Rural hospitals feel the squeeze as Medicare extender funding in flux

As Congress considers waiting until January to fund expired Medicare programs, the continued uncertainty already roils rural hospitals.

The Medicare dependent hospital program and the low-volume adjustment are among the Medicare provisions that must be regularly renewed by Congress, but expired on Sept. 30, known as extenders. These are mandatory appropriations, but Congress has to agree to make them through legislation and the hope was that they would ride along with the Children's Health Insurance Program in the last spending bill of the year.

Medicare dependent hospitals — facilities where 60% of their patients are on Medicare — have to make up an additional 19% in revenue from other payers including Medicaid or private insurers to replace the lost extender funding, according to Maggie Elehwany of the National Rural Health Association.

This is happening as the rate of rural hospitals that operate at a loss has just increased to 44% — a 3% increase since last year, according to analysis by the Chartis Center for Rural Health.

Rural hospitals have to look for this extra money as they continue to see bad debt from high-deductible insurance claims and Medicaid climb by about 50% and as exchange carriers have gone scarce in rural areas. This makes the task impossible, Elehwany says.

"It's very devastating," Elehwany says of Congress' continued delay in funding the extenders. "The uncertainty for the hospitals is tremendous."

But now, according to hospital lobbyists who closely track the Capitol Hill spending discussions, these Medicare programs may be lost in the shuffle and get shifted into next year. Lawmakers differ on their projections as talks remain in flux ahead of final negotiations, but one thing is certain after this tumultuous year marked by bitterly divided intra- and inter-party debate: not even mandatory appropriations can be counted on when they're expected.

The uncertainty affects about 800 rural hospitals that qualify for the increased Medicare rate through the low-volume adjustment, Elehwany says. As many as 200 rural hospitals at one time were deemed Medicare-dependent, although that number has diminished with the mass closures in recent years.

The other end-of-year wild card is the fate of the disproportionate share hospital payment cuts — which affects a swathe of hospitals with a high percentage of poor patients. These have already taken effect and it's unclear when Capitol Hill lawmakers will reinstate their delay.

New York and Missouri have already withheld DSH payments from their hospitals.

DSH allotments are paid out quarterly, and in an ordinary year the federal government would make the first of four payments in January. This means most hospitals haven't felt the blow yet. But if Congress doesn't delay the cuts by Dec. 31 all states will likely see a reduced payment to start out the year, according to a lobbyist who represents a large share of DSH hospitals.