New rural hospital designation still needs tweaks and more flexibility, stakeholders say
To staunch the losses of rural hospital closures that endanger access to care for millions, federal regulators are hoping some facilities opt in to a new payment model, but providers say they want more flexibilities and clarity before making the pivot.
Rural stakeholders say they’re excited about the new model that provides needed flexibilities for rural operators to stay open, but say more tweaks are needed to address the realities of providing care in rural America.
The new rule “maybe gets halfway there,” Jennifer Findley, vice president of education and special projects at the Kansas Hospital Association, told Healthcare Dive. “It’s not as much as we were hoping for but it does give some more flexibility than what you have today.”
The need for a new model
There have been growing concerns about rural hospital closures over the past decade.
About 138 rural hospitals closed between 2010 and October 2021, many of which are located in the South, according to a brief from the National Advisory Committee on Rural Health and Human Services.
Those closures cut off access to care for many rural Americans, who tend to be older, sicker and poorer than their urban counterparts. Overall, about 20% of Americans live in a rural area, according to research funded by the Federal Office of Rural Health Policy.
In many rural communities, there simply isn’t enough volume to financially support a traditional hospital with inpatient services, which has fueled cries for more flexibility.
The intent behind the new designation is to relax some of the regulatory burdens faced by rural hospitals, like the requirement that hospitals must provide inpatient services in order to receive Medicare payments, a critical funding stream many providers couldn’t forgo.
That’s a pain point for many rural hospitals that have very low patient volumes.
“We have 40-some hospitals who on any given day have like two patients,” Findley said. Kansas is expected to have the most facilities convert to the new designation, according to a prior report from the North Carolina Rural Health Research Program.
Communities need other options than full-service hospitals to ensure continued access to services, the MedPAC, the group that advises Congress on Medicare policy, has said.
MedPAC urged Congress in 2018 to allow rural facilities to operate as stand-alone emergency departments, omitting inpatient services altogether, after finding that about 130 rural hospitals averaged less than one admission per day across all payers in 2016.
Under the new designation, hospitals will have to end inpatient services, but must maintain emergency services 24 hours per day, seven days a week.
While that is a welcome change, Kansas stakeholders are concerned that other elements of the proposed rule are still too prescriptive or unclear.
The need for flexibility
Rural operators want to be able to use existing space and staff to provide the services their communities need, stakeholders told Healthcare Dive.
Findley says rural operators want to avoid rigid rules around the use of space and staff in order to be nimble and efficient with resources.
One area of frustration in the rule is how skilled-nursing beds can be used. Under the proposed model, hospitals would have to set up a separate operation that can’t be folded into the rural hospital or included in the new payment model.
It again raises questions about the continued viability of this type of service due to low patient volumes.
There are questions around whether the facilities can continue in the 340B program and if rural health clinics can continue to use current payment methodologies.
Transportation is another area of concern because many rural areas rely on voluntary emergency medical services. Findley and her group had hoped additional funding would be available for transportation, but it wasn’t included in the proposed rule.
Altering the payment model pivot
Rural operators are now modeling whether they can afford to switch to the new model.
Under the proposed rule, hospitals will be paid under the outpatient payment system and will get to tack on an additional 5% for the care they provide. Plus, they’ll receive a monthly facility payment, which is higher than anticipated, Carrie Cochran-McClain, chief policy officer of the National Rural Health Association, told Healthcare Dive.
That will likely make it more financially feasible for some, Cochran-McClain said. Still, it isn’t intended for every provider.
“It’s not in any way, intended to be a panacea for all rural hospitals and all rural hospitals’ financial concerns,” Cochran-McClain said. “Most of the facilities that make this transition are going to be ones that are really struggling financially,”
Almost 70 hospitals are expected to convert to the new designation and almost half are concentrated in four states: Kansas, Texas, Nebraska and Oklahoma, according to a prior analysis.
Hospitals will be able to start receiving payments next year under the new designation, but states must first pass legislation to allow for the operation of these new hospitals, a potential hurdle for some operators.
Federal regulators have received more than 3,500 comments on the proposed rule, which were due this week.
“I still think it’s a really exciting opportunity. I think we just might need to make a few tweaks to make it even better,” Findley said.