Rural hospital CEOs plead for better reimbursement to avert cuts

Rural hospitals are weighing which services to cut if lawmakers do not boost Medicare and Medicaid reimbursement and streamline pay processes, CEOs said.

Half of rural hospitals were operating in the red last year, up from 43% in 2022, according to a February report from the consulting firm Chartis Center for Rural Health. As a result, a growing number of providers in rural communities are slashing obstetric and chemotherapy services, among others, the report found.

Related: One year later, how CMS' rural pay model has helped providers

Astria Toppenish Hospital in Washington state closed its maternity ward early last year. Children's Hospital Colorado is considering closing its cancer treatment center, the Aurora-based facility said in May. Mammoth Hospital in Northern California also ceased obstetrics services last year.

Here is what three rural hospital CEOs said about the financial pressures facing their communities. Their comments have been edited for clarity and length.

Darryl Wolfe, CEO of Olympic Medical Center in Port Angeles, Washington

The demographics of our service area are heavily weighted toward Medicare and Medicaid. When 85% of our business pays way less than our costs, it is not sustainable. You can only do so much without closing services, which we have not had to do. But if we don't see some sort of relief in the next few months, that’s where we are going to end up.

We deliver about 400 babies a year. A lot of facilities have turned there to lower costs. We don't have that option. We are the only provider [of maternity services] locally.

We’ve strengthened partnerships with other provider groups outside of our area. We've reduced our reliance on contract labor by over half as we focus on retention. We've frozen hiring of nonclinical positions. Through attrition, we’re down almost 100 [full-time equivalents] between 2022 and 2023. But we need to think of a new model.

For facilities like us, there are two options. One option is you somehow figure out a way to go to 25 beds to get cost-based reimbursement, which for a facility our size is a disaster. The other option is you look for a more meaningful partner. But then you're no longer a community-owned and operated hospital, you become part of a larger system. There are models on the books for facilities that are bigger, like the community rural hospital demonstration project, which we have talked to our legislators about.

Siri Nelson, CEO of Marshall Medical Center in Placerville, California

More than 80% of our net revenue comes from either Medicare or Medicaid, which do not cover the cost of care. If the federal government could stop cutting our Medicare reimbursement, that would be great.

Our cost for electricity service has more than doubled in a year. The [hospital market basket updates] do not even come close to inflation. 340B, the Medi-Cal hospital fee program, specialty pharmacy [reimbursement]—if any of those supplemental payment programs are in danger, we are going to have to have a serious conversation about reducing services.

Last year alone, Marshall wrote off more than $5 million in charges for surgical care that we did not get prior authorization for in time. We can’t keep doing that. Payer accountability is a huge issue for us. All we want is when we sign a contract, just pay us based on the contract we signed. We signed a contract with a big payer, and it has been over two years — we are still not getting paid correctly for all of our physician fees.

Sammie Cribbs Roberson, president and CEO of North Arkansas Regional Medical Center in Harrison

Post-pandemic inflation, especially when most of your reimbursement doesn’t cover the cost of care, is exponentially magnified in rural markets because you have lower volumes.

Arkansas in particular has some challenges in maternal care. Healthcare agencies are making tough decisions to discontinue those services due to lack of reimbursement and inadequate funding from payers. In 2023, the state lost 5% of our delivering hospitals. So 60% of Arkansas hospitals do not deliver babies.

Policies to ensure that Medicare Advantage plans are equitable and the reimbursement is appropriate, and regulatory changes to reduce the administrative burden on rural hospitals from prior authorizations, peer-to-peer review, denial management and claims processing, would be key.

We’re looking at a lot of efficiencies in the way we purchase supplies, productivity, volume growth, contract management and service lines. We’re looking at grant funding and how we spend those dollars to optimize services. We made a difficult decision to move a [primary care] provider out of an independent clinic into a centralized clinic. We made the decision, based on volume, to close one of our urgent care locations.