Hospital Medicare Funds Get Bipartisan Push

When last we looked in on the status of federal funding for Medicare-dependent and low-volume rural hospitals, a pre-election Congress was distracted and dithering before the Oct. 1 deadline.

Now, more than two months later, we can report that a post-election lame duck Congress remains distracted and dithering with no budget compromise in sight as the federal government stumbles toward the so-called "fiscal cliff."

"The funding expired on Oct. 1 and we are very concerned about it. We are desperately hoping it will be included in whatever package, if there is a package, that is put together at the end of the year," says Maggie Elehwany, government affairs and policy vice president for the National Rural Health Association.

"We are having lobbying advocacy efforts, grassroots efforts on a daily basis hitting Capitol Hill. We think that these Medicare-dependent hospitals are starting to feel the brunt but obviously it's going to hit harder next year. On top of that we have sequestration hitting on Jan. 2. So, it is a very tough situation."

Even though the enhanced funding for the 212 Medicare-dependent hospitals and about 650 low-volume hospitals expired when the new federal budget year began on Oct. 1, hope remains.

A bipartisan group of 31 Senators sent a letter this month to the Senate Finance Committee Chairman Max Baucus, D-MT, and ranking member Orrin G. Hatch, R-UT, urging them to include "The Rural Hospital Access Act of 2012" (S. 2620) in the pending Medicare physician payment legislation. The bill, S. 2620, is cosponsored by 26 Senators from both parties.

"Rural hospitals deliver healthcare to more than 60 million Americans and are the health and economic backbone for communities across our nation," said the letter.

"These small, hardworking hospitals are often the sole source of comprehensive healthcare in their area, and are typically the largest employer, and economic engine, in the communities they serve. Yet, rural hospitals face a wide array of financial difficulties and operational challenges under the current Medicare Prospective Payment System."

MDH status, enacted by Congress in 1987, requires that hospitals be in a rural area, have no more than 100 beds, and show that Medicare patients represent at least 60% of their inpatient days or discharges.

A study done for NRHA found that in 2009 MDHs operated at a negative 4% margin on average. Without hospital-specific and transitional outpatient payments, the study estimated that those MDH margins would have fallen to negative 12.6%.

A Senate Finance Committee aide, speaking on background, told HealthLeaders Media that "Chairman Baucus is working with members of Congress on the full extenders package that includes the provisions in this letter. They're hopeful Congress will be able to reach an agreement on the package before the end of the year."

Such assurances may be of little use for the administrators at rural hospitals across the country who, unlike Congress, have to provide for a balanced budget. Unfortunately, in this gridlocked environment that may be about as much as we can expect.

So, let's look at some of the reasons for hope that the funding will be restored.

First and foremost, as the number of sponsors makes clear, protecting rural hospitals is a bipartisan effort because every Senator represents scores of rural hospitals. The 31 senators who signed the letter were led by Sens. Charles E. Schumer, D-NY and Chuck Grassley, R-IA. There are few topics in the lame duck Congress that a bipartisan group of more than 30 Senators could agree on.

Second, lawmakers made it clear in their letter that they understand that these Medicare-dependent and low-volume hospitals provide vital access to healthcare in remote areas.

They understand this because the many advocates for rural health, including the NRHA and the American Hospital Association have made it abundantly clear what would happen if these hospitals were allowed to fail.

In addition, lawmakers acknowledge that most of these hospitals are the largest employers in their areas. If they shutter communities lose healthcare access and healthcare jobs and the economic effect of those lost jobs reverberates in the community.

A lot of people are hurt and somebody in elected office will be held accountable. In other words, there are direct and linkable consequences for members of Congress who fail to protect rural hospitals.

Third, for Medicare-dependent hospitals, the amount needed to fund their status is about $100 million over 10 years. By Congressional standards, that's pocket change.

The cost is a bit pricier for low-volume hospitals, about $450 million over 10 years, according to some estimates. Elehwany says that and other issues could make securing funding for low-volume hospitals particularly tricky.

"The low-volume hospitals were expanded under the healthcare reform bill, so they sort of have those thumbprints on them," she says. "It went from applying to just 19 hospitals across the country to about 650 or so. Some folks say we overshot the target and that maybe it applies to too many hospitals now. There are some on Capitol Hill trying to look for a happy compromise between that 19 and 650 figure but we don't know what that is going to be."

With so much at stake, Elehwany is urging local hospital leaders to contact their members of Congress to voice their support for S. 2620.   

"We are telling them to touch base with us weekly. We have grassroots calls target lists for the House and Senate every Wednesday at noon," she says. "We are doing state-by-state outreach making sure hospitals know what is happening in this lame duck session and what is at stake."

Elehwany says most hospital administrators are so busy providing care that they don't realize all of the federal provisions and funding sources that are at risk. "For the Medicare-dependent hospital it can mean about a 12.6% average loss to a facility," she says.

"Because they are depending upon Medicare for at least 60% and in some cases 80% of their revenues, they would have to make up at least 20% from their private payer patients. That is not happening, so we think some of these hospitals are going to close if this is lost."