Industry Insights

Flexibility & Loud Voice Needed for Rural America

August 2017
Author:  Eddie Marmouget

Eddie Marmouget

National Industry Partner

Audit

Health Care

910 E. St. Louis Street, Suite 200
P.O. Box 1190
Springfield, MO 65801-1190 (65806)

Springfield
417.865.8701

It’s hard to believe I’m entering my 26th year at BKD. While working with health care providers nationwide, I’ve learned a universal fact:  managing a large, integrated health system or small critical access hospital isn’t an easy task. The challenges can be different, but it's not a job for the faint of heart.

However, the financial stress on rural health care providers today is more acute than I’ve ever seen. Since 2010, there have been approximately 80 hospital closures in rural America, and one in three hospitals are financially at risk, according to recent studies. I see the effect on the communities these hospitals served. It’s a domino effect that influences the financial health of businesses and individuals in those communities.

To turn it around, rural America will need to be flexible in championing policies that match the changing health care environment and use a loud voice to deliver that message to Washington, D.C., policymakers.

Rural America’s difficulties haven’t changed much, but they have become more acute. These include:

  • An aging population – Compared to urban areas, individuals 65 or older can make up 5 percent to 10 percent more of the population in rural areas, with more Medicare and Medicaid dual-eligible individuals. Adding to this challenge is the higher degree of chronic health care problems with the dual-eligible population.
  • Increased Medicare or Medicaid reliance – The aging population leads to a higher Medicare and Medicaid program reliance. The Medicare and Medicaid payor mix of rural providers can be as high as 70 percent to
    80 percent. This creates tremendous difficulties because the aggregate cost of providing Medicare and Medicaid patient care exceeds the aggregate reimbursement, or the margin available isn’t enough for future investment in health care for these communities.
  • The ability to recruit and retain health care professionals – Physicians are more difficult to recruit in rural America. Factors such as the amount of call time required makes rural America less attractive to the new generation of physicians.
  • Lack of commercial insurance coverage in rural America – This can be the most significant difference between managing health care in rural America and urbanized areas. As costs continue to rise, rural providers aren’t able to negotiate and cover the unreimbursed cost of providing care to the Medicare and Medicaid population within the commercial insurance contracts like their urban counterparts.

With all these challenges, how can rural providers start transitioning to the value-based care payment models and take on more risk? The thought of preparing for this environment is like going to the moon when you have all these other challenges to address first.

Rural America’s solutions must be flexible, and policymakers need to think differently. Going forward, rural providers can’t rely on margins generated from inpatient hospital care to fund the costs necessary to operate a 24-hour emergency room and access to basic primary care and outpatient services. Just as in urban areas, rural facilities need to improve patient outcomes and reduce the need for hospital admissions and readmissions. To do that, payment policies must be in place that encourage rural areas to make the transition to value-based payment models. This can include flexibility for:

  • Telemedicine, as this is the future of reaching patients in rural areas. However, it’s necessary to make sure that service is adequately paid for and the reimbursement is reflective of not only the cost of care but return of capital necessary to reinvest in health care in rural communities.
  • Payment reform for alternative emergency room staffing models in rural areas
  • Ambulance payment policies that encourage investment in alternative modes of transportation allowing patients to safely get to necessary care
  • Hospitals operating rural health clinics that promote routine specialty physician care beyond just primary care
  • Allowing rural providers to partner with organizations that bring capital and expertise to rural areas and not lose their ability to retain special Medicare status and payment enhancements

This is merely a brief list highlighting what rural providers are advocating for in Washington, D.C. As providers participate alongside organizations such as the National Rural Health Association in organized marches and hill visits, it’s important to educate policymakers on rural America’s needs and challenges. BKD remains committed to analyzing how policy may affect clients and helping provide insight into financial strategies to navigate the uncertain environment.

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