Becker's Hospital Review

Becker's Hospital Review Nov 2013

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48 Sign up for the COMPLIMENTARY Becker's Hospital Review CEO Report & CFO Report E-Weeklies at www.BeckersHospitalReview.com or call (800) 417-2035 Rural Healthcare Amidst Reform: Are Critical Access Hospitals Endangered? By Bob Herman I n November 2009, Debra Wright, RN, MSBA, stepped into the corner office as CEO of Howard Memorial Hospital in Nashville — that is, Nashville, Ark. The 20-bed critical access hospital sits within a city of about 5,000 people halfway between Dallas and Little Rock and about 45 miles from the nearest fullservice provider in Texarkana, Texas. "And those are Arkansas miles," Ms. Wright says with a laugh. "As my grandson says, they are wiggly roads." She used to work at one of those larger hospitals in the Texarkana area as a nurse and eventually made her way up to administrative roles, including chief nursing officer and chief clinical officer. She heard about the chief executive opening at Howard Memorial, and the hospital's board of directors gave her a shot, something she has been "very appreciative" of to this day. But she has had to deal with some rather large learning curves associated with CAHs. Ms. Wright went from managing the nursing and clinical strategies for upwards of 500 full-time equivalent employees to managing the entire direction of a CAH with 120 FTEs, total. "I have had to really learn, in transitioning to this hospital, how to be a good generalist," she says. "And the way the financials are in a CAH versus a [prospective payment system] hospital, it is so different. Contracting, in-house attorney — you just can't afford all that support in a small facility." This year, iVantage Health Analytics named Howard Memorial as one of the "Top 100 Critical Access Hospitals" in the United States due to the organization's high quality scores, patient satisfaction, affordability, efficiency and sound finances. Not all CAHs have Howard Memorial's reputation, though, and many have been making headlines as of late for inauspicious reasons. Due to high rates of uncompensated care and generally shaky bottom lines, several have had to close their doors this year: Vidant Pungo Hospital in Belhaven, N.C., Charlton Memorial Hospital in Folkston, Ga., Stewart-Webster Hospital in Richland, Ga., Calhoun Memorial Hospital in Arlington, Ga. The list goes on, and it probably will continue over the coming years as CAHs, like all healthcare providers, try to adapt to a changing healthcare environment. The most notable recent news item for CAHs was an August report from the HHS Office of Inspector General. The government report found Medicare spent an extra $449 million in 2011 reimbursing facilities that don't meet location requirements for CAH status. With CAHs closing across the country and the OIG calling for a reassessment of the program, a major question has bubbled to the surface of the hospital sector: Are CAHs facing a new paradigm that could put them out of business? Background of critical access hospitals The "critical access hospital" designation made its way into healthcare vernacular after the Balanced Budget Act of 1997, but the concept of CAHs started even earlier. According to the Medicare Payment Advisory Commission, the CAH program was created through the combination of two separate demonstrations: the Medical Assistance Facility program and the Rural Primary Care Hospital program. Together, the programs said small, rural hospitals should receive cost-based payments from Medicare — instead of prospective payments — because of their isolated locales and limited services. Today, Medicare pays CAHs 101 percent of their allowable costs for outpatient, inpatient, lab and other services. Medicare pays slightly above cost to ensure the CAH stays open for its community. Today, there are 1,332 CAHs throughout the country, according to the Flex Monitoring Team at the Universities of Minnesota, North Carolina and Southern Maine. (The Flex Monitoring Team works with the federal government to monitor and evaluate CAHs.) In other words, CAHs represent one out of every four acute-care hospitals. Every state contains a CAH except Connecticut, Delaware, Maryland, New Jersey and Rhode Island. In 2011, Medicare reimbursed CAHs roughly $8.5 billion for care, meaning the average CAH received about $6.4 million in Medicare revenue. To be considered a CAH, a hospital has to meet certain requirements. Most notably, a CAH cannot have more than 25 acute-care beds, must offer 24-hour emergency services and cannot have an annual average length of stay greater than 96 hours. Essentially, a CAH is a stopgap between a pure outpatient facility and full-fledged tertiary care provider. CAHs also must meet specific location requirements, which were the subject of the government's report. The OIG report: Lightning rod for discussion According to CMS, CAHs must meet two location-related requirements: They must be more than 35 miles from another hospital, or they must be 15 miles from another hospital in mountainous terrain or areas that only have rugged secondary roads. Hospitals were able to get around those location requirements if their state designated them as a "necessary provider." Necessary providers, which make up about threequarters of CAHs, still must abide by all other CAH requirements, but they don't have to follow the distance rules. However, Congress eliminated that exemption in 2006, and CAHs can no longer obtain the "necessary provider" status. In the recent report, analysts at the OIG found that 849 CAHs — two-thirds of all CAHs and many of which are "necessary providers" — would not meet the location requirements if they reapplied for CAH status today. More than 70 hospitals alone were located fewer than 10 miles from the nearest hospital. If CMS decertified hospitals that did not meet the location rules — thus putting the facility on the more variable inpatient and outpatient prospective payment systems — the government could have hypothetically saved $449 million in 2011 alone. The OIG recommended CMS remove the permanent exemption from "necessary provider" CAHs so CMS could reassess them, and it also suggested that CMS revise the CAH program to include alternative location-related requirements. "For example, CMS could allow CAHs to keep their certifications if they serve communities with high poverty rates, even if they don't meet the location requirements," the report stated. CMS agreed with most of the OIG's suggestions, except Administrator Marilyn Tavenner did not agree with the additional location-related requirements. In a letter, she said establishing new criteria would be both burdensome to implement as well as challenging, since socioeconomic location factors could easily fluctuate. Don White, a media spokesperson for the OIG, declined to comment further on the report and instead referred to a recent OIG podcast transcript. In the podcast, Brian Jordan, an OIG analyst who worked on the report, said the agency wanted to make sure the enhanced payments to CAHs are "tax dollars well spent." "We were concerned that some of these hospitals may not be providing critical access to rural patients because they were located very close to other hospitals that could provide similar services," Mr. Jordan said in the podcast. "Remember, necessary provider hospitals never had to meet the distance requirement. And, until March of 2013, CMS

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