OIG Recommendation 'Would Kill Rural Health'

Alan Morgan, CEO of the National Rural Health Association, is blasting a federal report that recommends stripping critical access designation from any hospital that was brought into the program under a state "necessary provider" designation. "The practical effect is that it would kill rural health," Morgan says.

Hundreds of small hospitals across the nation could lose their critical access status and the extra funding that goes with it if the federal government acts on a series of recommendations made public this week.

The Department of Health and Human Services' Office of the Inspector General has recommended that Congress allow the Centers for Medicare & Medicaid Services to strip critical access designation from any hospital that was brought into the program under a state "necessary provider" designation.

Brian Jordan, a program analyst for OIG's Office of Evaluation and Inspections in Chicago, said in a podcast produced by his office that nearly 1,000 of the approximately 1,300 critical-access hospitals in 45 states gained the "permanent exemption" under the necessary provider designation. Congress closed the loophole in 2006, but grandfathered in the hospitals.

Without that designation, Jordan said about 800 hospitals would not have met location requirements in 2011 because they were too close to another hospital.

"We were concerned that some of these hospitals may not be providing critical access to rural patients because they were located very close to other hospitals that could provide similar services," Jordan said. More than 300 critical access hospitals were less than 15 miles from another hospital in a 2011 review.

Jordan said that Medicare could save $1.3 million for every critical access hospital that is stripped of its designation, and that "de-designating" critical access hospitals that are less than 15 miles from the nearest hospital would save Medicare $449 million a year.

"Remember, necessary provider hospitals never had to meet the distance requirement," he said. "And, until March of 2013, CMS never went back to check that other critical access hospitals still met the location requirements. With new hospitals being built and towns expanding, some of these hospitals might no longer qualify for critical access hospital status. Since we pay these hospitals more to provide this critical access to rural patients, we wanted to know if these increased payments are tax dollars well spent."

Alan Morgan, CEO of the National Rural Health Association, blasted the report.

"The practical effect is that it would kill rural health," Morgan says. "I know that is a strong statement, but OIG viewed this with blinders on, not looking at how healthcare is delivered in rural America. We aren't talking about just closing 800 rural hospitals potentially. We are also talking about closing the EMS services in many of those communities and removing access to mental healthcare in many communities. Most of these hospitals have provider-based rural health clinics and a lot of these hospitals have nursing home beds in effect."

"OIG is viewing this strictly [as] a narrow payment issue and not recognizing what this will do to the rural healthcare safety net," he says. "It's about access and this report is only about finances and not access. It is a spending and finance issue and we seem to have forgotten the rationale for the creation of this program, which was an access issue."

Jordan said OIG is merely recommending that "CMS periodically check if each critical access hospital still provides services that rural beneficiaries can't easily get somewhere else, and therefore deserves the increased financial support from Medicare and beneficiaries. We also recommend that necessary providers be required to meet the distance requirement."

If CMS follows the OIG recommendations, Jordan believes it would not necessarily result in nearly two-thirds of critical access hospitals losing their designation.

"These hospitals are costly for Medicare and beneficiaries, but we have to balance cost concerns with hospital access for rural beneficiaries," Jordan said on the podcast. "With that balance in mind, we recommend that CMS create alternative location related requirements for critical access hospitals that don't meet the distance or rural requirements. For example, CMS could allow critical access hospitals to keep their designations—if they serve communities with high poverty rates."

Morgan says the nation's hospitals are already reeling from the effects of the 2% sequestration cuts and that removing the critical access designation, which theoretically allows hospitals to collect 101% of Medicare costs, "effectively closes them."

"The first thing we are going to hear argued back at us is that OIG isn't recommending that they shut the doors, but they are," Morgan says. "When they're talking about removing that designation from facilities where a large percentage of them are operating in the red already, that will effectively close them. So it's not an honest argument saying that 'we are not recommending closing 800 rural hospitals.'"