Rural funds roll out amid small hospital paperwork challenges

The first rounds of federal funding for rural healthcare improvement are rolling from the federal government to the states to distribute to their hospitals and other awardees.

For some independent rural hospitals, the lack of administrative staff created paperwork obstacles to those funds.

The first $10 billion of a five-year, $50 billion total in grants from the Rural Health Transformation Program (RHTP) were released by CMS to each state in recent weeks for distribution to providers and other entities. The distribution of those funds by the states is based on the review of applications from providers and other entities earlier this year.

Small hospital challenge

Some state-level hospital advocates and advisors said rural hospitals have garnered a large share of the funds but also noted challenges for small, independent rural hospitals — versus those that are part of larger health systems — to win any of the grants.

“The complicated nature of it was more than they anticipated and the technical support that they may have had access to might not have been as robust as they had hoped for,” Danne Howard, president and CEO of the Alabama Hospital Association, said in an interview.

She said that some small independent hospitals had to hire consultants to help with their applications, “which was kind of counter because that is an expense that is not allowed to be reimbursed through any of these grants.”

For the second year of the program, the association is looking to beef up its administrative help for those hospitals, Howard said.

The small hospital administrative challenge is something Chris Nelson, a strategic account executive at PowerTrain, said he has seen across multiple states.

“These [small] health systems are short-staffed as it is and none of them have a grant writer on staff,” he said. “Most [hospital staff with whom] I have talked have had this assigned to them or the CEO is trying to do this as well.”

In contrast, larger health systems with rural facilities “have a distinct advantage since they have grant writers at their central office,” he said.

Some small Arkansas hospitals recognized the technical expertise challenge of the RHTP grant early on and sought support from the Arkansas Hospital Association, said Donald McCormick, director of analytics and financial policy for the association.

And the association was able to help a small number either with writing or reviewing their grant applications.

Among the Arkansas awards announced so far, most of the funding small hospitals were able to garner came through a group of about 28 hospitals called the Arkansas Rural Hospital Partnership, made up primarily of critical access hospitals (CAHs), he said in an interview. The awards will provide these hospitals with funding for telehealth-related services, including telehealth devices, equipment and software, as well as vendor support.

Advance funding or reimbursement

Another concern raised during the first year of the program was the need for advanced funding instead of only retrospective funding, which requires small organizations to find the funding for the new initiatives and wait for repayment. The overall federal rules established funds as cost-reimbursable grants.

“Some of the awardees [are] not going to be able to front a million dollars in capital,” McCormick said. “So, there will need to be some wiggle room on that. But the state is still working through how they’re going to address that issue.”

Consultant concern

Some observers raised concerns over the costs imposed on small hospitals by consultants they needed to hire to identify initiatives, create the required project tracking and write applications for RHTP funds, among other steps. The need for outside expertise was compounded by the tight timelines the process established for providers, said RHTP observers.

“There’s been too much emphasis paid on assessments and consultants in Year 1, so the Year 1 dollars have failed to reach what they were intended for,” said Jonathan Cohee, founder and CEO of C3-60 Health Institute, which advises structurally distressed hospitals. “That money may technically be going to a provider doing program X, but most of that money is actually going to be spent on a consultant or study of that program.”

The need for consultants was driven by complex administrative requirements of the program that small hospitals and other organizations lacked the time and expertise to complete, he said.

He called out Indiana as a state effectively getting its recently announced funds to hospitals and health systems, instead of large shares going to consultants. 

That state has been highlighted by observers for its unusually mature regional coalition funding architecture. Indiana is splitting its $207 million first-year federal award between statewide initiatives and regional coalition grants, including one led by the Indiana Hospital Association.

McCormick said concerns over consultants garnering RHTP funds directly drove Arkansas to establish a unique process that used a portal for grant applications, which was only open to submissions from not-for-profit organizations.

“So, a consulting firm that is a for-profit consulting firm could not receive funds, regardless, without the funds being passed through a not for profit or a hospital,” McCormick said.

Changes needed

Hospital advocates also are urging a range of changes for the second year of RHTP.

Those include a request by the American Hospital Association (AHA) to prioritize direct support for rural hospitals and providers. Specifically, the AHA urged the agency to lift the 15% funding cap on provider payments and the 20% cap on infrastructure and capital improvement funding for Years 2-5 of the program.

Additionally, the AHA urged CMS to ensure that states and the agency not enact “undue administrative barriers to hospitals’ ability to receive the funds.”

“Complex bureaucratic processes or excessive paperwork could delay or even prevent hospitals from getting the support they need to improve rural healthcare,” wrote officials of the AHA.

Howard said her association also plans to ask CMS to lift the spending caps identified by the AHA and for it to reconsider the “way these funds can be used.”

“The rules that came out of CMS and the language in the law was a little bit more restrictive than what everyone assumed [at] the beginning,” she said.