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Rural hospitals are vital care providers and economic engines

Jason Harrington

The nearly 1 in 5 Americans who live in rural areas rely on local hospitals and health systems as a critical – and often the only – source of care in their communities. But rural hospitals are more than just care sites. They serve a vital role for regional economies; jobs generated by rural hospitals support the tax base that funds public education, fire and police services, and road maintenance. Nearly 60 million rural Americans depend on their hospitals as an important source of care as well as a critical component of their area’s economic and social fabric.

Unfortunately, too many rural hospitals struggle to keep their doors open. A recent report from the Center for Healthcare Quality found more than 500 rural hospitals at risk of closure even before the public health emergency, including 40 rural hospitals in Iowa. Low patient volumes, sicker patient populations, geographic isolation, shifts in care delivery, increased regulatory burden and the opioid crisis contribute to these bleak statistics.

The pandemic has hastened these trends. Recent forecasts project total hospital revenue in 2021 could drop by up to $122 billion from pre-pandemic levels. This sustained reduction in hospital resources could slow down vaccine distribution and administration, continue pressure on caregivers and diminish access to care in rural communities.

We must do everything we can to ensure rural hospitals have needed resources and payment flexibility to avoid cash flow challenges that could force them to close.

A promising payment tool is the rural community hospital demonstration model championed by Sen. Chuck Grassley. Designed with rural hospitals in mind, the model targets facilities lacking economies of scale because of their size but may be too large to qualify for programs to help the smallest hospitals.

The model pilots reimbursement based on the costs for providing services in rural hospitals that have fewer than 51 beds and provide 24-hour emergency care services.

At Lakes Regional Healthcare in Spirit Lake, we already know this essential help for rural communities works. We are a rural hospital with about 60% Medicare patients. During a typical year, we incur losses with our Medicare patients of approximately $4-$5 million. This has a great impact on a bottom line that, without the model, runs close to breakeven. Of the Medicare patient revenue generated, 25% is for inpatient care. To be reimbursed at a higher level that covers the hospital’s costs for inpatient care through the model allows us to generate a modest net income. This net income provides for new equipment and expansion in service lines for the area’s growing Medicare population. Without the model, the long-term viability of Lakes Regional Healthcare and other similar hospitals would be in jeopardy.

A 2018 report to Congress from the Centers for Medicare and Medicaid Services found the financial benefits of participating in the model saved many facilities from having to alter or downsize their operations, improved cash and financial security, and facilitated the continued support of their local economies. The report also shows that the model provided high quality care, so patients don’t have to sacrifice quality to stay at their local hospitals.

Sen. Grassley just led the successful effort to extend this important program for another five years. Now we can build on the promising results we have seen so far, supporting patient access to care and helping keep our doors open when it is so sorely needed.

Rural hospitals and health systems have been on the front lines of the COVID-19 pandemic, working to provide quality care for patients, families and communities. Despite unprecedented financial and health care challenges, rural hospitals remain committed to ensuring local access to high-quality, affordable health care during the pandemic and beyond. Thanks to Sen. Grassley’s leadership in maintaining the rural community hospital program, Lakes Regional Healthcare and other rural community hospitals nationwide will continue serving as community anchors and lifelines of care.

Jason Harrington is the president and CEO of Lakes Regional Healthcare in Spirit Lake. He also is the chair of the Iowa Hospital Association’s board of officers and trustees.

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