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Looming Sequestration Cuts Put Rural Providers on Edge

John Commins, for HealthLeaders Media, February 20, 2013

"Our whole message to Capitol Hill is that a 2% across-the-board cut might sound like a way of providing equitable pain, but it is actually disproportionately harmful to the rural safety net. We are trying to let people know that there are serious ramifications to sequestration in rural America and a 2% cut to a small rural hospital can mean services being cut to patients and it could mean job losses. When you are operating at that small margin, and 40% of rural facilities already operate at a loss, this 2% cut on top of this other uncertainty is incredibly challenging."

Estimates provided to NRHA by iVantage Health Analytics show that urban hospitals would eat about $2.4 billion of the $2.9 billion in Medicare cuts this year, while rural hospitals would take a $482.6 million hit.

Urban hospitals will lose more overall dollars, according to iVantage. Rural providers, however, would be disproportionately affected because of their thinner operating margins, negligible economies of scale, and a reliance on Medicare funding to provide care for an older, sicker, poorer population.

"Rural hospitals probably don't have burn centers, or oncology, or Level 3 trauma centers,  but if you trim the outliers of care, these rural hospitals have to do the same blocking and tackling that urban hospitals have to do every day," iVantage Executive Vice President John R. Morrow says.

"You are hitting the organizations that are required to offer a breadth of services that it is already difficult to provide in the rural setting because of the lack of economies of scale."

"A lot of times," Morrow says, "you get lost in this idea that it is the big academic medical centers or the tertiary care centers that matter the most. It depends on where you live. If you are one of the 80 million Americans who lives in a rural area you don't really care how many beds they have as long as they have one for you at the time you need it."

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2 comments on "Looming Sequestration Cuts Put Rural Providers on Edge"


Mark Vande Kerkhoff (2/20/2013 at 4:46 PM)
The article's focus is on Congress, but does not give credit to the origins of the sequestration idea. I believe it is important that it also be reported: "Ultimately, the solution came from White House National Economic Council Director Gene Sperling, who, on July 12, 2011, proposed a compulsory trigger that would go into effect if another agreement was not made on tax increases and/or budget cuts equal to or greater than the the debt ceiling increase by a future date. The intent was to secure the commitment of both sides to future negotiation by means of an enforcement mechanism that would be unpalatable to Republicans and Democrats alike. President Obama agreed to the plan. House Speaker John Boehner expressed reservations, but also agreed." Everyone wants to blame Congress and not the bill's ultimate author.

roger (2/20/2013 at 3:36 PM)
So, where's the President's plan? All he has done so far is complain about it. He promised the sequester wouldn't happen even after Democrats pushed for it in the Congressional negotiations and he signed it.