Small Hospitals and the Affordable Health Care Act, Why Are They Disappearing?


A week ago I was sitting in a medical staff meeting listening the regular issues of nursing care and staffing, bottom line economics, thoroughly bored when the topics shifted to a group of aggravated, complaining physicians who wanted to bring up the main issue of the reduction of services of their small 50 bed hospital. They brought up the “facts” that they knew that the ultimate strategy was to close their hospital. They then brought their demands that they needed their own neurologist, endocrinologist, urologist and hospitalist specialists.

One of the smarter physician administrators asked the important question…. How do we pay for these physicians? They wanted either the bigger university health care system or the taxpayers to pay for it. Then they thought of the strategy that these physicians could be part time, but again who will pay and what are these physicians to do with the other hours that they are not seeing patients in their part time status. How does a small 50-bed hospital continue to pay the bills? And worse in the era of Quality Measures and good health care, they had one of the highest readmission rates. That is their patients were readmitted to the hospital after surgery and medical care more than most hospitals in the State. Then I came across this article written by Jeff Byers reporting that earlier this month, Covered California, the state’s health insurance exchange, released a draft proposal for its network management and delivery systems standards. California Healthline’s Chad Terhune notes the organization is threatening to let poor performing hospitals go from the system. The initiative is not being well received by providers nor insurers.

Covered California Executive Director Peter Lee stated the organization’s goal is to decrease costs and increase quality of care. “We are now shifting our attention to changing the underlying delivery system to make it more cost effective and higher quality. We don’t want to throw anyone out, but we don’t want to pay for bad quality care either,” Lee was quoted by Terhune. “If approved, insurers would need to identify hospital ‘outliers’ on cost and quality starting in 2018. Medical groups and doctors would be rated after that,” Terhune wrote. Plans would be expected to get rid of poor performers by 2019.

The idea is genuinely novel. And with a novel idea in the healthcare space, you can imagine hemming alongside hawing. Not surprisingly, insurers and providers are not very excited about this proposal. Insurers aren’t necessarily excited to potentially disclose provider negotiated rates while providers themselves are raising a red flag of Covered California overreaching its authority and not providing clear measures on which they will be judged. For example, the California Hospital Association stated that Covered California is “acting too much like a regulator.”

Lee noted he has taken his proposal to the desks of other marketplaces and employer groups in hopes to gain traction for similar efforts to increase pressure on providers and insurers.

“It’s the right goal but the wrong approach,” Charles Bacchi, California Association of Health Plans’ chief executive, told Terhune, adding, “Covered California is proposing a top-down, arbitrary measurement system that carries a big stick. This can make it difficult for health plans and providers to work together constructively.” The proposal will be voted on in April.

Another interesting related article written by Meg Bryant pointed out the same problem, the closing of the rural or smaller hospitals. When the hospital in Newton, Mississippi, closed in December, Wendy Bailey felt as though she had lost a lifeline — literally.

“One of my biggest fears is one morning getting up and finding my daughter on the floor from a seizure, not breathing, not responding … and not being able to get help quick enough to know what to do,” said Bailey, whose daughter suffers from grand mal seizures. Rather than a short drive to the emergency room at Pioneer Community Hospital of Newton, Bailey must now drive an hour to get care.

It’s a story heard in communities across rural America. Since 2010, 71 hospitals have closed, fueled by congressional spending measures that cut Medicare payments and by the ACA, which favors hospitals that do a high-volume of business. One of the latest closings came this month in Ellington, MO. The pace is escalating: Last year, the rate of closures was six times greater than in 2010.

According to the National Rural Health Association, another 683 rural hospitals are at risk of closing — taking with them, should that occur, 700,000 patient encounters, 36,000 healthcare jobs, 50,000 community jobs and $10.6 billion in U.S. revenues. Overall, 35% of rural hospitals operate at a financial loss.

Cuts in reimbursement for bad debt have been particularly hard on rural hospitals, which often operate at the narrowest of margins, said Maggie Elehwany, vice president of government relations at the NRHA. Not only do rural hospitals experience lower volume of patients than their urban counterparts, their patients tend to be older, poorer, and sicker. Elehwany said it’s probably not coincidental that most of the closures have occurred in states that have not expanded their Medicaid programs.

Rural hospitals’ struggles aren’t new. They began back in 1983 when the government moved to a prospective payment system that rewards volume versus actual costs. Over the next five years, more than 400 rural hospitals closed. Congress eventually stepped in with a series of unique payment models aimed at helping rural hospitals stay open — among them, the Medicare-Dependent Hospital, Low-Volume Hospital and Critical Access Hospital, the smallest of hospitals, which receive slightly enhanced cost-based Medicare reimbursement to remain solvent, Elehwany said.

Rural hospitals have been fighting to stay alive. Then came the 2008-2009 recession, followed by 2% Medicare payment cuts in 2011, a 30% to 35% reduction in reimbursement for Medicare patients who can’t cover their out-of-pocket expenses in 2012, and the 2013 across-the-board 2% budget sequestration. Rural hospitals have been fighting to stay alive ever since.

