Reform 3: Improving Rural Healthcare

Rural hospitals provide essential health care services to nearly 54 million people, including 9 million Medicare beneficiaries. Rural hospitals face great pressures as government payments decline due to their small size, modest assets and financial reserves, and higher percentage of Medicare patients since rural populations are typically older than average urban populations (1). It is known that persons living in rural areas are at a disadvantage because many do not have access to the healthcare they need. One-fourth of America's population lives in rural areas. Compared with urban Americans, rural residents have higher poverty rates, a larger percentage of elderly, tend to be in poorer health, have fewer doctors, hospitals, and other health resources, and face more difficulty getting to health services (5).Congress should take action now to improve Federal funding for rural hospitals and Critical Access Hospitals.

There are already many Federal programs in place in order to help improve rural access to healthcare. The Rural Hospital Flexibility Grant Program is a program that provides funding to strengthen rural health. The FLEX program:

1.Allows small hospitals the flexibility to reconfigure operations and be licensed as Critical Access Hospital (CAHs).
2. Offers cost-based reimbursement for Medicare acute inpatient and outpatient services.
3. Encourages the development of rural-centric health networks.
4. Offers grants to States to help implement a CAH program in the context of broader initiatives to strengthen the rural health care infrastructure (3).

Programs such as the FLEX program are already working towards improving rural access to care, but more needs to be done. The Critical Access Hospital Program was created by the 1997 federal Balanced Budget Act as a safety net device, to assure Medicare beneficiaries access to health care services in rural areas. It was designed to allow more flexible staffing options relative to community need, simplify billing methods and create incentives to develop local integrated health delivery systems, including acute, primary, emergency and long-term care (2).

According to The Financial Effects of Wisconsin Critical Access Hospital Conversion, the Critical Access Hospital (CAH) program was created to improve the financial stability of small, rural facilities. These facilities were struggling with Medicare’s Prospective Payment
Systems (PPS). Medicare payments to these institutions were inadequate because they did not take into account low volumes and higher fixed costs. The financial deterioration of the hospitals resulted in a lack of capital investment. Some facilities closed. Lack of access to healthcare services became an issue in some areas. Currently, CAHs are paid 101% of their Medicare costs for inpatient services, outpatient services (including laboratory and therapy services), and post-acute services in swing beds. As a result, prior studies have shown that the CAH program has improved financial performance and access to capital.

The Wisconsin Medical Assistance Program has recently announced plans to reduce reimbursement to CAHs by an average of 10%. CAHs, which on average, have higher Medical Assistance utilization than PPS hospitals in Wisconsin, will need to contend with a reduction in reimbursement that will further stress their financial condition.
According to the study, in order to address these economic concerns, 90% of hospitals have made cutbacks to address economic challenges. Some of the cutbacks hospitals have taken are: reduced staff, administrative expense cuts, and reduced services such as behavioral health, post acute care, clinic, patient education and other subsidized services. (4).

It is clear that federal funding is needed in support of critical access hospitals and rural health care. Rural hospitals are already making cutbacks due to economic challenges and patient education, unfortunately, is a critical area that is losing funding. Funding given to rural health care and critical access hospitals would allow these facilities to employ more staff. This, in turn, would increase access. Access to higher quality care would cause an increase in quality of patients because they would be getting one-on-one attention. Many people might say that funding should be increased in urban areas because the population is greater in urban areas so more people would be reached. Residents of rural areas face health disparities that those living in urban populations do not face. Access to healthcare in rural areas needs to be addressed and federal funding must be increased for rural hospitals and critical access clinics.




(1) American Hospital Association. Issues: Rural Health Care. Web. 29 March, 2010. http://www.aha.org/aha_app/issues/Rural-Health-Care/index.jsp

(2) Washington State Department of Health. Rural Health Programs. Web. 28 March, 2010. http://www.doh.wa.gov/hsqa/ocrh/cah/cah399.html

(3) U.S. Department of Health and Human Services. Rural Health Policy. Web. 29 March, 2010. http://ruralhealth.hrsa.gov/funding/flex.htm

(4) Gullickson, Dale and Donkle, Richard. The Financial Effects of Critical Access Hospital Conversion. August, 2009. Web. 29 March, 2010. http://www.worh.org/files/FinConv09.pdf

(5) U.S. Department of Health and Human Services. Improving Healthcare for Rural Populations. March, 1996. Web. 29 March, 210. http://www.ahrq.gov/research/rural.htm