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Critical Times for Small and Rural Hospitals

Philip Betbeze, for HealthLeaders Media, July 8, 2014

For healthcare facilities that serve an important niche, such as critical access hospitals, a variety of pressures are changing the way they do business.

This article appears in the June 2014 issue of HealthLeaders magazine.

Although critical access hospitals are protected from many of the disruptions of the Patient Protection and Affordable Care Act, their fates will differ greatly depending on their individual circumstances. Geography, the right mix of services, affiliation with larger partners, and, most critically, cuts of preferential reimbursements that critical access hospitals currently receive but that are far from guaranteed in the future—all of these play a role.

Thanks to the decision of many states not to expand Medicaid, whether a small rural hospital or critical access hospital survives may depend on a host of variables over which leaders have little or no control. For instance, many organizations stand to benefit as more of the previously uninsured acquire health insurance, unless, of course, your state decided to not expand Medicaid.

But leaders can have only very limited influence on such circumstances. Where they can make a difference: strategy and vision. Whether they focus their strategic efforts in joining regional partnerships to make investments in EMRs, ACOs, and other care coordination models, or they find a way to offer services unique to their area or region could mean the difference between life and death.

Run them like a business

One lifeline many rural hospitals and health systems have utilized to stay afloat in recent years, so-called cost-plus reimbursement from CMS, is vulnerable, too. Most experts, including the chief administrators of these organizations, expect to eventually have to live under a value-based purchasing regime of some kind, even if it does not represent the majority of their reimbursement mix. President Obama's original budget proposal this year, even though it will not pass as is, cuts critical access Medicare reimbursement from 101% of cost to 100%.

"We've got to make sure we can run them as a business," says Charles Hart, MD, MS, CEO of Regional Health Inc., of rural and critical access hospitals.

Regional Health is a nonprofit owner of five hospitals, based in Rapid City, South Dakota. It manages, owns, or leases six critical access hospitals. It also has 40 other sites of care incorporated into the system, and its flagship, Rapid City Regional Hospital, is a 329-bed Level II trauma center. Despite its diversification, what happens to rural and critical access hospitals has deep implications for Regional Care's future.

Outside of reimbursement, Hart says the continued development of telemedicine and other remote healthcare modalities will put significant pressure on such hospitals.

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