When a rural hospital closes, the impact is far-reaching. Not only do people lose access to critical care, they often lose access to primary care as well, as most physicians are hospital-based, said Elehwany. “If the hospital closes, you also lose the physicians, the nurses, the physician assistants. We’re getting these complete medical deserts forming.”

When a hospital closes, the community also loses a major source of jobs and income that help to sustain local shops and restaurants. It’s harder to attract new businesses and families to an area that doesn’t have a local emergency room, said Becky McIntire, director of hospital marketing at Pioneer Health Services.

Residents in Newton, MS, now face up to a 90-minute drive to have their blood drawn or visit a hospitalized family member, McIntire said. The hospital closure — which resulted from CMS’ reinterpretation of its CAH distance requirement — has also put a strain on ambulance services, which saw turnaround time increase from 20 minutes to an hour with the longer distances to treatment facilities. As a result, patients have had to rely on surrounding counties’ ambulance services to get to and from hospitals.

Legislation introduced by Reps. Sam Graves (R-MO) and Dave Loebsack (D-IA) last July would provide some relief for rural hospitals by eliminating Medicare sequestration and reversing bad debt reimbursement cuts. The bill, H.R. 3225, would also permanently extend the current LD and MDH payment levels and reinstate Sole Community Hospital “hold harmless” payments, said Jonathan Mason, senior legislative assistant to Graves. “We’re getting these complete medical deserts forming.”

The bill would also create a new classification — Community Outpatient Hospital — that provides 24-hour ER services, outpatient services and primary care. The hospital would have no inpatient beds, but would be required to have an agreement with another facility allowing it to transfer patients who required hospitalization.

That could be a life saver for CAHs that have too little volume to make ends meet, said Elehwany. “It offers a way to keep that 24-7 emergency room open” and maintain patient access to primary care. COHs would be able to tailor their outpatient services to the needs of the community.

The Save Rural Hospitals Act has not yet advanced in the House Ways & Means Committee, but Graves “continues to seek cosponsors” for the bill, Mason said. The measure currently has 31 cosponsors. A number of other bills have been introduced in the House dealing with various aspects of the rural health dilemma, Mason noted. In the Senate, Sen. Chuck Grassley (R-IA) introduced legislation last summer that would also create a Community Outpatient Hospital.

Some states are trying to reverse the tide, too. California has been making headway with a bipartisan funding plan to save five rural hospitals. And a proposal by a committee convened by Georgia Gov. Nathan Deal (R) would use large regional hospital as communication hubs to direct rural patients to appropriate care sites, according to Modern Healthcare. “I think the states are trying to think creatively, especially when it comes to keeping emergency rooms open,” said Elehwany. “North Carolina, South Carolina, Georgia, and Texas have a tremendously high number of closures and number of rural hospitals at risk.” For now, though, the number one priority is stopping Medicare cuts, she said. “As important as the new [COH] model is, at the rate hospitals are closing, we aren’t going to have any left to turn into that new model. It’s absolutely critical that we stabilize the rural healthcare system before we can even think about looking to a new model.”

Again, there’s the problem of distribution. In the Chicago area we are still building hospitals even though inpatient volume is dropping. Yet, it is communities like the one I point out that loses a facility. An enormous amount of this is based on political clout.
The fact is we need hospitals to close, but in areas that are grossly over saturated.
Eventually, that will happen. But we need to wait for all of the consolidations to occur.

To play devil’s advocate, if the nearest hospital is 10, how about 20 or 30 miles away, is patient care suffering?

Maybe if there is a TRUE emergency, going 10 miles away could impact patient care, but honestly, other than the lost jobs and inconvenience of the slight drive, not much else will be any different care wise.

Why is it always Medicare’s fault? Private insurance companies are making billions in profits and nobody holds them accountable.

There will only be a few large hospital chains tied to insurance companies in the future. Mid and small hospitals will be closed or turned into heli-pads for transport to larger aggregation hospitals. This is all a logical progression of Obamacare./ACA

Right now we have too many hospitals in our county of less than 10,000 people TOTAL. There are many government programs for underserved areas, which are being exploited. Hopefully some of the small hospitals will be turned into nursing homes. They have been regulated so aggressively and Medicare/caid payment is so low, many have closed.

In the city it’s a different story. There are hospitals everywhere. However, with Manhattan traffic, it can take more time to get across town in a cab that it takes to drive 14 miles in the country.

I agree that building more hospitals is probably not a good use of resources in many cities. But, at the same time, it is inevitable that as rural areas drain of population some of those facilities should close as well. Spending more money on upgrading transportation to larger hospitals is a better use of resources than spending much more to keep low volume rural locations open.

it would seem we could provide our elders with a more cost effective AND hospitable environment. Atal Gwande’s book, “Being Mortal” does review succinctly some interesting ideas as well as brief history of ALF’s, etc. . I’m happy for those that have that kind of money in their sunset years, but many don’t.

