Rural health – rethinking care in the wake of hospital closures

In July, the Carolinas HealthCare System Anson in Wadesboro, N.C., a town of about 5,800 people, opened the doors to its new facility and embarked on a bold experiment: replacing Anson Community Hospital, a 52-bed inpatient facility built in 1954, with a new model of delivering health care.

Built for $20 million, the new hospital kept the emergency department, but cut the number of inpatient beds by nearly three quarters, to 15. While the facility still offers radiology, digital imaging, laboratory, pharmacy, surgery, and inpatient services, there is a patient-centered medical home within the ED, in an effort to provide primary care while reducing costly and unnecessary ER utilization. There are also community-based partnerships to address chronic health issues, such as diabetes, in rural Anson County, which in 2012 was ranked 89th out of North Carolina’s 100 counties in the County Health Rankings & Roadmaps program.

At a time when rural hospitals are closing at a rapid pace — more than two dozen have closed since January 2013, according to the National Rural Health Association — the leaders at the Carolinas HealthCare System knew things needed to change.

“We realized we needed to built a new model of care for the Anson community,” says Michael Lutes, a senior vice president with Carolinas HealthCare System. “We didn’t want to build the traditional model, especially with the challenges of rural medicine. We wanted to do something really different.” While it’s too early to determine the full impact of the change in Anson, in the first few months the hospital has seen a significant decrease of ER utilization for health issues that can be treated by primary care doctors.

“A lot of these patients didn’t have a primary care physician,” Lutes says. “If the first 90 days is anything like the next five years is going to be, we’re definitely on to something.”

‘Older, poorer, and sicker’
A majority of the rural hospital closures were in states with Republican leadership that blocked the Medicaid expansion offered under the Affordable Care Act. Still, many in the health care field agree that a number of issues affect rural facilities.

“Rural Americans are typically older, poorer, and sicker than their urban counterparts,” says Brock Slabach, a senior vice president at the National Rural Health Association. “It’s compounded if you’re a senior or minority living in a rural area.”

Indeed, data from the 2010 National Hospital Discharge Survey found that 51 percent of inpatients at rural hospitals were aged 65 and over, compared with 37 percent of inpatients in urban hospitals. Mark Holmes, director of the North Carolina Rural Health Research Center, notes than in the south, where many of the closures have been, the economy tends to be weaker.

“A small change would manifest as a closure there,” Holmes says. “States that have not expanded Medicaid have seen a larger portion of their hospitals close. We don’t know if it’s the Medicaid expansion or the region.” Medicaid Disproportionate Share Hospital (DSH) Payments have also been dialed down, and that’s squeezing hospitals further, Holmes says.

In addition, a recent report by the U.S. Department of Health and Human Services’ Inspector General found that because of the system that Medicare uses to calculate coinsurance amounts for beneficiaries receiving outpatient services at critical access hospitals, patients paid between two and six times the amount than they would have paid for the same services at acute care hospitals.

“Right now, Medicare is getting a bargain,” Slabach says. “They’re paying a lower portion for critical access hospitals and calling on the patient to pay the difference.” The primary care physician shortage has also hit rural communities particularly hard. Slabach says his organization recently started working on expanding the number of rural training tracks for primary care doctors.

“We have seen increased matches in terms of fill rates for these resident training programs,” Slabach says. “We think this is a really good sign before we have the data.” Lutes, of the Carolinas HealthCare System, says that historically, Anson County has had a revolving door of physicians. With the new model, there is a primary care team of five providers, and four are from Anson County. They have also brought the family practice residency program to the Wadesboro facility.

Higher costs, bigger cuts
Some of the biggest challenges that rural hospitals face are the high costs that come with investing in electronic health records systems and avoiding meaningful use penalties.

“It’s harder for hospitals in rural areas to invest in this technology,” especially if they don’t have the same volume, says Priya Bathija, senior director of health policy at the American Hospital Association. According to the National Hospital Discharge Survey data, 64 percent of rural hospital inpatients had no procedures performed while in the hospital, compared with 38 percent of urban hospital inpatients.

There have also been budgetary threats from proposed Medicare cuts. For example, President Barack Obama’s fiscal year 2015 budget proposed to reduce critical access hospital payments from 101 percent to 100 percent of reasonable costs and to eliminate the CAH designation for hospitals that are less than 10 miles from the nearest hospital. The Center for Medicare and Medicaid Services recently indicated that it will begin more tightly enforcing the 96-hour rule for critical access hospitals, requiring physicians to certify Medicare and Medicaid patients will not be there more than 96 hours, or face loss of reimbursement. “There’s sort of a barrage of threats,” Bathija says.

Improving population health
Holmes, of the North Carolina Rural Health Research Center, says that as the industry moves toward accountable care organizations — networks that coordinate patient care and are rewarded for delivering it better and for less money — it’s not clear what the long-term role of rural hospitals will be.

Paul Bengtson, chief executive officer of Northeastern Vermont Regional Hospital in St. Johnsbury, Vt., who leads the American Hospital Association’s Section for Small or Rural Hospitals, says his hospital is a member of one accountable care organization, OneCare Vermont, and works closely with two.

