A few years ago, Carilion Giles Community Hospital in Pearisburg, Va. was faced with a decision: undergo a dramatic transformation or continue with business as usual. The choice was obvious.

“So many aspects of the old hospital were making it almost impossible to pass Joint Commission accreditation and those types of things. It was becoming more problematic all the way,” says James Tyler, the hospital’s vice president.

The critical access hospital was one of the first in the country to receive funds from the Hill-Burton Act in 1946. The law had been passed by Congress to increase the nation’s ability to provide health care, with the intention to provide at least 4.5 hospital beds per thousand citizens. But in the 60 years following, funding cuts increased and requirements to obtain additional funding became more difficult to meet.

Through corporate bonds that were acquired before the market crashed, and more importantly, because the Critical Access Hospital is part of the Carilion Clinic Health System, a bigger, newer hospital was built in 2010.

But most rural hospitals across the U.S. are not as fortunate to have the financial capital that often comes from being associated with a large health system.

“Financially, it’s simply stated as ‘keeping their doors open’ — that’s the problem [rural hospitals] are facing on the largest level,” says Alan Morgan, CEO for the National Rural Health Association (NRHA).

Rural hospitals are up against a confluence of challenges that impact their bottom lines. A disproportionate number of Medicare beneficiaries and low patient volume are two of the overarching contributors to the financial woes.

A critical time in Congress
A high portion of Medicare patients make providers at rural facilities more vulnerable to changes in reimbursements and eligibility— something inextricably linked to the financial health of the hospital.

Recognizing the unique financial challenges that rural hospitals face, Congress has enacted a number of programs to aid providers. Medicare extenders, as they are called, normally appear as payment adjustments and have to be renewed on a yearly basis. Currently, many are under fire as Congress figures out ways to decrease the budget deficit.

“For the most part, people think rural hospitals are not in danger because there are smaller amounts of money associated with rural programs,” says Lisa Kidder, vice president of legislative affairs at the American Hospital Association.

But it may be that kind of thinking that’s lining up rural facilities for the chopping block. Multiple proposals are currently on the table with a focus on ways to cut health care programs rural hospitals depend on.

In early August, NRHA organized a march on Washington to pressure Congress to spare two particular Medicare extenders, which are set to expire Oct. 1. They include the Medicare dependent hospital designation and the low-volume hospital adjuster, both created in the 1980s to help cover the costs for low-volume rural hospitals that primarily treat Medicare beneficiaries.

But times have changed, as have members of Congress. Many longtime supporters of the supplemental payments have been replaced, especially in the House of Representatives, with members who are more focused on fixing the deficit, according to hospital advocates. And many of these new members are pushing for assessments of the benefits of each extender.

For example, a bill introduced in the House by U.S. Rep. Tom Reed, R-New York, in June, supports Medicare extenders, but requires the Government Accountability Office to conduct a study on the financial impact of federal rural health funding programs.


Kidder points out that these programs do not, in fact, cost the Medicare program more money. In April, NRHA analyzed CMS sharedsavings program data and found that Medicare spent 3.7 percent less per rural Medicare beneficiary than for care provided in other areas.

“What we really have at the end of the year is an opportunity to influence Congress to extend these programs an additional one year,” says Kidder.

Other Medicare extenders are up for grabs, as are the two percent Medicare sequestration cuts in January and a decrease in the bad debt reimbursement from 70 percent to 65 percent.

A hard time fitting in
New Medicare payment models under health care reform propose to financially support rural and urban hospitals alike. But rural providers will have a hard time fitting into new, more collaborative models of care, specifically Accountable Care Organizations (ACOs), according to Morgan.

ACOs encourage providers to hold joint responsibility for the health of a patient, giving them financial incentives to cooperate and save money. Providers that achieve this, while also meeting quality targets, are able to keep a share of the savings. But if an ACO is not able to save money, it might have to pay a penalty or eat the costs of investments made to improve care. When the Obama administration originally released its proposed rule on ACOs, rural providers weren’t happy. Complaints about the costs of establishing an ACO led to a concession from the administration to allow rural providers to apply and receive advanced payments in order to help them build the infrastructure for coordinated care.

CMS recently said they would accept applications until Sept. 19 for critical access hospitals and small rural hospitals who want to participate in the Advance Payment Model ACO program starting Jan. 1, 2013. This first wave of applicants will more or less be the test group to determine whether advance payments to small ACOs will help them coordinate care more effectively and generate Medicare savings.

Strength in numbers
Rural communities constantly battle with recruiting and retaining health care providers. Only 10 percent of physicians practice in rural health facilities, although 20 percent of the population lives there. One of the major ways health care reform supports providers in rural America is through several payment incentives.



“This really represents the largest expansion and investment into the workforce that we’ve seen in a number of years and it’s across the board,” says Morgan. “It is investments in training, grants, government support, distribution of residency slots, and on and on.”

Of all the provisions under health care reform, Morgan says workforce expansion is the one most favored by the rural health care community.

Reliance on telemedicine
Part of Carilion Giles’ revamp meant going all-digital. Now, images can be stored through PACS and incorporated into the patient’s medical record.

“If we do a CT on a stroke victim, and then put them in a helicopter to transport them to the mothership, they don’t have to do another CT of the head,” says Tyler. “So it’s better utilization of resources.”

Although Carilion Giles is fortunate enough to have one radiologist on staff, many rural facilities aren’t so lucky and instead have to depend on teleradiology to transmit imaging results for review. But that requires broadband access. Without sufficient broadband speed, transmissions are either delayed until after business hours, or other Internet-based operations in the hospital are impacted.

The White House Rural Council, created last year, recognized this issue and many others facing rural hospitals. It included rulemaking to help expand deployment of broadband capacity and health IT infrastructure. The Office of Rural Health Policy within the U.S. Department of Health and Human Services and other federal agencies have consulted with the Federal Communications Commission on the redesign of its programs to encourage greater participation by rural health care providers.

In Carilion Giles case, the hospital was even able to make large capital equipment purchases when they rebuilt— something that likely helped tie them for first place in patient satisfaction among Virginia hospitals.

Reimbursement issues loom for telemedicine
Provider training, patient monitoring, and medical data transfer are just some of the ways telemedicine improves health care in underserved areas.

While there’s an interest in expanding telehealth, Morgan says barriers still remain in the form of licensure and reimbursement.

“Those barriers are still there, despite the ACA. The components of the ACA have to have telemedicine to work. But those barriers in a lot of states are still going to keep telemedicine out of the mainstream. It’s a huge policy issue we are still concerned with,” he says.

Critical components of telehealth include digital data and electronic health records.

In 2009, the Health Resources and Services Administration led a federal rural HIT task force and identified access to capital as a key challenge for rural hospitals who wanted to purchase EHRs and other health IT. In addition to the funding incentives from the Affordable Care Act (built on investments from the Recovery and Reinvestment Act of 2009) that allow hospitals to use EHRs and attain meaningful use, HRSA sponsored a series of workshops and national conference calls that specifically link rural hospitals with loan programs for the purchase of HIT hardware and software.

Despite what the federal government is trying to do, as it stands today, rural health care is on the endangered species list. For the health care professionals at these hospitals and the communities they serve, the benefit is clear. Now it’s just a matter of seeing if elected officials are on the same page.