by Michael Topchik
National Leader, The Chartis Center for Rural Health
February 6, 2018
The Chartis Center for Rural Health has been monitoring and modeling rural provider performance in an effort to better understand the overall stability of the rural health safety net. Our research findings have made an important contribution to the national narrative around the complex challenges confronting rural providers and the downward pressure caused by different policies and legislation. This week we’ll be sharing our latest findings with rural health leaders, advocates and members of Congress at the NRHA’s Rural Health Policy Institute in Washington.
Since 2010 rural America has lost 83 hospitals to closure and our newest research underscores the downward trajectory of rural provider operating margins. With the old adage “no margin, no mission” in mind, operating margin has emerged as a key indicator within our research for assessing the impact of a series of government policies negatively impacting provider revenue. Today, 44 percent of rural providers have a negative operating margin. This represents a 4-percentage point increase in the last 12 months.
Although none of these policies is specifically targeted at rural healthcare, the reimbursement reductions and other revenue cuts may disproportionately impact rural providers with a typical Medicare/Medicaid payment mix of 55% (compared to 41% for non-rural providers). When compared to more urban counterparts, our research has shown that rural communities are socioeconomically disadvantaged and suffer greater health disparities with less access to care. Add to this the reality that in many rural communities, a hospital is one of the largest (if not the largest) employers and the true impact of losing a rural hospital comes into focus.
When exploring the impact of existing policies, our research efforts have focused on four key pieces of legislation – Sequestration, Bad Debt, PPS Coding Offset and 340B. Our current models indicate a significant impact to rural provider revenues over a 12-month period. Within one-year, these four policies will result in a revenue loss for rural providers of $550 million. These losses would be accompanied by the loss of 12,000 jobs and a $1.4 billion loss to gross domestic product (GDP).
Impact of Pending/Proposed Policies
As rural providers confront the impact of enacted legislation, several other threats to revenue – all related to different policies – have emerged on the horizon. The newly signed Tax Cuts and Jobs Act (2018) has triggered PAYGO (Pay As You Go) rules first introduced with the Budget Enforcement Act of 1990, which require increases to direct spending or decreases in revenue be offset by other spending decreases or revenue increases. Unless waived by Congress, providers could see a two percent or four percent reduction in Medicare. For rural providers, this would translate into a loss of $348 million (two percent reduction) or $697 million (four percent reduction) in revenue.
The potential exists for rural provider revenue to also be negatively impacted by The House Ways and Means Committee’s proposed reductions to swing bed payments. Swing beds enable rural providers to offer skilled nursing support in order to allow patients to recuperate locally. Our models indicate that should the proposed swing bed cuts move forward, rural providers would stand to lose $1.5 billion in revenue, the single largest potential cut to rural hospital reimbursements we are tracking.
Impact of Attempts to Block Grant Medicaid
Last year, we released a series of models assessing the impact to rural hospital reimbursement of efforts to repeal/replace the Affordable Care Act. Neither the American Health Care Act of 2017 (AHCA), Better Care Reconciliation Act (BCRA) nor Graham-Cassidy would have been kind to rural providers and communities. Based on our models, Graham-Cassidy – the final attempt at repeal/replace in 2017 – would have been the largest. Within one year, Graham-Cassidy would have resulted in a Medicaid revenue loss of $1.7 billion, claimed 37,000 jobs and a $4.1 billion loss to GDP.
Graham-Cassidy – with a similar construction found in the AHCA and BCRA proposals – suggests this may be the starting point for future efforts to repeal/replace the Affordable Care Act. When viewed alongside the modeled impact of the other pending policies, a new layer of uncertainty has formed above rural healthcare. As part of this research update, we modeled the impact to rural provider operating margins if each of the pending policies identified above come to fruition as well as Graham-Cassidy. In this scenario, the percentage of rural providers with a negative operating margin increases significantly from 44 percent to 68 percent.
An alternative Path Forward
Amidst this uncertainty, rural health leaders are searching for viable alternatives. The Graves-Loebsack Save Rural Hospital Act has the potential to be such a model. Based on our models, implementation of Graves-Loebsack would preserve $968 million in revenue within the first year as well as 22,000 jobs and $2.5 billion in GDP. Most importantly, it would serve to maintain vital emergency department and outpatient services in rural communities.
We have posted several resources online related to these findings. Check out the links below, and don’t hesitate to reach out to me directly with any questions or comments at [email protected] or 207-518-6705.
Research Presentation: 2018 NRHA Rural Health Policy Institute (PDF)
Research Infographic: Policy Implications for the Rural Health Safety Net
Policy Impact Super Tables: Existing, Pending and Proposed Policy Impact