Rural hospitals are now Congress' healthcare cause celebre.
With lawmakers from rural states taking high-profile roles on key congressional committees, rural hospitals and other healthcare providers may see Medicare and Medicaid spending policies start to tilt their way. Indeed, in the $34 billion, five-year Medicare-spending-increase package enacted late last year, rural hospitals were the biggest beneficiaries of last-minute talks, with lawmakers doubling to $1.8 billion the amount of new Medicare disproportionate-share spending that rural hospitals will get between now and 2005.
Rural providers and their advocates in government and the private sector are feeling even more confident with the scheduled completion of a report this June from the Medicare Payment Advisory Commission. The report may, among several other proposals, recommend increasing payments for low-volume hospitals.
With the rise of Sens. Charles Grassley (R-Iowa) and Max Baucus (D-Mont.) to chairman and senior Democrat, respectively, of the Senate Finance Committee, and with Rep. Jim Nussle (R-Iowa) taking the helm of the House Budget Committee, the report's recommendations are expected to echo across Capitol Hill in coming years.
"The interest in this report has gone up dramatically," says Herb Kuhn, vice president of advocacy at the Premier hospital alliance. "Some people have seen this report as the standard for the next five years, as a benchmark for changes in payment policy."
Betsy Holahan, a spokeswoman for Sen. Pat Roberts (R-Kan.), a member of the Senate Rural Health Care Caucus, says the group welcomes the report.
Caucus members "will use the report to form their agenda," Holahan says. "A greater focus on the challenges rural healthcare providers face is definitely a positive step."
The report was ordered in a 1999 law that increased Medicare payments by an estimated $16.1 billion between 2000 and 2004. The law specified that MedPAC, which advises Congress, draft a report covering payment, quality and patient access at rural facilities.
Although much of MedPAC's heavy lifting on the rural report is to come in its March and April meetings, the idea of a "low-volume" adjustment has emerged as a key draft recommendation in the commission's early discussions on the report.
The low-volume adjustment would join an array of special add-ons to Medicare hospital inpatient payments, including those to pay for extremely high-cost patients and teaching programs.
The justification for the new adjustment is that small rural hospitals with lower volumes have higher per-case costs. Those hospitals' fixed costs for buildings and equipment are spread out over fewer patients, which means the hospitals lose money for treating Medicare beneficiaries.
Staff analysts reported at MedPAC's November 2000 meeting that the hospitals with the fewest discharges tend to have the highest per-case costs.
Federal healthcare programs might be able to take a sink-or-swim attitude about such payment imbalances with urban or suburban hospitals, but advocates for rural hospitals say allowing those facilities to go out of business is not an option because that could increase patients' travel time to hospitals.
"You can't beat efficiency into a system that has those characteristics," says Mary Wakefield, a MedPAC member who is a rural health expert at George Mason University's center for health policy, research and ethics in Fairfax, Va.
The finding that rural providers have higher per-case costs conflicts with another MedPAC conclusion. Last year, the commission recommended a doubling in the number of DRGs used to categorize patients for payment purposes, in part because the less-precise categories tend to result in overpayments to small, rural hospitals.
Wakefield says she supported the recommendation to improve payment precision by increasing the number of DRGs, but she adds that those changes need to take place at the same time as the low-volume adjustment.
One decision the commission must make is whether to retain many of the special payment categories that already exist for rural hospitals. For example, hospitals designated as Medicare-dependent, sole-community or critical-access facilities receive Medicare reimbursement on a reasonable-cost basis, rather than by the prospective payment rates paid to most hospitals.
One rural hospital representative says that payment method should be maintained but not the special designations.