Hospitals in one rural system have negative operating margins of $100 million a year, CEO says

WHAT HAPPENED

Rural hospitals are suffering from declining populations, lack of revenue, Medicare reimbursement that doesn't cover costs, a shortage of physicians, and a need for greater data sharing and digital health, a CEO and other experts told the Subcommittee on Primary Health and Retirement Security Tuesday, during a hearing on healthcare in rural America.

The subcommittee, headed by Chairman Senator Mike Enzi of Wyoming and Ranking Member Bernie Sanders of Vermont, made no recommendation, but are allowing for additional submitted comments for up to 10 days.

The full Senate Committee on Health, Education, Labor & Pensions was scheduled to meet Thursday, but that hearing on reducing healthcare costs and improving affordability through innovation, has been postponed.

WHY IT MATTERS

Rural hospitals have been steadily closing, with an estimated 85 shutting their doors since 2010. 

THE TREND

By 2030, there will be more older Americans needing care and a shortfall of 90,000 physicians, said Morgan Reed, president of App Association and executive director of the Connected Health Initiative. Twenty percent of the population lives in rural America but only 10 percent of physicians practice there, he said.

A declining rural population leads to lack of revenue, which is enough to send some hospitals into a death spiral, said Alan Levine, executive chairman, president and CEO of Ballad Health in Johnson City, Tennessee.

At two of the largest hospitals in Wyoming, Medicare reimburses at 75 percent of the actual cost. This amounts to a large cost shifting to the population that has private insurance, said Tom Glause, commissioner of the Wyoming Department of Insurance. 

Deborah Richter, MD, chair of Vermont Healthcare for All, said she, supports the one payer system as embodied in Sanders' Medicare for All plan.

ON THE RECORD

Rural communities have to pay more to recruit and keep physicians,  Levine said.

"In each of our practices, we lose for a specialist, we lose anywhere from $150,000 to $200,000 a year for a doctor that we employ," Levine said. "Our system generally has negative operating margins of more than a $100 million a year sustaining physicians in our rural communities."

THEIR TAKE

Two measures already in the works would help ease the financial situation of rural hospitals. These are reimbursement for digital telehealth and a federal determination over health information blocking that would allow for greater data sharing.

The Centers for Medicare and Medicaid Services this year unbundled Code 99091, representing an important first step to increasing the reimbursement for remote care, as long as the codes reimburse at the level of the amount physicians have to spend, Reed said.

Senator Tim Kaine of Virginia said there are bills pending to allow for more telehealth services.

Secondly, a report on health information blocking from the Office of the National Coordinator for Health Information Technology was  moved to the Office of Management and Budget on September 17. The ONC is expected to issue a rule on the interference of the exchange of electronic health information that rural providers hope will allow them to more easily share data.

Rural hospitals need data of what's working and what's not, Reed said. 

"We don't have access to data," he said.

When data is shared it can be used for predictive analytics to know what the costs are going to be, Levine said. 

Nothing is more frustrating for the CEO of a health system than being unable to say what a procedure is going to cost, he said. The problem for rural providers is that, even with the insured population, many patients are unable to pay the biggest part of their out-of-pocket healthcare costs. 

"Unfortunately, we're having to eat that," Levine said.

Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com