Listening to a health care economist from Vanderbilt speak last winter, they predicted that about 25% of the current hospitals in the U.S. would close due to the ACA. Most of those would be the smaller, rural hospitals.

The closure of hospitals has been the desired outcome of some liberal individuals — note Ezekiel Emanuel, who feels that the reduction of hospitals from approx 7,000 in 1984 to approx 4,900 (and dropping) today is not enough. Emanuel said that 4,000 hospitals would be fine. He said “long live fewer hospitals. Welcome to the new age of digital medicine.” and “we don’t need 5,000 hospitals.”
So what the heck are patients who live in an area where a hospital closed down supposed to do? Guess Emanuel doesn’t care. He is the same person who advocates the “complete lives system,” who views that people under the age of 2 and over the age of 50 are a drain on the health care system and that resources to those age groups ought to be diminished.

Wow, I cannot believe he is a physician who deals with ethics given the above thoughts.

Interesting the same problem is happening in Canada. People there blame the one-payer system.

The problem of course is all demographics.

Hospitals first- the cost of medical care has increased to the point where financial brakes need to be put on. Back when I was a kid- late 50’s to mid-60’s- health insurance was rare but just starting to show its ugly head. My parents could pay the bills for my birth ($75-$125 TOTAL for my mother’s hospital stay!) house calls, etc.. Of course, all the imaging and cancer therapy tools, “wonder drugs”, etc., were not available. These things improve our treatment mightily, but they do cost money! And, like the space program, everything “man-rated” costs 7-10X more than if it were sold on the open market for non-medical use. Unfortunately, the government’s efforts to rein in costs have only resulted in such a huge regulatory burden that complying with the regulations results in a cost that is greater than any savings in actual treatment costs it may engender!

As for caring for the elderly at home, our improved medical care now means we keep people with chronic and debilitating illnesses, dementia, etc., alive much longer than they did in the past. So the “old folks at home” are no longer just still-functioning but less capable folks who sit around a lot, but help as much as they are able, but they are a real care burden. They don’t live on the farm anymore, where everyone works at home & someone is always around. Instead, the families of today are rarely in the home, with both parents working, kids at planned activities, when not in school, to which a parent must often drive them as it’s no longer considered safe to let them out of the house unchaperoned, etc. So who’s there to care for them most of the day? If you’re saving for your kids’ education to give them something other than a mundane future, the cost of a home health care aide is prohibitive. If the oldster at home is incontinent and requires 6+ bed changes per day, or demented and always getting into the wrong things, the entire family focus is on them, and everyone and everything else in family life is lost. It’s easy to see why most families faced with a care burden like this would want to shift the burden to a care facility, if the cost is roughly the same as hiring home health care and not prohibitively more expensive.

Most nursing homes are, indeed, horrid, especially if they house mostly Medicaid patients, whose own financial resources have run out, and whose families can’t afford to pay for a better place, even if they so wished

You cannot sustain a hospital with taxpayer funds. This is against all good business practice which every conservative republican state like KANSAS should know.
The pundits state what is the point of a hospital other than an ER, OR’s for surgery that can’t be done safely in an outpatient setting or inpatient beds for those who can’t safely be kept at home or in a skilled facility? It’s time for physicians to start using their cognitive brain instead of their memorization skills. Hospitals should only supply the above with the support services needed to support the above. Outpatient imaging? NO. Outpatient radiation therapy and chemotherapy? NO. Outpatient laboratory? NO. Everything becomes outpatient except for the above. Hospitals should be barred from outpatient services or employing physicians. This racket needs to end with the process of divestiture starting now.

The ACA and now MACRA are just the most recent installments in a long litany of legislative planners within the beltway attempting to control or adjust the health care market in America.

We are in for more significant trouble and difficult adjustments and as you know we are struggling with these present problems already and they not improving the delivery of healthcare.

It’s both Medicare’s and the ACA’s fault because it is leading the spiral to the bottom. Like it or not, Medicare basically sets the fee schedules for virtually all medical services except for some services like cosmetic plastic surgery. In case you haven’t noticed, Medicare’s and the ACA exchange’s negotiating ploy is basically, “Take It or Leave It.” The ACA through the exchanges and through Medicaid pays about ten cents on the dollar for services. How does a hospital or more importantly medical practices pay their bills?

Read the business sections of your newspapers, if not the front pages. Insurance companies are jacking up premiums, not because they’re making billions but because, not having actuarial experience to guide them under the insurance for all scenario dictated by the ACA, their premiums were too low and many were losing millions if not hundreds of millions. Now comes the large boost in premiums, which, must be approved, by the state insurance commissioners or regulatory agencies of each state in which the insurance company offers policies. If adequate premiums are not approved, the next step is that the private insurance companies either stop offering insurance in that state or decrease the number and variety of plans offered. This later scenario is already happening!

Thanks to Obama and his horrible healthcare bill our country is in chaos. This is all about financial sustainability and the rationing of care. Are we poised for eventual Socialized Medicine and will this solve our problems? Look at the other countries who have socialized medical systems.

Another reason to worry about the eventualities of this flawed health care system.






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