Proposed Cuts to Critical Access Hospitals Draw Fire

Rural health advocates fear cuts in the president's budget could impede health-care delivery for at-risk populations.
by | March 2, 2012
 

More than 1,300 critical access hospitals (CAHs) dot the nation’s countryside, according to the federal Health Resources and Services Administration (HRSA), serving rural populations and receiving enhanced Medicare reimbursements from the federal government to support their bottom line. Their patient populations are largely elderly and low-income without access to the more elaborate health-care systems present in urban areas.

But, given the current fiscal and political climate, the federal government is looking for cuts in every corner of its checkbook. In his fiscal year 2013 budget for the U.S. Department of Health and Human Services, President Barack Obama proposed cutting enhanced reimbursements for CAHs from 101 percent to 100 percent of reasonable costs. Estimated savings: $1.4 billion over 10 years. He also suggested prohibiting hospitals within 10 miles of another hospital from receiving the CAH designation starting in 2014. Estimated savings: $590 million over 10 years.

In conversations with Governing, rural health advocates expressed serious concerns that the president’s proposals, if passed, would significantly hinder the ability of CAHs to deliver care to their patients or lead to closures. The president’s budget is largely a political document, especially in an election year, Joy Wilson, health policy director at the National Conference of State Legislatures, acknowledged. But cuts to entitlement programs would be the kind of proposals most likely to gain support, she said, either this year or in years to come.

“I think it’s a conservative statement that rural health care would be devastated,” Alan Morgan, CEO of the National Rural Health Association (NRHA), said. Nationally, most CAHs operate with a negative operating margin, even with the current enhanced reimbursement, he explained. Teryl Eisinger, president of the National Organization of State Offices of Rural Health, agreed. Rural health care is “fragile as it is without any additional cuts,” she said. “Any one of the proposed cuts could be devastating to people who live and work in rural America.” Many states provide additional Medicaid reimbursements for CAHs, as many patients are eligible for both Medicare and Medicaid, so reductions to federal aid could put greater pressure on state dollars to make up the difference.

There is also a question of whether Obama’s proposal replaces or adds to the sequestration cuts, under which CAHs face a 2 percent cut. That could mean that their Medicare reimbursements would ultimately drop from 101 percent to 98 percent, exacerbating the effects. Kenneth Baer, director of communications at the Office of Management and Budget, did not respond directly to questions about the CAH cuts, but said the administration encourages passage of the president's budget "to avoid the sequester."

It is unclear what the total effect of the budget cuts would be for CAHs or how many would be forced to close nationwide under the president’s proposals. But examples from Kansas and Texas, two states in which a significant portion of the population rely on these hospitals for emergency services and inpatient care, could provide some insight into the potential impact.

Don McBeth, director of advocacy at the Texas Organization of Rural and Community Hospitals (TORCH), anticipated the state’s 79 CAHs would individually lose about $75,000 annually, $5.9 million altogether, under the cuts, which adds up to nearly $60 million over 10 years. When each hospital typically operates on a profit margin of 1 percent or less, “somebody is going to be laid off,” he said. And outright closures of hospitals, which usually employ between 80-100 people, would be a distinct possibility, he said.

Cindy Samuelson, vice president of the Kansas Hospital Association, estimated that the state’s 83 CAHs would collectively lose $3.8 million annually (or $46,200 each) and $44.3 million over 10 years. Although Obama’s budget is unclear on how the 10-mile radius for CAH designations would be measured, she expected only one hospital would lose its status.

“There will have to be cuts,” Samuelson said. After conversations with Kansas hospital executives, she said pay and hiring freezes would be an expected side effect. Hospitals would likely be forced to postpone purchasing updated medical equipment. More auxiliary services, such as mental health and preventive care, could be terminated, which could lead to higher costs in the future, Samuelson said. “It all adds up to hospitals fighting for survival,” she said.

In an election year, it remains to be seen how many, if any, of Obama’s proposals will be taken up by Congress. But the mere fact that these cuts are on the table is worrisome to rural health advocates. “Unless rural communities actively counter these proposals, they will come back,” NRHA’s Morgan said. If the proposals gain traction, hospitals would have to rely on their congressional representatives to respond to the needs of their constituents rather than the demand of budget trimming, they said.

“There is an overarching trend of not being sensitive from a public policy perspective to the dynamics of rural hospitals,” TORCH’s McBeth said. “They can’t balance the budget on the backs of rural hospitals.”

The map below, assembled from HRSA’s data, marks each CAH in the United States. Zoom in to see specific locations.

View Critical Access Hospitals in a full screen map

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