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Rapid City Regional Health Losing $1 Million a Week

Analysis  |  By Jack O'Brien  
   June 14, 2018

The South Dakota safety net system is pursuing numerous financial strategies to counteract dwindling IHS reimbursements and a difficult payer mix.   

Due to dismal federal reimbursement rates and a large government-based healthcare population, Rapid City Regional Health (RCRH) is losing about $1 million per week, according to its leadership.

The rise in uncompensated care largely stems from RCRH's payer mix, which is 68% government-based, including a large portion reliant on Indian Health Services (IHS).

While other federal healthcare programs have decent reimbursement rates, the Department of Veterans Affairs (VA) reimburses 40%, Medicare reimburses 35%, and Medicaid reimburses 30%, IHS only reimburses around 26%, according to Mike Diedrich, vice president of governmental relations for RCRH.

Diedrich said IHS has, at times, reimbursed RCRH for only 1% of costs over 18 months. This creates a difficult situation for the system where IHS refers a patient to RCRH for service but does not guarantee payment due to uncertainties in their purchased/referred care budget.

Diedrich told HealthLeaders Media he first noticed the financial issues surrounding uncompensated care in 2015, saying they only worsened from there. Last year, RCRH had a net operating revenue of $713 million but also operated on a $3 million deficit. Diedrich said RCRH has been forced to stretch its scarce resources to provide for its coverage area in southwestern South Dakota.

"The big fear is that as a non-profit health system, we're really the stewards of the community asset of healthcare and we have to operate it like a business," Diedrich said. "So when we have issues like IHS, where you may get paid 1% of costs, no business could survive on that level of payment. We need to find ways to collaborate and make it most efficient."

Fixes for the problem

Diedrich identified three potential solutions to improve the system's current financial situation:

  1. More favorable payer mix.

  2. More commercial insurers in the market.

  3. IHS reimbursements at Medicare-levels for services provided.

What they're doing

Diedrich said RCRH is working to stem the tide of difficult finances in the most cost-effective ways, namely by improving its home health services while also bolstering telemedicine.

  • Supplying more care navigators to help with treatment and improve patient outcomes.

  • Deploying kiosks for telemedicine care at access points for patients, including at grocery stores, nursing homes, and rodeo grounds.

  • However, any telemedicine improvements for consumers and providers are dependent on continued improvement of broadband in South Dakota.

  • Addressing VA reimbursement rates disbursed to RCRH but suffer from high 90 days past due levels, according to Diedrich.

  • This has improved recently due to advocacy from the state's congressional delegation, resulting in a slight decline of past due levels.

Potential Native American Medicaid work requirements

Diedrich said the Trump administration's decision to deny waivers for Medicaid work requirements applying to Native American populations could have a negative impact due to socio-economic factors in South Dakota.

  • The state has a low unemployment rate, which means employers seek skilled workers for limited job opportunities.

  • RCRH services nearly 23,000 Native Americans who are eligible for service though IHS and were previously treated at Sioux San Hospital, the local IHS hospital.

  • However, Sioux San has closed its ER and eliminated its inpatient capacity, essentially operating as a medical clinic.

  • Diedrich said there are another 27,000 Native Americans living in Pine Ridge, South Dakota, who occasionally receive treatment at RCRH.

  • If the work requirements went into effect for the Native population, Diedrich predicts an increase in uncompensated care and reduced access to care.

  • However, Diedrich also said internal estimates point to only 1,500-2,000 Medicaid recipients excluded from care if the policy went into effect.

Additional issues for similar rural systems

  • The proposed and enacted changes to the 340B Drug Pricing Program is another challenge on top of other healthcare issues for RCRH.

  • Transportation challenges for patients receiving care and emergency services, Diedrich says the system wants to maintain local care options.  

  • Because patients come in with such a wide range of issues, it strains the ER and the system has had to divert care to other parts of the state or even out of the state. Removes local care elements

  • Changes to site-neutral payments, which could cause a reduction in reimbursement levels, reduce the resources available to RCRH, and access points for patients.

Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.

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