Sunday, November 16, 2014

“Code Blue”: Medicare reimbursement reform needed to save the life of rural hospitals.

The healthcare industry has undergone drastic reforms over the last few years. It has been strained by inflating costs and pressed with questions about the Affordable Care Act’s implementation and future. Few hospitals and patients are immune from these stressors. Rural hospitals have been impacted especially hard. The hardships that rural hospitals face are largely a byproduct of the special Medicare rules for rural hospitals. These rules substantially differ from that of urban and suburban hospitals. 

Rural areas typically have hospitals that are categorized as “critical access” hospitals. Critical access hospitals are much smaller than their urban counterparts. These hospitals can have no more than 25 inpatient beds, they must maintain an annual average length of stay of no more than 96 hours, and they have to be a minimum 35 miles from the next nearest hospital.

Certification as a critical access hospital allows that hospital to receive cost-based reimbursement from Medicare, as opposed to the flat rate reimbursement that non-critical access hospitals typically receive. Medicare requires that a patient pay 20 percent of the amount that the critical access hospital charges. Patients also pay 20 percent coinsurance at non-critical access hospitals, however that 20 percent is based on the amount Medicare reimburses, which is typically significantly lower than what the hospital charges.

This reimbursement structure stresses both the critical access hospital and the rural Medicare patient. For example, in 2012, when a Medicare patient received an electrocardiogram at a rural critical access hospital, they owed an average of $33 for that procedure. Patients at other, more urban hospitals would only have had to pay about $5. According to a recent report by the inspector general at the Department of Health and Human Services, many Medicare beneficiaries who received treatment at these rural critical access hospitals have ended up paying between two to six times more for services than patients non-critical access hospitals.

When interviewed on this topic, Eric Draime, chief financial officer for Avita Health Systems, stated that this difference is not the rural hospitals' fault. "Critical access hospitals don't charge more. They charge less, but the way Medicare developed the system, the enrollee ends up footing more of the bill," CFO Draime said.

To make matters worse, the rural population is not only paying more, but their hospitals are closing due to this payment structure. USA Today recently reported on these closures, stating: “[l]ow Medicare and Medicaid reimbursements hurt these hospitals more than others because it's how most of their patients are insured, if they are at all.”

Thus, the costs that the rural population is currently facing is not only financial, but the cost in the length of time that it takes to get to the next nearest hospital post critical access hospital closure. In another USA Today report, this issue was shockingly addressed in the case of a man who had a stroke and, because of the closure of his local critical access hospital, had to be ambulanced for nearly 40 minutes to the county’s urban hospital. 

The inspector general’s office has advised that Congress change the law so that a Medicare beneficiary’s financial responsibility better reflects the cost of the service. Brock Slabach, a senior vice president at the National Rural Health Association, said that “[t]he reason this hasn’t been solved is it would require the Medicare program to subsidize more. . . .” 

In addition to reconfiguring the reimbursement aspect of Medicare, Congress should mandate that the 23 states that refuse to participate in the Medicaid expansion do so. Without reform, more hospitals will close, cost will continue to rise, and rural Americans will bear the burden of the very program intended to help them.


David Gomez said...

Insurance billing is far from uniform or fair. Large insurance companies and government insurance programs like medicare pay pre-determined contract rates for services. It is unfortunate that rural populations pay increased costs compared to similarly situated urban citizens. What is worse is that the extra money paid is still not keeping hospitals open in rural areas.

Ahva said...

Thanks for this post -- I was not aware that Medicare reimbursements are too low for beneficiaries receiving care from critical access hospitals. I also agree with David's point regarding the unfairness of insurance billing and the fact that rural populations often pay more for healthcare. Although I think that overall, the ACA has been extremely beneficial (particularly for states that have adopted the Medicaid expansion), the ACA has also exacerbated the rural-urban cost divide in healthcare in some ways. Although the ACA prevents insurers from charging higher premiums or refusing coverage to persons based on a pre-existing condition, the ACA does allow insurers to take geographical factors into account when setting premiums. This has had a particularly negative impact on rural populations. Granted, healthcare costs have always been higher in rural areas as a result of the general shortage of doctors and medical facilities. But since the ACA has come into effect, many insurers have sought to balance the loss in higher premiums they previously charged based on preexisting conditions by setting higher premiums for persons living in rural areas.

Kate Hanley said...

I'm a little confused by the statement that critical rural hospitals are closing down for lack of payment, when Medicare reimburses 80% of the actual cost than a lower, flat fee. (I'm thinking of your $33 vs. $5 example.) Is it that patients cannot afford their co-pay, so they don't go to the hospital at all? (Even though it's the closest hospital out there?) is it just that there are naturally fewer patients, so fewer total dollars are coming in? Is there just fewer people coming in with any insurance at all, including Medicaid? (I know that the ACA has created a coverage gap that means rural residents who can't afford insurance may not qualify for Medicaid.)

So we're charging rural patients more than urban patients for the same procedures, and technically reimbursing the hospitals more through Medicaid, and the hospitals are closing down for funding issues. Huh.