Payment Reimbursement and Managed Care

Azar seeks to counter trend of rural hospital closures

May 6, 2019 6:09 pm

April 5—As rural hospital closures since enactment of healthcare reform moved into the triple digits, the Trump administration revealed some steps it is pursuing to reverse the trend.

Alex Azar II, secretary of the U.S. Department of Health and Human Services (HHS), this week told senators that the administration is considering various ways to stem the tide of rural hospital closures, which recently reached 102 since January 2010, according to researchers.

In response to concerns raised by Sen. Cindy Hyde-Smith (R-Miss.), in whose state half of rural hospitals are at risk of closure, Azar discussed the task force he launched to find ways to address the crisis. The ideas under consideration include:

  • Increasing the use of telehealth services
  • Allowing providers to practice to the top of their license
  • Ensuring federal regulations do not create “artificial barriers to economically viable models of hospitals in rural America”

“Are we trying to force a 1960s model of hospitals through our payments systems and other regulations onto rural America?” Azar said, referring to existing rules. “We’re looking at how do we reconcile the needs of rural America from a hospital perspective.”

Azar’s comments came during the Senate Appropriations Committee’s Labor, Health and Human Services, Education, and Related Agencies Subcommittee hearing on Trump’s proposed FY20 budget for HHS.

In an eye-opening moment for Azar, he recently learned that federal rules require critical access hospitals to keep a surgeon on staff even if they perform only a handful of procedures annually.

“One has to ask, why does that requirement still hold in the modern era and is that part of making that facility economically viable long-term to be able to provide access in that community?” Azar said.

The National Rural Health Association (NRHA) has urged three strategies to arrest the decline in rural hospitals:

  • Ensuring rural provider payment rates are sufficient to remain solvent
  • Reducing the cost of providing care, including through regulatory relief that reduces costs without negatively impacting patient care
  • Supporting new models that allow communities to retain necessary access to local care, including a local emergency department, while allowing flexibility for the facilities to meet the specific needs of the community

On rural hospital payment, Sen. Lamar Alexander (R-Tenn.) highlighted ongoing concerns about the Medicare area wage index, which is used to annually adjust Medicare hospital payments to reflect labor prices in local labor markets.

The index is “continuing to be a reason why hospitals, especially in rural Tennessee, and other parts of rural America closed, because of the unfairness of that index,” Alexander said.

The administration’s consideration of changes to the wage index system were revealed in 2018 amid correspondence with the HHS Office of the Inspector General. Azar confirmed in March at a Senate Finance Committee hearing that HHS is considering changes to the index and will seek public comments.

Senators from urban states complained in that hearing that the administration allowed expiration of the so-called rural floor, which required that Medicare rates for urban hospitals in a state remain higher than for rural hospitals. 

ACA implementation to continue amid court fight

Azar also confirmed that HHS will continue to fully administer the Affordable Care Act (ACA) even though it is asking federal judges to throw out the law.

In a March 25 filing by the Department of Justice (DOJ) with the 5th U.S. Circuit Court of Appeals, the administration backed the ruling of a federal judge in Texas that the entire ACA was unconstitutional due to Congress’s elimination of the individual-mandate tax penalty. When the case was before the District Court, the DOJ argued for tossing only two provisions of the ACA.

“We have not and will not make any changes to how we administer the [ACA] in light of the litigation,” Azar said. “It could be a year, two years before we get any final ruling by an ultimate final court of jurisdiction. I have instructed my team, my organization, to continue to implement the Affordable Care Act faithfully and fully across the board without regard to litigation positions taken by the administration in court.”

If the ruling striking down the law is upheld through all appeals, Azar said the administration will seek to to develop a replacement law before the overturn goes into effect.

President Donald Trump recently tweeted that the administration will develop a replacement option for voters to consider as part of the 2020 presidential election.

 “It’s pretty clear that if the administration goes after [the ACA] in court, people will lose pre-existing conditions protections,” said Sen. Patty Murray (D-Wash.).

However, Azar said the administration plans to include a requirement that insurers cover pre-existing conditions as part of any ACA-replacement legislation.

Other healthcare bills coming

Alexander, who is chairman of the Health, Education, Labor, and Pensions Committee, said he is working with Democrats on far-reaching legislation to reduce healthcare costs.

“We have testimony before our committee which says that up to half of healthcare costs are unnecessary,” Alexander said. “We’re working on that the same way we worked on opioids, which means Democrats and Republicans working together, various committees working together, staffs working together.”

His committee plans to vote on such cost-cutting bills in the next few months and for the full Senate to vote on them by June or July.

Among the issues the legislation is expected to address are:

  • Surprise medical bills
  • Prescription drug costs and rebates
  • Direct primary care
  • Transparency requirements

Azar said the administration plans to support that cost-savings push.


googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text1' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text2' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text3' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text4' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text5' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text6' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text7' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-leaderboard' ); } );