back Med­i­caid and tax sub­si­dies to pur­chase in­di­vid­ual health in­sur­ance plans, Fairview’s lead­er­ship had been pre­par­ing for what they feared to be the in­evitable—a loss of rev­enue from cuts to fed­eral health­care pro­grams.

Con­se­quently, Fairview Re­gional had started slash­ing its non-es­sen­tial ser­vices, which could put its Medi­care el­i­gi­bil­ity at risk.

Fairview, a 25-bed crit­i­cal-ac­cess hos­pi­tal that serves a pa­tient pop­u­la­tion of roughly 9,000, is just one of the many ru­ral hos­pi­tals in Ok­la­homa and across the coun­try that has been op­er­at­ing on slim mar­gins for some time.

“I don’t know what the next cut would be with­out tak­ing a dras­tic ac­tion to re­visit us as be­ing li­censed as a med­i­cal-sur­gi­cal hos­pi­tal and chang­ing our li­cens­ing to some other form,” Knak said.

The lat­est Repub­li­can ef­fort to re­place the ACA failed to gar­ner enough vote to pass the Se­nate, leav­ing Med­i­caid pro­grams as they are, for now.

But ru­ral health­care providers such as Fairview re­main con­cerned that the par­ti­san wran­gling over the health­care law’s fu­ture will just per­pet­u­ate the in­er­tia over ad­dress­ing the fi­nan­cial prob­lems most ru­ral hos­pi­tals now face.

“It seems to be the same un­cer­tainty with­out any clear di­rec­tion,” Knak said.

Repub­li­can law­mak­ers are con­tin­u­ing their ef­fort to get a ma­jor­ity of sen­a­tors to vote “yes” on the Bet­ter Care Rec­on­cil­i­a­tion Act, but re­mained four votes shy as of dead­line. The Se­nate’s GOP-backed bill would stop Med­i­caid ex­pan­sion and cut $700 bil­lion from the pro­gram by 2026.

Pres­i­dent Don­ald Trump on July 19 met with GOP sen­a­tors to try and per­suade them to pass the bill, but with seem­ingly lit­tle ef­fect. Sen. Ma­jor­ity Leader Mitch McCon­nell (R-Ky.) has called for a vote on a re­peal-only mea­sure that the Con­gres­sional Bud­get Of­fice es­ti­mated would lead to 32 mil­lion los­ing health cov­er­age by 2026.

Med­i­caid cov­ers nearly one-quar­ter of non-el­derly adults, in­clud­ing 52 mil­lion Amer­i­cans in ru­ral ar­eas.

Thou­sands of pre­vi­ously unin­sured Amer­i­cans re-

“I don’t know what the next cut would be with­out tak­ing a dras­tic ac­tion to re­visit us as be­ing li­censed as a med­i­cal-sur­gi­cal hos­pi­tal and chang­ing our li­cens­ing to some other form.” Roger Knak CEO Fairview Re­gional Med­i­cal Cen­ter

ceived cov­er­age thanks to the ACA’s Med­i­caid ex­pan­sion, which in­creased el­i­gi­bil­ity to cover adults earn­ing up to 138% of the fed­eral poverty level in those states that chose to do so. Med­i­caid ex­pan­sion was a real boon for ru­ral hos­pi­tals in ex­pan­sion states since ru­ral res­i­dents are more likely to be unin­sured.

But the ACA’s treat­ment of Med­i­caid ended up hurt­ing hos­pi­tals in non-ex­pan­sion states. To help pay for the ex­pan­sion, pol­i­cy­mak­ers set­tled on Medi­care re­im­burse­ment cuts as the pri­mary source, said Andy Fos­mire, vice pres­i­dent of ru­ral health for the Ok­la­homa Hos­pi­tal As­so­ci­a­tion. Ok­la­homa never ex­panded Med­i­caid af­ter

the Supreme Court in 2012 ruled the ACA couldn’t re­quire states to do so, yet hos­pi­tals there are still car­ing for unin­sured pa­tients while fac­ing re­lated hits to Medi­care re­im­burse­ment.

Bad-debt bur­den

In ad­di­tion, since 2013 many hos­pi­tals have seen Medi­care re­duce the share of ben­e­fi­cia­ries’ un­paid debt it cov­ers for out-of-pocket costs; the rate dropped from 70% to 65%. But the cut was much deeper for crit­i­cal-ac­cess hos­pi­tals, which went from hav­ing 100% of that debt cov­ered down to 65% .

“Though we strongly, strongly sup­ported the ob­jec­tives of the ACA to get peo­ple in­sured, un­for­tu­nately where some of the ACA has failed has been in ru­ral ar­eas,” said Mag­gie Ele­hwany, vice pres­i­dent of gov­ern­ment af­fairs and pol­icy for the Na­tional Ru­ral Health As­so­ci­a­tion.

Iron­i­cally, some of the fi­nan­cial prob­lems ru­ral providers have in­curred in re­cent years are a byprod­uct of hav­ing more in­sured pa­tients since the ACA was passed, with many buy­ing in­sur­ance plans through a health­care mar­ket­place. Many of those pa­tients who visit ru­ral hos­pi­tals have low-pre­mium, high-de­ductible plans. Ru­ral hos­pi­tals that re­ceive pa­tients through their emer­gency depart­ment of­ten hold them long enough to sta­bi­lize them be­fore trans­port­ing them to a larger fa­cil­ity, but are stuck with the cost of the de­ductible if a pa­tient can’t cover it.

“A pa­tient’s in­sur­ance fi­nally kicks in once they are at a larger fa­cil­ity, be­cause they al­ready met their de­ductible with the ru­ral hos­pi­tal,” Ele­hwany said.

