Rural hospitals hit hard by reductions in Medicare disbursements, declining population

Approximately 3 percent of all rural hospitals closed in the period between 2013 and 2017, which can affect rural residents’ access to health care services. The U.S. Government Accountability Office (GAO) did a study to determine how HHS supports and monitors rural hospitals’ financial viability and rural residents’ access to hospital services. The study also details the number and characteristics of rural hospitals that have closed as well as what is known about the factors that contributed to those closures. According to the GAO report, Medicare Dependent Hospitals and for-profit hospitals were some of the hardest hit by reductions in Medicare disbursements, while hospitals in Medicaid expansion states and states with higher enrollment under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) were the least affected (GAO Report, GAO-18-634, September 30, 2018).

Rural hospitals

In 2017, 2,250 general acute care hospitals in the United States met the definition of rural. Rural hospitals represented approximately 48 percent of hospitals nationwide and 16 percent of inpatient beds. Rural hospitals spread across 84 percent of the United States land area that is classified as rural and served 18 percent of the United State population that lived in those areas. Rural areas tend to have a higher percentage of elderly residents than urban areas, a higher percentage of residents with limitations in activities caused by chronic conditions, and a lower median household income. Rural areas also face a decreasing population and slow employment growth.

Payment policies and programs

HHS provides key financial support to rural hospitals to provide rural residents access to hospital services through a number of payment policies and programs. CMS administers five rural hospital payment designations, in which rural or isolated hospitals that meet specified eligibility criteria receive higher reimbursement for hospital services than they otherwise would have received under Medicare’s standard payment methodology. The Federal Office of Rural Health Policy (FORHP) administers multiple grant programs, cooperative agreements, and contracts that provide funding and technical assistance to rural hospitals. CMS’s Center for Medicare and Medicaid Innovation tests new ways to deliver and pay for healthcare. There are also the broader HHS payment policies and programs such as Medicare and Medicaid base payments, Medicare and Medicaid uncompensated care payments, the state innovation models initiative, as well as other targeted HHS payment policy and programs.

Rural hospital closures

An analysis of data shows that from 2013 through 2017, 64 rural hospitals closed. This is more than twice the number of rural hospitals that closed during the prior 5-year period and accounts for more than the share of urban hospitals that closed and more than the number of rural hospitals that opened. Rural hospitals in the South represented 38 percent of the rural hospitals in 2013 but accounted for 77 percent of the rural hospital closures from 2013 through 2017. Medicare dependent hospitals represented 9 percent of the rural hospitals in 2013 but accounted for 25 percent of the rural hospital closures.

For-profit hospitals are twice as likely to experience financial distress relative to government-owned and non-profit hospitals and represented 11 percent of rural hospitals in 2013 but accounted for 36 percent of closures. Bed size also seems to be a factor as rural hospitals with between 26 and 49 inpatient beds represented 11 percent of the rural hospitals in 2013 but accounted for 23 percent of the closures. While critical access hospitals (CAHs), which have 25 acute inpatient beds or less and make up a majority of the rural hospitals, were less likely than other rural hospitals to close. This may be due, in part, to the CAH payment designation.

Contributing factors

Data shows that rural hospital closures were generally preceded and caused by financial distress. This is partially due to a decrease in patients seeking inpatient care at rural hospitals. There are an increasing number of federally qualified health centers or newer hospital systems outside of the area that create increased competition for rural hospitals. Technological advances have also allowed for more services to be provided in outpatient settings. There is also data showing that the years 2010 through 2016 marked the first recorded period of rural population decline.

Rural hospitals are sensitive to changes in Medicare payments because, on average, Medicare accounted for approximately 46 percent of their gross patient revenues in 2016. Reductions in nearly all Medicare reimbursements and reductions in Medicare bad debt payments have contributed to negative margins for rural hospitals.

Medicaid expansion

According to stakeholders that were interviewed and literature that was reviewed, the strongest factor that likely strengthened the financial viability of rural hospitals was the increased Medicaid eligibility and enrollment under the ACA. A 2018 study showed that Medicaid expansion was associated with improved hospital financial performance and a substantially lower likelihood of closure, especially in rural markets. Drops in uninsured rates in 2008 through 2009 and 2014 through 2015 corresponded with states’ decisions to expand Medicaid, with small towns and rural areas seeing the largest increase in Medicaid coverage and decline in uninsured. Data shows that from 2013 through 2017, rural hospitals in states that had expanded Medicaid as of April 2018 were less likely to close compared with rural hospitals in states that had not expanded Medicaid.

The ACA makes a measureable difference with HIV coverage

People with HIV experienced significant coverage gains under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) as a result of Medicaid expansion, the creation of the health insurance marketplaces, and the elimination of pre-existing condition exclusion. According to a Kaiser Family Foundation (KFF) Issue Brief, as long as the future of the ACA remains uncertain, those access and coverage gains are at risk.

Baseline

To develop a baseline for understanding current access to care for people with HIV, KFF examined multiple variables across the three main pathways for HIV coverage and care: (1) Medicaid, (2) private insurance and the ACA marketplace, and (3) the Ryan White HIV/AIDS program. KFF considered factors like states’ Medicaid expansion status, the number of health insurance issuers per county, and AIDS Drug Assistance Program (ADAP) eligibility levels.

Medicaid 

Prior to the ACA’s Medicaid expansion, most individuals with HIV obtained Medicaid coverage through the disability pathway, meaning that coverage was often not obtained prior to a beneficiary’s development of AIDS. Currently, 62 percent of people with HIV live in a Medicaid expansion state, where care is more likely to be accessible through the income pathway, regardless of disability level. Additionally, 24 states provide Medicaid coverage through the disability pathway above the federally mandated level of 73 percent of the federal poverty level (FPL).

