Rural hospitals are in dire need of help. Will a new government plan help?

Research from the Lown Hospitals Index shows that many rural hospitals are doing an exceptional job devoting resources to charity care, avoiding overuse, and caring for low-income members of their communities. In fact, the most socially responsible hospital on the Lown Index this year, Adventist Health Howard Memorial in Willits, CA, is a rural hospital. [see the most socially responsible hospitals]

But their survival is uncertain. Rural hospitals operate with much lower margins than hospitals in urban areas and have been closing at high rates in recent years.

The Centers for Medicare and Medicaid Services (CMS) has established a new way to classify rural hospitals serving in healthcare deserts: Rural Emergency Hospitals (REH). This designation will purportedly prevent some rural hospitals from closing their doors, allowing for the provision of select services for patients under 24 hours annually. Will this new plan be enough to mitigate the struggles of rural hospitals serving their communities?

Rural hospitals have been struggling and so have their communities

Rural communities face intersecting social and health challenges. Despite comprising 15% of the U.S. population, people living in rural areas are more likely to die from heart disease, cancer, and chronic lower respiratory disease, amongst other conditions. Many of these conditions require frequent — and expensive — treatments in order to maintain good quality of life. Due to travel time, burden of cost, childcare, and a plethora of other reasons, it can be difficult for patients in rural communities to access care consistently. 

On the hospital side, an unsteady flow of patients translates to an unsteady flow of cash. This constant financial stress looming over rural hospitals has been getting worse, and COVID-19 didn’t help. With elective services canceled, increased purchasing of PPE, and variability in patient flow due to pandemic waves, rural hospitals were hit hard. The CARES Act was passed to mitigate the short-term financial impacts of COVID-19 and did help rural hospitals stay afloat during the early stages of the pandemic, but it remains unclear if this was sufficient enough to be a longer term solution.

When rural hospitals struggle financially, they’re left with the agonizing decision to close down sections of the hospital and deny care to those who need it, or shutting down the entire hospital. This is already starting to play out in a major way. One of the first departments to see cuts is typically obstetrics, as the number of deliveries per year is often not enough to fund the entire unit. With the Dobbs v Jackson decision, it’s likely that more pregnant people will find themselves in need of obstetrical care and have no easy access options as rural hospitals continue closing units. Obstetrics is just one example though – other specialized units may find themselves in the crosshairs depending on the financial situation. 

CMS has a plan, but it may not be enough

REHs are, according to CMS, an opportunity for rural hospitals to keep their doors open and continue providing crucial care to their communities. By definition, REHs have less than 50 beds and do not provide acute care services with the exception of distinct, skilled nursing facility units. With this new plan, REHs will receive a monthly facility payment and outpatient services will receive an additional 5% payment per service from CMS, without charging the beneficiary for coinsurance.  Outpatient services are defined in broad terms with the intention of easing financial burdens on REHs. 

The key question is whether or not this new plan will reimburse hospitals at a rate high enough to meet the needs of the community. The amount of the facility payment is “the linchpin for the whole program,” said Brock Slabach, chief operations officer for the National Rural Health Association, in Kaiser Health News

It is clear that something needs to be done to address the decreasing access to healthcare in our nation’s rural communities. Our system of incentivizing volume — specifically elective procedures — is failing rural hospitals. We won’t know for a while if the CMS plan to support rural emergency hospitals will be effective, or if rural hospitals will participate at high enough rates to make a difference. It’s promising that something is being done on the national policy level to alleviate the financial burdens on rural hospitals. In the meantime, the federal government should keep looking at options to restructure how we pay hospitals to maximize patient health rather than volume.