GOP health bill could spell doom for rural providers

Roger Knak has made some especially tough decisions in the past few years.

Knak, CEO of Fairview Regional Medical Center in northwest Oklahoma, had to lay off one of the center's three staff physicians. The rest of the employees haven't gotten a raise in three years.

But the past month has been especially hard. As Senate GOP lawmakers worked toward passing the Better Care Reconciliation Act, which would have severely cut back Medicaid and replaced the Affordable Care Act, Fairview's leadership was preparing for what they feared to be the inevitable—a loss of revenue thanks to the cuts to federal healthcare programs.

Consequently, Fairview Regional started slashing its non-essential services, which could put its Medicare eligibility at risk. Fairview, a 25-bed critical-access rural hospital that serves a patient population of roughly 9,000, is just one the many rural hospitals in Oklahoma and across the country that has been operating on slim margins for some time.

"I don't know what the next cut would be without taking a drastic action to revisit us as being licensed as a medical-surgical hospital and changing our licensing to some other form," Knak said.

The Senate GOP bill would stop Medicaid expansion and cut $700 billion from the program by 2026. Medicaid covers nearly one-quarter of non-elderly adults, including 52 million Americans who live in rural areas. Thousands of previously uninsured Americans received coverage thanks to the ACA's Medicaid expansion, which made adults earning up to 138% of the federal poverty level eligible. That move created a new revenue stream for rural hospitals in states that expanded the program. Rural residents are more likely to be uninsured.

To help pay for the expansion, policymakers settled on Medicare reimbursement cuts as the primary source, said Andy Fosmire, vice president of rural health for the Oklahoma Hospital Association. But Oklahoma never expanded Medicaid after the Supreme Court ruled the ACA couldn't require states to do so, yet hospitals there are still caring for uninsured patients while facing cuts in Medicare reimbursement. In Oklahoma, where four rural hospitals have closed since 2010, 53 of the 65 facilities in rural areas of the state operate with a negative margin every month, Fosmire said. Thirty-seven of them operate with less than 14 days of operating cash on hand.

Nationally, 41% of rural hospitals are already operating at a loss, according to a 2016 study by the Chartis Center for Rural Health. Since 2010, nearly 80 rural hospitals have closed, with the majority occurring within the 19 states that did not expand Medicaid. Another 670 rural providers are at risk of closing, most of which are in non-expansion states that President Donald Trump won in last year's presidential election.

Other federal programs were reduced as a result of the expected increase in Medicaid coverage, with Medicare disproportionate-share hospital payments being reduced by more than $1.25 billion in 2015 and by another $1.2 billion last year.

"I've been laying off employees over the last 12 months," said David Keith, CEO of McAlester (Okla.) Regional Medical Center, a 171-bed rural hospital. McAlester serves a population of about 200,000 in the southeastern part of the state. For some time now, Keith hasn't been replacing staffers who quit or were fired.

If the current GOP plan is passed, Keith estimates he would lose another 50 of his 650 staffers and 30% of his revenue. A recent Commonwealth Fund study projected the Better Care Reconciliation Act could lead to 919,000 fewer healthcare jobs by the year 2026.

That could leave more rural hospitals without essential services and jobs in the community.

McAlester is the only local provider with urology and interventional cardiology lines in its area, and it receives referrals from many surrounding smaller, critical-access hospitals. Still, Keith is contemplating cutting those lines to make sure it can still provide primary and emergency care.

"If we don't have those tertiary services, those hospitals are going to have to send their patients 3½ hours away to the big urban centers for their specialty services," Keith said.

Rural hospitals also may feel the squeeze from proposed changes to the federal 340B drug discount program, which could cut another lifeline for some hospitals.

The ACA allowed more rural and critical-access hospitals to save about $10,000 a month in drug costs during a period when prescription drug cost budgets have skyrocketed, according to a 2015 Marshall University study.

But critics of the 340B program say it's mismanaged and prone to fraud and waste. Rep. Greg Walden (R-Ore.), chair of the House Energy and Commerce Committee, wrote a letter to the head of the Health Resources and Services Administration in June saying that participating hospitals don't share their savings with uninsured and underinsured patients who end up paying full price for their prescriptions.

Meanwhile, the White House recently seems to have abandoned a draft executive order leaked last month that would have reduced the number of patients and providers eligible to participate in the program. The CMS this month proposed cutting hospital payments for 340B to 22.5% less than the average sales price for drugs instead of the current rate 6% above the average sales price.

Though HHS Secretary Dr. Tom Price said the move was part of Trump's promise to address rising drug prices, the change might not influence drug companies to drop their prices. Instead, it would just hit hospital budgets, said Brad Gibbens, deputy director of the Center for Rural Health at the University of North Dakota School of Medicine and Health Sciences. The loss of even one provider in the most rural areas can significantly widen gaps in health coverage across several communities because there are already a limited number of health professionals serving those areas.

While only 20% of the population lives in rural areas, that group represents more than half of the population for areas that lack basic medical care, according to the U.S. Health Resources and Services Administration. Rural areas make up 58% of all dental care shortage areas and 53% of all mental health shortage areas throughout the country.

"When you look at the Senate bill, you essentially take away Medicaid expansion and you put access to care at risk," Gibbens said.

He estimated that Medicaid made up around 10% of the total revenue of rural hospitals in North Dakota. Among 54% of the state's rural hospitals now have positive financial margins since Medicaid expansion compared with 46% of providers that still have negative balances. Gibbens said providers most at risk of closing were those located in counties with populations of just a few thousand residents where the only other healthcare provider is hours away.

"If we lose Medicaid expansion, that will put them even more at risk," Gibbens said.