Such sce­nar­ios have led to a 50% in­crease in the bad debt ru­ral hos­pi­tals have taken on since im­ple­men­ta­tion of the ACA, ac­cord­ing to the NRHA.

In Ok­la­homa, where four ru­ral hos­pi­tals have closed since 2010, 53 of the 65 fa­cil­i­ties in ru­ral ar­eas op­er­ate with a neg­a­tive mar­gin ev­ery month, Fos­mire said. Thirty-seven op­er­ate with less than 14 days of op­er­at­ing cash on hand.

Na­tion­ally, 41% of ru­ral hos­pi­tals are op­er­at­ing at a loss, ac­cord­ing to a 2016 study by the Char­tis Cen­ter for Ru­ral Health. Since 2010, more than 80 ru­ral hos­pi­tals have closed; the ma­jor­ity were in the 19 states that did not ex­pand Med- icaid. An­other 670 ru­ral providers are at risk of clos­ing, mostly in non-ex­pan­sion states that Trump won in last year’s pres­i­den­tial elec­tion.

Medi­care cuts

Other fed­eral pro­grams were re­duced by the ACA as a re­sult of the ex­pected in­crease in Med­i­caid cov­er­age, with Medi­care dis­pro­por­tion­ate-share hos­pi­tal pay­ments be­ing re­duced by more than $1.25 bil­lion in 2015 and by an­other $1.2 bil­lion last year.

“I’ve been lay­ing off em­ploy­ees over the last 12 months,” said David Keith, CEO of McAlester (Okla.) Re­gional Med­i­cal Cen­ter, a 171-bed ru­ral hos­pi­tal. McAlester serves a pop­u­la­tion of about 200,000 in the south­east­ern part of the state. For some time now, Keith hasn’t been re­plac­ing staffers who quit or were fired. Keith es­ti­mated he was on pace to lose 50 of his staffers and see a 30% de­cline in to­tal rev­enue if the GOP plan were to pass.

A re­cent Com­mon­wealth Fund study pro­jected the Bet­ter Care Rec­on­cil­i­a­tion Act could lead to 919,000 fewer health­care jobs by the year 2026. That could hit ru­ral com­mu­ni­ties with a dou­ble whammy: fewer jobs and the loss of es­sen­tial ser­vices.

McAlester is the only lo­cal provider with urol­ogy and in­ter­ven­tional car­di­ol­ogy lines, and it re­ceives re­fer­rals from many smaller, crit­i­cal-ac­cess hos­pi­tals. Still, Keith is con­tem­plat­ing cut­ting those lines to make sure it can still pro­vide pri­mary and emer­gency care.

“If we don’t have those ter­tiary ser­vices, those hos­pi­tals are go­ing to have to send their pa­tients 3½ hours away to the big ur­ban cen­ters for their spe­cialty ser­vices,” Keith said.

Ru­ral hos­pi­tals also may feel the squeeze from pro­posed changes to the fed­eral 340B drug dis­count pro­gram, which could cut an­other life­line for some hos­pi­tals (See re­lated story, p. 10).

The ACA al­lowed more ru­ral and crit­i­cal-ac­cess hos­pi­tals to save about $10,000 a month in drug costs as pre­scrip­tion drug spend­ing sky­rock­eted, ac­cord­ing to a 2015 Mar­shall Univer­sity study.

But the out­look is not good for the 340B pro­gram. Crit­ics say it’s mis­man­aged and prone to fraud and waste. The CMS this month pro­posed cut­ting hos­pi­tal pay­ments for 340B to 22.5% less than the av­er­age sales price for drugs in­stead of the cur­rent rate 6% above the av­er­age sales price.

Though HHS Sec­re­tary Dr. Tom Price said the move was part of Trump’s prom­ise to ad­dress ris­ing drug prices, the change might not in­flu­ence drug com­pa­nies to drop their prices. In­stead, it would just hit hos­pi­tal bud­gets, said Brad Gibbens, deputy di­rec­tor of the Cen­ter for Ru­ral Health at the Univer­sity of North Dakota School of Medicine and Health Sciences.

Mar­ginal risk

While only 20% of the pop­u­la­tion lives in ru­ral ar­eas, ru­ral res­i­dents make up more than half of the pop­u­la­tion of ar­eas that lack ba­sic med­i­cal care, ac­cord­ing to the U.S. Health Re­sources and Ser­vices Ad­min­is­tra­tion. Ru­ral ar­eas make up 58% of all den­tal-care short­age ar­eas and 53% of all men­tal health short­age ar­eas across the coun­try.

Gibbens es­ti­mated that 54% of North Dakota ru­ral hos­pi­tals now have pos­i­tive fi­nan­cial mar­gins since the state’s Med­i­caid ex­pan­sion com­pared with 46% of providers that still have neg­a­tive bal­ances. He said providers most at risk of clos­ing were those in coun­ties with pop­u­la­tions of just a few thou­sand res­i­dents where the only other health­care provider is hours away.

For providers such as Fairview and McAlester, con­tin­u­ing the cur­rent sys­tem is un­sus­tain­able.

“We have such short cash re­serves on hand that all it’s go­ing to take is one hic­cup with re­im­burse­ment and we could be (tap­ping) into an op­er­at­ing line of credit, which is usu­ally the first step to­ward bank­ruptcy,” Fairview’s Knak said.

“A pa­tient’s in­sur­ance fi­nally kicks in once they are at a larger fa­cil­ity, be­cause they al­ready met their de­ductible with the ru­ral hos­pi­tal.” Mag­gie Ele­hwany Vice pres­i­dent of gov­ern­ment af­fairs and pol­icy Na­tional Ru­ral Health As­so­ci­a­tion

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