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April 2, 2015 - Kim Moore [see other posts]

Hospital Closed

Closing Rural Hospitals

Kansas Health News Service reported this week that two southeast Kansas hospitals—Mercy in Independence and Fort Scott—might close and are actively negotiating with potential partner facilities. See These hospitals are in relatively sizeable communities compared with many hospital sites in Kansas. The Independence and Fort Scott hospitals are prospective-payment hospitals. They receive fee for service payments, not cost-based reimbursement from Medicare and Medicaid, so volume which pays for care is critical to their survival. Hospitals receiving fee for service payments have been particularly hard hit by the failure to expand Medicaid in Kansas. The Affordable Care Act implemented lower reimbursement for Medicare payments (a large component of rural hospitals’ clientele) but envisioned less charity care with Medicaid expansion reducing the uninsured rate and costs to providers (1). The ability of states to separately decide about a Medicaid expansion—per the US Supreme Court decision—has resulted in hospitals receiving only the negative reimbursement side of the ACA.  Kansas remains a no Medicaid expansion state.
National Rural Health Association states that 48 rural hospitals have closed since 2010 and there are 280 more in trouble. Prior rural hospital closings have been mostly in southern states and have primarily involved critical access hospitals. Critical access hospitals are a Medicare reimbursement category, receiving cost-based reimbursement and limited to not more than 25 beds. Kansas has 83 critical access hospitals

A concern for the future of rural health care, which is so intertwined with the rural hospital and particularly with critical access hospitals, is what led the Health Ministry Fund to move its access to health care programming to rural health system improvement about four years ago. In most frontier and low population rural areas, the critical access hospital is the base of administration and the facility for the companion rural health clinic (physician services). The presence of a hospital appears to be an important factor in the ability for these communities to recruit physicians. The hospital is frequently the organizer of access to specialty care and plays a vital role in emergency service delivery. It is hard to envision a replacement for the critical access hospital, in part because there is no other reimbursement system like the critical access cost-based system to support emergency room services adequately.

Yet, that creative work of determining a new type of provider appears to be timely and important. Kansas Hospital Education and Research Foundation has fielded a project, with financial support from the Health Ministry Fund, to test a short-stay hospital model with strong emergency room and highly coordinated upstream referral capability. Five communities have signed on for a process of clinical and financial records review to determine how a different “hospital” model could serve their communities as well as or better than the critical access model. If the results are favorable in terms of economic viability and necessary service access for the community, the hope is that this model could be reality tested in a national demonstration project involving Medicare and Medicaid.  

Other models for critical access hospitals to improve quality and reduce cost are important to test as well. Several of those ideas will be implemented through the Kansas Rural Health System Improvement Pilot Project, which has been moving forward with plans since late 2013. Implementation of care coordination models, community paramedicine, mental health integration and telemedicine projects will be occurring in the next few months. Cheyenne, Clark, Kearny, Osborne, Phillips, and Smith Counties are all taking part in that project (2).

The question right now is: can Kansas create one or more new provider models and improve financial viability of existing critical access hospitals fast enough? Success will require creative thinking and open minds in rural communities, governmental and private payors and the host of other players interested in rural health care. Should the process succeed, we will be discussing Kansas Health News Service headlines like “Rural Community Maintains Improved, Viable Health Services” instead of “Kansas Community Loses Its Hospital.” I hope it is the former.

Footnote 1:
It should be noted that the American Hospital Association supported the Affordable Care Act apparently accepting this trade off— lower Medicare reimbursement for thousands of covered lives under Medicaid.

Footnote 2:
KRHSIPP is supported by Blue Cross and Blue Shield of Kansas Foundation, Kansas Health Foundation, Sunflower Foundation, Kansas Hospital Association, Kansas Hospital Education and Research Foundation, and United Methodist Health Ministry Fund.  Additional funding is provided by Kansas Office of Rural Health in fulfillment of grant expectations for the Kansas Medicare Rural Hospital Flexibility (FLEX) program.   The FLEX grant was awarded to the Kansas Department of Health and Environment (Grant No. H54RH00009) from the Federal Office of Rural Health Policy, Health Resources and Services Administration.