Low-volume rural hospitals that are not the sole providers in their communities should not be eligible for special payment adjustments from Medicare, the head of the Medicare Payment Advisory Committee testified Wednesday.
The testimony from MedPAC Executive Director Mark Miller was delivered during a hearing (PDF) on a number of hospital payment issues in front of the House Ways and Means Committee's Health Subcommittee.
It reopens the debate about which hospitals should receive help from the federal government in order to keep their doors open—and whether certain facilities would be better served by finding another lifeline, such as a larger partner.
The CMS in recent years has made a number of Medicare payment adjustments to help rural hospitals improve their operating margins. Those changes have worked. The 860 rural hospitals that are paid on the inpatient prospective payment system have higher Medicare margins than their urban counterparts, Miller said, according to documents posted on the committee's website.
But not all of these facilities should qualify for the same assistance; special adjustments should be reserved for isolated hospitals, he added. Nine percent of hospitals designated as sole community providers, as well as 16% of designated critical-access hospitals, are actually located within 15 miles of another hospital, he said.
“These providers are not necessary for access, and it may be inappropriate to give a low-volume adjustment to two competing low-volume hospitals that are five or 10 miles from each other,” Miller said. “Such a policy may also encourage two nearby hospitals to merge, increasing patient volumes.”
Moreover, patient volume should be measured by total volume, not just Medicare volume, he testified.
Miller's testimony is not the first time policymakers have floated the idea of changing the definition of critical-access hospitals. A 2013 report from HHS' Office of Inspector General concluded that the “vast majority” of critical-access hospitals (PDF) do not meet the location requirement of being at least a 35-mile drive from another hospital or 15 miles when the terrain is mountainous or primary roads are not available.
The CMS would have saved $449 million in 2011 if critical-access hospitals in close proximity to other facilities were decertified from receiving special payments, the OIG report concluded.
The National Rural Health Association did not provide comment by deadline. But on its website, the group said Miller received "many critical questions" from members of the House subcommittee on why dozens of rural hospitals have closed and another 283 are on the brink of closure.
Another hearing will be held next Tuesday to discuss rural health disparities.
Rural hospital leaders have argued that a critical-access designation can be the difference between staying afloat and being in the red. Thirty-seven rural hospitals have shut their doors since 2013, according to the North Carolina Rural Health Research Program at the University of North Carolina at Chapel Hill.
