Jeff Meyer, chief executive officer of Osceola (Wis.) Medical Center, had planned on building a replacement facility for his roughly 60-year-old hospital about a mile from its current location, but a proposed CMS rule would stymie that relocation.
The CMS proposal, published in the May 4 Federal Register, has drawn a harsh reaction from the American Hospital Association because it could mean that 20-bed Osceola and many other rural hospitals would lose their critical-access designation if they build a replacement more than 250 yards from their current spot.
"They (the CMS) are drawing a firm line and not being realistic," said Danielle Lloyd, an AHA senior associate director for policy. The AHA contends many rural hospitals are in aging facilities and need to move more than 250 yards because they are landlocked. Also, remodeling existing buildings is likely to disrupt operations and cost more than starting fresh. The AHA plans to send a letter to the CMS before the public comment period ends June 24.
The federal critical-access program allows rural hospitals to receive CMS reimbursements at 101% of their cost rather than under the prospective payment system, which tends to hurt low-volume hospitals.
Rural hospitals are eligible for the program if they have 25 or fewer acute-care beds, have an average length of stay of 96 hours or less, and are located 35 miles from another hospital. A hospital can also be eligible if it is 15 miles from another hospital, but located in a mountainous area or one with only secondary roads. Hospitals that don't meet the mileage requirement can also be granted a necessary-provider provision-essentially a state waiver-that allows them to enter the critical-access program.
After Dec. 31, however, states will no longer be able to grant the waivers, and the proposed CMS rule states that if necessary providers in the program move 250 yards or more from their existing location, they'll lose their status and will revert to the prospective payment system. The only way to keep the necessary-provider designation is if a hospital can demonstrate that its construction plans began before Dec. 8, 2003, according to the proposed rule.
Ruben King-Shaw Jr., a former deputy administrator with the CMS who is now a partner with Pine Creek Healthcare Capital, suggested that the CMS consider pushing back the deadline or eliminating it if it turns out many hospitals' development plans would be affected. He said, though, that he doesn't think the CMS is trying to hurt rural hospitals because the agency realizes what a vital healthcare role they play. Shaw, whose firm targets rural hospitals' real estate ventures, added that it would be a mistake if the rule were put in place as a cost-saving mechanism because critical-access hospitals account for only 1% of the Medicare budget, according to the AHA.
Woodrow Hathaway, CEO of 25-bed Chatham Hospital in Siler City N.C., said his critical-access hospital received permission from the CMS to build a $26 million replacement about three miles from its current campus in February. After hearing about the proposed rule, Hathaway contacted the CMS and the agency said his hospital would not be in danger of losing its designation because CMS approved the project before the proposal was published.
Other provisions-such as one that states the hospitals must serve at least 75% of the same population that they served before a move-haven't caused as much backlash. That provision was likely put in place to prevent critical-access hospitals from taking market share from PPS hospitals, said Bill Bruce, president and CEO of Hillsboro, Wis.-based St. Joseph's Community Health Services, which would like to build a replacement. "It would be ethically incorrect to move 60 miles and be competing against a PPS hospital," he said.
Bruce can't build next to his 15-bed hospital because there's a lake on one side and a highway on the other. Meyer's 25-bed hospital is in a similar situation, with a river on one side and a downtown area on the other.
"It's pretty," Meyer said. "There's just no room to expand."