Proposal for Rural Hospitals May/Might/Probably Will Hurt Rural Hospitals

Our U.S. Senators from Georgia issued a press release Thursday applauding a proposed rule change to ‘aid rural hospitals.’ The biggest component of the change is an increased Medicare reimbursement for some facilities, which has advocates of rural healthcare reform all kinds of hot and bothered.

As someone who used to live within walking distance of the metro Atlanta hospital conglomerate but is now in the healthcare desert of rural South Georgia, I understand the mounting pressures to fix the seemingly endless domino row of problems that is caused first by government bureaucracy and second by struggling communities with underinsured and uninsured Georgians. It’s then bogged down by inflated health care costs, pennies on the dollar reimbursements for Medicare, and relentless profit-driven insurance companies. It’s a mess, which is why I fail to understand why elected officials, in Congress and in the Georgia legislature, seek to ‘tweak’ components of our broken system one by one when a real overhaul is the only solution, but I digress.

The Trump administration is proposing a bump in Medicare reimbursements for “underserved and economically struggling regions.” Those regions are, of course, determined by the government by way of a formula calculated with a variety of factors. The desired result of this rule is to prop up those in the bottom 25%, a move both Isakson and Perdue have been pushing the Centers for Medicare and Medicaid Services Administrator to adopt.

Here’s what Senator Isakson said in the press release Thursday:

“We’ve been working to correct this reimbursement issue for years, including through legislative solutions. Too many Georgia hospitals have been forced to close in recent years, and it appears that this rule change is consistent with our efforts. If so, this is a huge victory for Georgians and it will help ensure patients have continued access to emergency and medically necessary care. I’m grateful to the administration for its efforts to improve access to health care in rural and underserved areas, and I look forward to studying this rule in the days ahead.”

Senator Isakson is correct that reimbursement rate has been an ongoing issue for years and seven rural hospitals have closed in Georgia since 2010, but it’s a stretch to claim that this will improve access and it’s borderline disingenuous to call it a ‘victory.’

Senator Perdue, of course, echoed Isakson’s sentiments saying:

“Health care providers should be focused on patient care, not Washington bureaucracy. Unfortunately, over the last 30 years, rules and regulations have put rural hospitals at a disadvantage. Improving the wage index will help protect rural hospitals in Georgia from devastating reductions in Medicare payments and ensure the long-term viability of our health care network. This is an important step toward leveling the playing field, and Senator Isakson deserves a great deal of credit for his efforts on this issue.”

So where to begin.

This proposal is directly focused at propping up those rural hospitals in the bottom 25th percentile by increasing the reimbursement rate, while at the same time manipulating those hospitals who are in the other 75%, but still hover close to the 25th percentile point.

That’s because the plan is to also reduce the wage index by up to 5% from the current fiscal year in the 75th percentile facilities in an effort to reduce Medicare spending, effectively giving them a lower reimbursement. The lower rate is supposed to discouraging Medicare spending. What isn’t being taken into account is the demographics of the patients who visit the majority of these rule hospitals.

The rural hospitals that will have a lower rate, per this rule, but still have a heavy Medicare-dependent population, are now going to receive less in reimbursement payments for at least FOUR years. The small hospitals that serve as a primary care facility as well as an emergency room because no other health care facility exists in the region will still serve as a primary care facility and an emergency room.

So one of two things is going to happen in this gap group just outside of the bottom 25th percentile: They’re either going to have a reduced level of care over a concern for Medicare spending and even lower reimbursements than in the current fiscal year OR you’re going to see those hospitals that already function in the red dive deeper into the red because they continue to provide the same level of care (or better) and receive even fewer pennies on the dollar for services.

All in the name of propping up the bottom 25%.

How is that a victory? How will that improve access? How will that secure the stability of hospitals?

It’s not, it won’t, and it can’t.

The rule effectively limits the incentive to thrive because it’s better to be in the bottom 25th percentile, at least for the next four years. The lower reimbursement rates could easily send more hospitals into the bottom 25th percentile, too.  And worst of all – it’s still creating a system, backed by taxpayer funds, that adjusts the price of healthcare based on where the facility is located and who it serves – instead of the service that is provided. In a perfect world, leveling the playing field, as Senator Perdue suggests, would instead mean treating all facilities equally under the rules and regulations they’re governed by.

I don’t believe this is ill-intentioned, but that doesn’t make it any less terrible.
You can read the proposal here.