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What Will Ensure Rural Hospitals’ Survival? More $$ and Good Broadband, Experts Say

What do rural hospitals need from Congress and state legislatures to survive, besides more money? The answer is — more money, several experts and hospital lobbyists said Wednesday during a webinar sponsored by the Bipartisan Policy Center.

Asked that question, George Pink, PhD, deputy director of the Rural Health Research Program at the University of North Carolina at Chapel Hill, replied, “Well, I’m going to disobey your instruction and say ‘Increased funding,'” including raising the annual increases allotted to the federal government’s Critical Access Hospital program.

Joan Hall, president and CEO of Nevada Rural Hospital Partners, a trade group for the state’s rural hospitals, mentioned the difficulty of getting cost-based reimbursement from Medicare Advantage plans, “which just seems so contrary — they’re Medicare plans, and we should get the same reimbursement. I think the other thing is really placing federal importance on critical access hospitals.”

Role of Telehealth

But Joe Schindler, vice president of the Minnesota Hospital Association, had a slightly different take. “Smart funding” is what’s needed, especially when it comes to telehealth, he said. “If there’s one thing we learned on the telehealth side, the ‘second pandemic’ was really the mental health challenges that we had going in and that were exacerbated during the pandemic. What would we do without telehealth, and what could we do with telehealth to prevent some of those hospitalizations that are occurring now? … The reimbursement that goes along with that, that’s money well spent — that’s lives saved.”

Lori Uscher-Pines, PhD, senior research fellow at the RAND Corporation, urged more funding for broadband access in rural areas. When her organization interviewed 20 chief financial officers (CFOs) at rural hospitals, “many CFOs told us that they were not forecasting big changes in their outpatient telehealth programs — where they’re delivering telehealth services — just because of lack of broadband infrastructure in their communities,” she said. “That’s something that they want to do but they just don’t feel like they can at this point.”


Without more funding, rural hospitals’ financial fortunes could decline even faster than before because of increased labor costs and reimbursement that doesn’t keep up with expenses, said George Pink of the University of North Carolina in Chapel Hill. (Photo courtesy Bipartisan Policy Center livestream)

How are rural hospitals managing to survive during the pandemic? Several factors account for this, said Pink: “First and most important, the federal government provided enhanced financial support for hospitals and other healthcare providers to compensate for revenue loss and the higher costs associated with the pandemic,” primarily through Provider Relief Fund (PRF) and the Paycheck Protection Program, he said, adding that the money distributed through the PRF to rural hospitals amounted to about $15 billion.

“Secondly, Congress placed a temporary moratorium on the sequestration reductions, which are the automatic scheduled payment reductions of 2% on Medicare services,” he continued. “Third, Congress provided for enhanced payments for telehealth services rendered during a pandemic, which was particularly important for rural providers.” However, with the COVID funds soon to be fully distributed, “unless Congress authorizes additional funding we expect rural hospitals to return to pre-pandemic levels of profitability,” Pink said. “In fact, profitability could decline even faster because of what hospitals are now having to pay for labor — particularly nursing — and because reimbursement increases are just not keeping pace with expenses.”

Increased Supply Costs

The federal relief funds “were truly a lifesaver,” Hall agreed, especially because the cost of supplies really jumped. “Even though we belong to a group purchasing program, you only got 10% of your allocation, because supplies were at such a need everywhere,” which forced hospitals to buy off-contract. As for labor costs, the hospitals might not have survived “without those federal dollars to … enable our hospitals to continue with the staff they had, especially with the revenue loss for outpatient services that typically we provided — everything kind of slowed down during COVID.”

Mental health services underwent many changes in rural areas during the pandemic, Pines noted. “Prior to the pandemic, rural Medicare beneficiaries used telehealth at relatively low rates, but their utilization rates were higher than urban areas,” in large part because Medicare paid for telehealth in rural areas, but generally not in urban areas, she said. In addition, “before the pandemic, about 80% of telehealth visits in rural communities were for mental health conditions, and most telehealth visits occurred in outpatient clinics,” where patients would receive care from remotely located specialists.

But once the pandemic hit, although telehealth use “increased exponentially” in both rural and urban communities, “things flipped … We’re seeing lower utilization of telehealth in rural areas compared to urban communities,” said Uscher-Pines. There are several theories about why this happened; “some experts say it’s because of the digital divide and the fact that as many as a third of rural individuals don’t have access to reliable broadband.” But the hospital CFOs that Uscher-Pines and colleagues interviewed also “expressed that there’s a real preference for in-person care in certain rural communities, and the personal connection that comes with in-person care,” she said.

Rural Emergency Hospital Program

Some rural hospitals also are considering whether to become “rural emergency hospitals” (REH) under a program created by Congress in late 2020; the program will launch next year. Pink said his group produced a study that found that 68 to 70 hospitals might be interested in such a conversion, but having talked to more rural providers since that study came out, “people are [now] estimating the number of hospitals that might convert ranged from zero to 200,” he said.

“I’m a finance professor, so you won’t be surprised when I say that I believe the number of rural hospitals that ultimately decide to convert to REH will be strongly influenced by the money. Is there a financial case for conversion to REH; that is going to be an extremely important question,” Pink added.

Hall said her member hospitals have a lot of questions about the REH program. “Can you keep your long-term care [beds]? Can you keep your swing beds? Can you continue to participate in the FLEX and CHIP grants because that is so important to our membership? And, if you did convert, and then found out this wasn’t working for your community, could you convert back easily?”

Hospitals also continue to struggle with workforce challenges, she noted: “We did a point-in-time assessment of nursing needs in our state at the first of June” for 13 rural hospitals, and “the need is about 466 registered nurses; currently we have 317. That’s a 30% vacancy rate … We’ve lost doctors as well; we’ve lost radiation techs, lab techs — getting those individuals back is truly a challenge.”

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    Joyce Frieden oversees MedPage Today’s Washington coverage, including stories about Congress, the White House, the Supreme Court, healthcare trade associations, and federal agencies. She has 35 years of experience covering health policy. Follow

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