Marketplaces 

In 33 states, where 83 percent of people with HIV live, there are three or more issuers in the ACA marketplace. While five states—Arkansas, Oklahoma, South Carolina and Wyoming—had only one issuer in 2017, some states had several. For example, Wisconsin had 15 insurers, New York had 14, and California had 11. KFF also looked at issuer representation in counties with high incidence of people with HIV. While 43 percent of people with HIV live in one of the eighteen (18) states with an average of three or more issuers per county, the majority of people with HIV—57 percent—live in one of the 33 states with less competition—one or two issuers per county.

Ryan White

The Ryan White HIV/AIDS Program provides outpatient HIV care and treatment to low and moderate income individuals. The program serves more than half of the people diagnosed with HIV in the country. The average eligibility level for the medication assistance program is 386 percent FPL. While 17 states use an eligibility level of 400 percent, 72 percent of people with HIV live in a state with eligibility levels at or above the national average. While the Ryan White program would continue to operate with an ACA repeal, many individuals currently covered by marketplace or Medicaid plans would likely turn to the program for coverage. Due to the program’s limited resources, KFF estimates that such an over-reliance could cause individuals to lose access to care.

CMS grants New Hampshire Medicaid funding compliance extension

CMS has clarified that New Hampshire’s Medicaid expansion may end next year, but the current program can continue until the end of 2018. CMS stated that New Hampshire’s use of voluntary donations from health care providers and hospitals in the New Hampshire Health Protection Fund fails to comply with the federal requirements. CMS raised the possibility that federal funds may be withheld which would have resulted in a termination of the program.

The Medicaid statute in Section 1903(w) of the Soc. Sec. Act and implementing regulations at 42 CFR Sec. 433.54 and 433.66 establish a prohibition on provider-related donations, except in very limited circumstances. In a letter to New Hampshire officials, CMS indicated that there is a relationship between the donations and Medicaid payments, because Medicaid expansion is conditioned on the receipt of donations as articulated in New Hampshire legislation. The state’s use of voluntary donations from hospitals to supplement federal Medicaid funding violates federal law. The non-federal share financing of the New Hampshire Health Protection Program or Medicaid expansion through the use of provider-related donations to pay for Medicaid service-related costs violates the requirement that a bona fide provider-relation is a donation that has no direct or indirect relationship to Medicaid payments.

The 50,000 New Hampshire residents participating in the Medicaid expansion will not see any change in their coverage through the current re-authorization which continues until the end of 2018.New Hampshire’s next legislative session will need to address compliance with the federal law for the 2019 budget to bring the state’s non-federal share financing into compliance with the existing federal statute and regulations. Otherwise, Medicaid expansion in the state will lose federal funding. Governor Chris Sununu (R) stated that stripping coverage from Medicaid enrollees would have been “grossly unfair,” and will use the transition period to consider future changes.

Senate urged not to proceed with BCRA by civil and human rights groups

One hundred sixty six civil and human rights organizations including The Leadership Conference on Civil and Human Rights, the National Health Law Program, and the National Partnership for Women & Families are urging senators to oppose the motion to proceed on the Better Care Reconciliation Act (BCRA) (H. R. 1628). The organizations sent a letter to senators on July 24, 2017, expressing their concern that the BCRA will “eliminate affordable quality health care for millions of Americans.” Specifically, the organizations said that the BCRA would gut the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) and slash federal funding as well as transform Medicaid [funding] into a block grant or per capita cap; and eliminate Medicaid expansion (see ACA sec. 2001 and sec. 1201 of the Health Care Education and Reconciliation Act of 2010 (HCERA) (P.L. 111-152). In addition, the organizations pressed senators to support the Parliamentarian’s ruling excluding the defunding of Planned Parenthood from the bill.

The Senate’s lack of transparency

The organizations noted that they were “seriously concerned about the lack of transparency of the discussions’ that lead up to the introduction of the BCRA and “the rush to vote on the bill without adequate time for analysis, hearings, and a discussion of a CBO [Congressional Budget Office] score.” The organizations stressed that such discussions, would allow the public to better understand the proposed legislation and participate in a discussion of their access to health care.

The impact of the BCRA

The organizations identified the issues that arise from the BCRA provisions that the organizations believe would have a serious impact on the communities that they represent including low-income families and people of color. These issues include:

  • The 15 million people that would lose their Medicaid coverage by 2026 under the revised version of the BCRA, as estimated by the CBO.
  • The repeal of Medicaid expansion, which will disproportionately affect the communities including Latinos, African Americans, Native Americans, Asian Americans, Native Hawaiians, and Pacific Islanders who have seen the largest gains in coverage under the ACA, and women.
  • The proposed cuts that could vastly reduce access to needed health care, reduction in needed services, increased medical debt, and persistent racial disparities in mortality rates.
  • The possible reduction in home and community-based services, which are cost-effective and keep individuals out of nursing homes and institutions.
  • The imposition of a work requirement as a condition of eligibility, which fails to further purpose of providing health care and undermines the objective.
  • The defunding of Planned Parenthood that would prevent more than half of its patients from getting affordable preventive care, including birth control, testing and treatment for sexually transmitted diseases, breast and cervical cancer screenings, and well-women exams.

Vanita Gupta, president and chief operating officer of The Leadership Conference noted that the letter reflects the widespread concerns of people, especially people of color, women, and low-income families, who currently “receive life-saving coverage because of the Affordable Care Act and the expanded Medicaid coverage” but will lose their access to quality affordable health care and will have higher health care costs “if the Republicans succeed.”