Healthcare Business Trends

More Federal Support Pledged for Rural Hospitals

February 7, 2019 8:00 am

HHS Secretary Alex Azar also raised doubts about the long-term financial sustainability of a hospital-focused rural healthcare system.

Feb. 5—The federal government plans to increase the number and variety of alternative payment models available for rural hospitals, which are facing growing financial pressures.

Alex Azar, secretary of the U.S. Department of Health and Human Services (HHS), told rural hospital advocates meeting this week in Washington, D.C., that he was concerned about the increasing number of hospital closures and that the existing payment system is not the “sustainable model for the future.”

“We closely track these hospital closures and the factors behind them,” Azar said.

Ninety-five hospitals have closed since the Affordable Care Act (ACA) was enacted in 2010, according to the latest count from the Chartis Center for Rural Health. And 46 percent of the nearly 2,000 rural hospitals—the most yet found—are operating with negative margins.

Michael Topchik, national leader for the Chartis Center for Rural Health, said researchers there have seen a high correlation between negative margins and eventual hospital closures.

To help address the financial challenges, Azar said HHS is looking to overhaul the Medicare wage index formula.

“We know it creates problems for rural providers,” Azar said at the meeting of the National Rural Health Association.

And a task force Azar established last year is looking for other ways to financially bolster rural hospitals.

HHS also is considering new and expanded payment models from which rural providers could benefit. For instance, the Center for Medicare & Medicaid Innovation (CMMI) is considering an expansion of the Comprehensive Primary Care Plus (CPC+) model, in which 20 percent of participating practices are rural.

Amy Bassano, deputy director of CMMI, said that among the 30 models being tested by CMMI, her office is most excited about CPC+, which aims to incentivize coordinated primary care, because it involves public and private payers offering uniform incentives and requirements.

The Centers for Medicare & Medicaid Services (CMS) in January launched a rural-access model for hospitals in Pennsylvania that is based on the all-payer hospital-rate model used in Maryland. The Pennsylvania global payment model aims to test whether providing more revenue certainty will free up hospitals to undertake broader efforts to improve their area’s population, such as by targeting the social determinants of health. CMS aims to expand that model from six to 18 hospitals by 2020, Bassano said. 

CMS also is considering changes to Medicare Shared Saving Program accountable care organizations (ACOs) that would be specifically focused on rural providers and allow them to take less financial risk.

Rural Service Shrinkage

In addition to the ongoing wave of hospital closures, advocates have become increasingly concerned about rural hospitals eliminating services due to cost. For instance, 134 rural hospitals have dropped obstetrics services since 2011, according to Chartis. Those reductions were in addition to the closure of 18 hospitals that had offered obstetrics services.

Regarding ways to address such “service shrinkage,” Sen. Tina Smith (D-Minn.) told rural hospital executives about her legislation that would extend federal funding for telehealth services to maternal health and obstetrics care providers.

Another issue contributing to the discontinuation of service lines at rural hospitals is the lack of affordability or availability of clinicians willing to work outside urban areas.

“Recruitment and retention are major issues in rural states,” Topchik said. The general workforce challenge faced by rural states was illustrated by the recent offer to pay people with STEM degrees to move to Maine.

Smith said she is backing coming legislation to provide expanded federal funding specifically for the rural healthcare workforce.

Sen. Tim Kaine (D-Va.) solicited hospital executive feedback for his own planned legislation that would expand federal debt-forgiveness programs for clinicians who agree to work in rural areas.

Telehealth Expansion

Expanding payment for telehealth was repeatedly emphasized by federal policymakers as a way to address rural healthcare challenges related to clinician shortages, transportation problems, and cost control.

For instance, Azar said Medicare needs to expand telehealth payments beyond geographic areas that are officially designated as having provider shortages. He highlighted recent regulatory efforts CMS has undertaken to expand telehealth use, including by allowing Medicare Advantage (MA) plans to pay for clinical services provided in the home instead of requiring that patients receiving telehealth be located in another clinical setting.

“This would remove disincentives for telehealth in Medicare Advantage and allow beneficiaries to receive any service covered by their plan from their home, or any other location, at any time they choose,” Azar said. “Even better, this work in Medicare Advantage could be an important innovation model for us to draw lessons to apply to Medicare fee-for-service.”

Medicare also has started to pay providers for remote patient-monitoring visits and for assessments of electronically transmitted images. Previously, a physician’s phone or video check-in with a patient was not payable by Medicare separately from a related in-person visit.

Kaine said he plans to push federal policy tweaks to specifically incentivize the use of telehealth services to provide mental health and substance abuse services.

However, states also will need to address legal barriers to telehealth, Azar said. For instance, several states require patients looking to receive telehealth services to first have an in-person examination by a clinician.

Despite the ongoing federal efforts to bolster the finances of rural hospitals, Azar expressed doubts about their long-term financial sustainability.

“A truly sustainable model for rural health care is going to require thinking about where we absolutely need traditional hospitals and where we can provide the same quality of care or even better through some other model, which may not yet exist,” Azar said.

Examples of “sustainable, low-cost, high-quality care” are community health centers funded by the Health Resources and Services Administration, he said.

“Most health centers are located in rural areas or urban areas with other challenges, and yet they have shown success in beating the national averages with their patients’ results in blood pressure control, diabetes treatment, and more,” Azar said.

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare


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