Becker's Hospital Review

Sign up for the COMPLIMENTARY Becker's Hospital Review CEO Report & CFO Report E-Weeklies at www.BeckersHospitalReview.com or call (800) 417-2035 never went back to check that other CAHs still met the location requirements. With new hospitals being built and towns expanding, some of these hospitals might no longer qualify for CAH status." Industry insight and reaction: What could this mean for CAHs? After the OIG published its report, a flurry of reactions came from every corner of the healthcare sector. Hospital and rural healthcare advocates met the OIG's recommendations with discontent, arguing that enhanced Medicare payments to CAHs are the lifeline for both the hospitals and communities. Government and reform advocates viewed the report as a way to reduce unnecessary Medicare expenditures in areas with numerous hospitals. Consolidation analysts said the proposal could be a way to counter health systems that own CAHs as well as nearby tertiary facilities. The OIG's report also followed in the footsteps of President Barack Obama's budget proposal for 2014. In April, President Obama proposed cutting more than $2.1 billion from CAHs over the next decade in two ways: First, CAH payments would be reduced from 101 percent of reasonable costs to 100 percent of reasonable costs. Second, in the same vein of the OIG's findings, CMS would prohibit CAH designation for facilities that are less than 10 miles from the nearest hospital. To be clear, the OIG did not call for the closure of any CAHs. In addition, any action resulting from the OIG's report is unlikely, considering CMS is busier dealing with the implementation of the Patient Protection and Affordable Care Act. As for President Obama's plan, Congress has shown it is more willing to shut down the government than act on a budget proposal. Nonetheless, CAH leaders have said if the government ever went through with the OIG's recommendations to "reassess" the program, it would inevitably lead to closures since most CAHs treat a high proportion of Medicare beneficiaries. "I would say if CAHs lost their reimbursement, many throughout the country would be forced to close. They wouldn't survive," says Jim Ferando, president of Banner Health's Western Region. He oversees seven different Banner CAHs scattered throughout Arizona, California, Colorado, Nebraska and Wyoming. "Most of the small rural facilities run at 1 to 2 percent margins. Those margins would go away if they lost their Medicare cost reimbursement." Ron Christenson, CFO of Morris County Hospital, a 25-bed CAH in Council Grove, Kan., agrees. He says although his hospital is currently on "solid financial footing," converting back to the Medicare prospective payment systems — which would happen to CAHs under the OIG's recommendations — would be detrimental. "The IPPS and the OPPS reimbursement models are clearly based on the urban healthcare delivery systems, where there are significant volumes of patients to offset the lower payment levels," Mr. Christenson says. "That system just doesn't work well in a rural setting where you don't have that level of business." Tim Putnam, DHA, president and CEO of Margaret Mary Community Hospital, a 25-bed CAH in Batesville, Ind., says the government doesn't have to look too far to see many rural providers are already out on the bleeding edge. "It's tough to look at the OIG report and say you can save $400 million when you know a hospital has closed in Georgia," Dr. Putnam says, referring to the multiple CAH closures in Georgia earlier this year. "When you lose a strong rural hospital, the community loses a strong portion of its infrastructure. It's going to be difficult to sustain any economy, and it will be virtually impossible to establish a strong healthcare system ever again." Dr. Putnam, who also is the president of the Indiana Rural Health Association, adds that the 101 percent of allowable costs that CAHs receive is somewhat misleading. Medicare does pay CAHs an automatic profit on services, but many other necessary services — like legal and marketing — aren't factored into that total. So, for example, while a CAH receives 101 percent of costs for knee surgery, any costs to advertise the surgery department come out of the hospital's coffers. "If you run a healthcare organization today without occasionally consulting an attorney, that's a pretty risky endeavor," Dr. Putnam says. "And if you don't let the community know what services or physicians you have available, you have a tendency to lose those patients to others who market more aggressively. Many of these costs you need to run a business are not [factored in]." Mr. Ferando of Banner Health says the Medicare payments for CAHs are especially needed right now amidst healthcare reform. Electronic health 49 records, the transition to ICD-10 and physician recruitment are all costly endeavors, especially for facilities that don't have much room for error if something goes wrong. "We're fortunate with Banner to have centralized billing, but for smaller independents, that's a big deal," Mr. Ferando says. "But even for us, physician [recruitment] is difficult. You have to find the right doctor willing to go to Worland, Wyo." Rural healthcare — and its patient base In nearly every hospital mission statement, patients will find verbiage centered on high-quality, patient-centered care. Mr. Christenson says if Morris County Hospital, roughly 25 miles from the next-closest hospital, ever lost its CAH designation, it would negatively change the health patterns of elderly community members. "If the hospital closed, all of the senior population would have great difficulty traveling to the next nearest healthcare facility. There are a number of them in town [who] don't even drive anymore," says Mr. Christenson, who has been CFO since 2007. "If this hospital weren't here, I am afraid most of them wouldn't go to the doctor anymore because it would be just too hard for them to get there." Ms. Wright, CEO of Howard Memorial, knows rural providers serve a need, and she says it's not practical to think the system would allow hundreds of CAHs to close overnight. The closeknit communities, she says, wouldn't allow it to happen either. "When you look at our HCAHPS, quality and patient satisfaction scores, you see we're working really hard to take good care of people," she says. "And in a rural community, these are friends and relatives — truly loved ones that you're caring for every day. Our mission takes on a lot of importance when you see these people at Wal-Mart or church or school. That's not a stranger to you." n Sign Up Today! Hospital CFO Report Concise, practical information for hospital CFOs and financial leadership Current news, analysis and best practices on hospital revenue cycle issues, including coding, billing and collections, the transition to ICD-10 and Recovery Audit Contractors To sign up for the FREE E-Weekly, visit www.BeckersHospitalReview.com or call (800) 417-2035

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