ALEX KACIK February 14, 2020 04:18 PM
More than 450 rural hospitals are financially
unstable as operating margins decline, new research shows.
Of the 453 vulnerable rural hospitals, 237 are
"at risk" and 216 are the least stable, according to an analysis from the Chartis Center for Rural Health that
weighed case mix, ownership model, capital efficiency, occupancy and other
factors. About 47% of the country's 1,844 rural hospitals are operating in the
red, up from 39% in 2015.
Rural hospitals in states that have not expanded
Medicaid recorded a -0.3% median operating margin, compared to 0.8% for rural
facilities in expansion states, according to the report. Providers in a
Medicaid expansion state are 62% less likely to close.
"Things are bad and getting worse,"
said Michael Topchik, national leader at Chartis, adding that 124 rural
hospitals have closed in the past decade. "If states haven't expanded
Medicaid, that works against them."
That sentiment has been echoed by hospital executives in Alabama, and other non-expansion
states. In a town like Greenville, Ala., with less than 8,000 residents, not
expanding Medicaid "almost shot our legs out from under us," said
Greenville Mayor Dexter McLendon, who chairs the city-backed L.V. Stabler
Memorial Hospital's board. About 38% of Alabama's rural hospitals were
considered vulnerable as nearly 80% of all the state's rural hospitals recorded
a negative operating margin, Chartis found.
Medicaid expansion is one of many factors. Case
mix also plays a major role, Topchik said. Hospitals typically suffered as they
lost higher-acuity patients.
Most patients that go to rural hospitals are
older and poorer, often covered by Medicare and Medicaid, which reimburse at
lower rates than commercial insurers. Hospitals are trying to cope by downsizing or closing service lines like obstetrics,
creating massive voids throughout the country.
Ownership models are another key
indicator. Rural stand-alone hospitals are most at risk, with
60.5% having lost money on an operating basis in from 2012 to 2017, compared
with 42% of their urban counterparts, according to an analysis of Modern
Healthcare Metrics data. Those owned by a health system fare much
better.
Occupancy rates also play a key role in a rural
hospital's financial status. The average total occupancy rate for rural
hospitals was 52.2% in 2016, which was well above the acute occupancy rate of
37.8%, a Modern Healthcare analysis of Metrics data revealed.
This suggests that hospital beds are largely underutilized for long-term,
lower-acuity care.
"The greatest financial burden to many
rural hospitals is supporting a 24/7 emergency department, where standby
staffing costs are high, volumes are relatively low and reimbursement comes
nowhere near to covering expenses," Christina Campos, administrator at
Guadalupe County Hospital in New Mexico, said last year.
Policies like sequestration and cuts to bad debt
reimbursement continue to roil rural providers. Sequestration, a Budget Control
Act of 2011 provision that trigged 2% annual cuts to Medicare, has
disproportionately hurt rural hospitals. That, combined with a 35% cut to
Medicare reimbursement for bad debt, have dented rural hospital revenues by
$531.6 million a year, according to Chartis' analysis. That translates to
potential losses of 11,540 jobs and $1.3 billion in gross domestic product.
Those projections are conservative, Topchik said.
"Without a hospital, these small American
towns dry up and blow away," he said. "When you track a rural
community two, three years after a hospital closes, a third of the tax revenue
disappears and businesses shutter."
But industry observers are hopeful that tweaks to the Medicare wage index will buoy rural
hospitals. Traditionally, higher cost-of-living states like California and New
York benefited while largely rural states where workers are paid less fared
worse.
Experts hope that the bipartisan Rural Emergency Acute Care Hospital Act would help. It
would create a new Medicare classification that would allow rural hospitals to
offer emergency and outpatient services but no longer have inpatient beds.
Payment rates would equal 110% of the reasonable cost of providing outpatient
and transportation services.
Meanwhile, hospitals like Guadalupe County
have reduced their inpatient footprint and pivoted to more
outpatient services. Lebanon, N.H.-based Dartmouth-Hitchcock Health recently
partnered with West Health—a group of not-for-profit organizations looking to
improve senior care—to create a geriatric emergency department. It would be one
of the first to focus on a largely rural population, executives said.
Urgency is important, given that 19 rural
hospitals closed last year, marking the most on record, Topchik said.
"I think it is a moral issue," he
said. "We are in a crisis."
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