“I have never had anxiety about accountable care organizations,” Bengtson says. “I actually like the concept. I like that they’re pushing us to do things that we should otherwise do. What I don’t like is the fact that there’s another layer of bureaucracy layered on all the other layers of bureaucracy.”

Like in Anson County, N.C., there is reason to shift to improving the health of the overall population. Bengtson notes that in Vermont, hospitals like his work closely with physicians, housing agencies, social service agencies, and agencies on aging.

“Vermont is a very interesting and progressive state,” Bengtson says. However, despite some progressive moves that can help address some of the special challenges that rural hospitals face, there are always going to be issues related to funding.

“The payment reform piece is not keeping up with the delivery reform piece, and that’s what’s causing most of the anxiety,” Bengtson says. “We’re living in a time of great ambiguity, so you have to have high tolerance.”

The Henry Ford Health System, which serves Southeast Michigan, including Detroit and some suburban areas, can see the challenges of urban hospitals pretty clearly. Readmission rates in Detroit are much higher than the system’s facility in West Bloomfield, says David Nerenz, director of the Center for Health Policy and Health Services Research at the Henry Ford Health System.

“As far as we know, not only are the staffing levels and the EMR system essentially the same, but we have additional resources in Detroit to deal with the challenges,” says Nerenz, who describes partnerships with community health organizations. “We see higher readmission rates in spite of all of that.”

The challenges of urban hospitals can vary greatly — Detroit, which has an aging, unreliable bus system, is a little different than the Upper East Side of Manhattan, where buses and relatively inexpensive cabs are easy to find. Nerenz, who also serves as vice chair of research in the department of neurosurgery at the Henry Ford Health System, says the outcome of a minor spine procedure can differ based on the patient’s circumstances — recovery can be more difficult if there’s no access to a park, or if they live in a fourth-floor walkup and it’s the middle of the summer.

“Some hospitals may have done some remarkable things in trying to address that, but the problems are still there,” Nerenz says. Readmission penalties went into their third year in October, and CMS is fining 2,610 hospitals, a record number. Hospitals with the highest readmission rates lose 3 percent of each payment, up from 2 percent last year.

The problem is, there is no risk adjustment for those readmissions, says Ellen Kugler, executive director of the National Association of Urban Hospitals, and hospitals treating a primarily low-income population are compared to the wealthiest suburban hospitals in the country. Hospitals do a ton of community outreach, but there are personal factors that are difficult to manage.

“Take the difference between grandparents who have a spouse at home, kids making sure they take their medications, and have meals and adequately secure housing, and compare that to someone staying in a short-stay hotel in downtown San Francisco,” Kugler says. “It’s very different.”

There are bills in the U.S. House of Representatives and the Senate to require CMS to add risk adjustment, taking into account the socioeconomic status of the patients the hospital serves when issuing penalties. “Insurers put all sorts of risk adjustments in there for setting premium rates,” Kugler says.

A smaller DSH
Urban hospitals do have some of the same challenges as rural facilities. For hospitals in the states that have expanded Medicaid, they still face big cuts to Medicaid Disproportionate Share Hospital (DSH) Payments. For hospitals treating the most uninsured patients, that means millions of dollars in reductions, Kugler says. Michigan is one of the Medicaid expansion states, but people didn’t start enrolling until this past April.

“DSH payment cuts preceded Medicaid expansion, even for states that did do the expansion,” Nerenz says. “So, if you’re in a state that expanded Medicaid, there was no corresponding revenue increase for Medicaid expansion for all of 2013 and half of 2014. It’s a tough situation for a hospital in serving an urban area with a disproportionate number of uninsured residents.”

Kugler notes that even for people who were able to secure health insurance under the state insurance exchanges, the affordable plans are usually high deductible plans. “They’re getting care, but they might have a $2,000 deductible, which is absolutely not affordable to them in any way, shape, or form,” Kugler says.

A recent analysis by Kaiser Health News of penalties likely under the CMS Hospital-Acquired Condition (HAC) Reduction Program found that the biggest impact will be on major teaching hospitals, with 54 percent of those facilities set to receive penalties, versus 18 percent of non-teaching hospitals. These facilities tend to be located in urban areas. “Patients are coming in with more comorbidities,” Kugler says. “You’re dealing with a sicker population. You need to be careful when you’re making these comparisons.”

Residency program cuts
For academic medical centers located in urban areas, there are threats to graduate medical education payments, says Priya Bathija, senior director of health policy at the American Hospital Association. CMS has a fixed number of residency slots that it funds, but the number of slots were frozen several years ago. Future cuts are included in President Barack Obama’s budget for the 2015 fiscal year. “Hospitals continue to fund residents above that cap without receiving payments,” Bathija says.

Reaching out
While contending with funding issues, many urban hospitals have been trying out some innovative things to help address the challenges. The Henry Ford Health System has developed formal partnerships and the creation of community health programs, Nerenz says.

Laypeople get a certain level of healthcare training. These community health workers, paid by local social service agencies, make sure discharged patients have access to rides, and get meals delivered if they’re homebound.

The health system has also developed and maintained a formally designated primary care medical home program, with services that include making sure that when people leave the hospital, the medications they’re taking don’t conflict. “It’s just now these more daily life challenges — as a patient and a family member, how do you get done the things you need to do to manage?” Nerenz says. In an urban area, “it is just harder.”