With Hospitals in Critical Condition, Can Rural America Survive?

hospital-closed-ruralThey may be the only places that provide health care for a hundred miles, and they may be the main source of local livelihoods. But rural hospitals are very much an endangered species. Nearly 30 percent of the nation’s 2,000 or so rural hospitals are likely to close in the next two years.

Rural hospitals have faced closure crises before, particularly in the late 1980s. This time around, however, the threats run deeper and are more challenging. While some states are taking steps to save hospitals operating in rural areas, there are growing barriers to the financial sustainability of these institutions. The decline and possible fall of rural hospitals mirror an existential question: Can rural areas themselves survive?

The present crisis got underway in 2010, according to Alan Morgan, chief executive of the National Rural Health Association (NRHA). After a decade of almost no rural hospital closures, 74 rural hospitals across the country have since shut their doors. In 2013, more than one-third of rural hospitals were operating at a deficit, according to NRHA.

A cause of the crisis can be traced back in large measure to the Affordable Care Act (ACA). The health reform law increased access to care in all states, but it also upended the overall health-care system by encouraging a move away from a traditional fee-for-service model. As that happens, critical-access hospitals -- hospitals in rural areas that have no more than 25 inpatient beds but provide emergency care -- are hurt. Critical-access hospitals were created in response to the rural hospital closure crisis in the late 1980s and have been reimbursed 101 percent of each service a Medicare patient uses in the hospital. The system is entirely reliant on fee-for-service, so a move away from that model could potentially spell devastating consequences for the future. “People often describe the program as a leaky life raft,” says Tim Putnam, president of Margaret Mary Hospital, a critical-access hospital in Indiana.

That isn’t the only leak. With the new law came new regulations and mandates. Hospitals have to adopt electronic health records and new forms of reporting, or face penalty fees for not complying with new initiatives. These regulations tightened finances for many hospitals, but especially rural ones which operate with a much smaller and less flexible financial base. Adding to the fiscal pressures, the ACA made at least eight reimbursement cuts for care provided to Medicare patients.

But the rural hospitals that suffered the most were those in states that didn’t take up the ACA’s provision to expand Medicaid coverage at the federal government’s cost. In Kansas, for instance, the state hospital association has told lawmakers that the state’s failure to expand Medicaid is having dire consequences. One hospital, for example, would receive about $1.6 million more in one year if the state expanded its Medicaid coverage.

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