More than half of rural hospitals could close under a public health option

More than half of rural hospitals could close under a public health option on the Affordable Care Act exchanges, according to Navigant Consulting analysis.

A public option through the exchanges would reimburse providers at  Medicare rates, placing as many as 55 percent of rural hospitals, or 1,037 hospitals across 46 states, at high risk of closure, the report said.

Those rural hospitals not at high risk of closure would face an increased financial threat which could eliminate services and reduce clinical and administrative staff.

The analysis was supported by the Partnership for America's Health Care Future, a coalition of about 30 provider, insurance and pharma organizations founded in 2018 to prevent Medicare for All legislation.

WHY THIS MATTERS

Rural hospitals, already in financial straits, would be the first to suffer from Medicare's lower rates as compared to private insurance payment.

A Navigant study released earlier this year found that more than 20 percent of the nation's rural hospitals are already in danger of closing because of financial issues.

Medicare for All, and variations on the single payer system such as the public option put forward by Democratic front-runner Joe Biden, have become a large part of the Democratic debate heading into the 2020 presidential election.

Biden's public option is seen as a less drastic option to get to universal coverage without undoing the current private payer system, but the study shows it could result in fewer services in rural areas should hospitals in these regions close.

The Navigant study looked at three possible scenarios: 

Revenue loss to rural hospitals is projected to be 2.3% under a Medicare public option if only the uninsured and current individual market participants shift to the public option, placing an estimated 28% of rural hospitals at high risk of closure.

If employers shift between 25% and 50% of their covered workers from commercial coverage to a Medicare public option, hospital revenues are projected to drop between 8% and 14% and cause an estimated 51 to 55% to face high risk of closure with an additional 39% to 41% facing moderate risk.

Offering a government insurance program reimbursing at Medicare rates as a public option on the health insurance exchanges could place as many as 55% of rural hospitals at high risk of closure, according to the report.

To keep hospitals from the financial consequences of this potential shift, Medicare would have to increase hospital payments for a public option between 40% and 60% above present Medicare rates, costing between $4 billion and $25 billion annually, the report said.

TREND

The Federal Communications Commission and the Centers for Medicare and Medicaid Services recently took action to help protect rural hospitals.

CMS increased the wage index to rural hospitals to address concerns over the disparity between hospital payments in high-wage areas versus low-wage areas, which tend to be rural. Hospitals located in areas with wages below the national average receive a lower Medicare payment rate than hospitals in areas with above-average wages.

On August 1, the FCC promoted telehealth through reforms to the Rural Health Care Program, including the distribution of RHC funding and revising the rules governing the Telecom Program to simplify calculation of the urban rate -- the amount healthcare providers pay -- and the rural rate--the amount that service providers receive.

As the demand for telemedicine has increased, the RHC Program has witnessed a dramatic increase in healthcare provider participation, which has put extreme demands on limited program funding.

In June 2018, the FCC increased the annual cap on program spending by nearly 43 percent, to $571 million, reversing across-the-board spending cuts imposed by the old cap. The new report and order provides for the program's $150 million cap on multi-year and upfront payment requests to be adjusted annually for inflation.

ON THE RECORD

"Whether it's transmitting electronic medical records, real-time medical imaging, videoconferencing with remote doctors, or enabling specialists to remotely monitor patients in rural hospitals and clinics, connectivity between patients and healthcare providers is essential to the one in five Americans who live in rural areas," FCC Chairman Ajit Pai said. "Indeed, to give just one recent example of what is possible, primary care doctors now can use a connected retinal camera during office visits to catch diabetic retinopathy, the leading cause of blindness among people with diabetes, with the help of a remote ophthalmologist."

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