OIG Again Calls for Review of Critical Access Hospital Status

For the second time in just over a year, federal watchdogs are calling for a review of critical access criteria for hundreds of small rural hospitals across the nation. CAH proponents cannot wish the issue away.

For the second time in just over a year, federal watchdogs are calling for a review of critical access criteria for hundreds of small rural hospitals across the nation.

In August 2013, a report from the Office of the Inspector General for the Department of Health and Human Services recommended that Congress allow the Centers for Medicare & Medicaid Services to strip critical access designation from the nearly 1,000 hospitals with "permanent exemption" status under a state "necessary provider" designation.

The report triggered alarm bells from rural healthcare advocates. Alan Morgan, CEO of the National Rural Health Association, said at the time that "the practical effect is that it would kill rural health. I know that is a strong statement, but OIG viewed this with blinders on, not looking at how healthcare is delivered in rural America."

After the hue and cry from rural providers quieted, we didn't heard much more about that OIG report. This month, however, OIG quietly refloated the idea in a related report detailing the higher costs that Medicare beneficiaries pay for outpatient services at critical access hospitals, when compared with the same services at acute care hospitals.

OIG said CMS could mitigate the "potential increase in Medicare expenditures by ensuring that only those CAHs that meet all participation requirements continue to receive cost-based reimbursements."

In other words, only critical access hospitals that meet location requirements set out in the original federal legislation that created the designation could continue to receive cost-based reimbursements.

Unsurprisingly, rural providers still haven't warmed to the idea.

MaryEllen Pratt is CEO of St. James Parish Hospital, a 25-bed critical access hospital in Lutcher, LA, created under the necessary provider designation that serves 21,000 people in rural southeastern Louisiana.

For Pratt, a 35-mile yardstick recommended by OIG is no way to measure critical access status. "From where I am in South Louisiana, it seems pretty arbitrary to use a distance as a determinant of where access to care is necessary," says Pratt, who is also the chair-elect for the Governing Council of the Small or Rural Hospitals section of the American Hospital Association.

"If you've been to Louisiana, you know we have large areas of swampland making it very difficult to traverse. It doesn't matter that there might be a hospital within 15-20 miles through a swamp. If you don't have a boat to get through it you can't access it," she says.

"Some barriers are just related to poverty and having a vehicle to get from one place to another. Thirty-five miles is a long way to go when you don't have transportation."

Pratt also notes that CMS doesn't make distinctions when talking about nearby hospitals.

"When they say 35 miles from another hospital, they're including anything that is a hospital, which could be a psychiatric-only facility or a rehab hospital. If you are having a heart attack and you need to go to the nearest hospital, I'm not thinking a psych hospital is going to help you out."

Pratt says the federal government should trusts that states knew what they were doing when they gave certain hospitals critical access status.

"The states were prudent with the way they designed things individually for each state. They did what they thought made sense to assure that their residents and Medicare beneficiaries had access to care," she says.

Priya Bathija, AHA's senior associate director, policy, says the AHA wants the federal government to address the higher copays for Medicare beneficiaries that were identified in the OIG report, but not in a way that would harm the critical access hospitals providing the care. Limiting the higher reimbursements only to hospitals that meet the mileage requirement is "simply an attempt to cut payments to hospitals providing essential health care services to seniors in rural communities."

"We are definitely alarmed by the fact that they've gone back to the same recommendation they made in August 2013," Bathija says. "We are doing our best to educate not only policymakers but Congressional staff about the benefits that critical access hospitals are providing for communities and the continued need for all the CAHs that have been designated through the program, either through the mileage requirement or because they were granted necessary provider status prior to 2006."

Here's my take on all of this.

Don't fault OIG for recommending a review of critical access status. It's their job as the watchdogs of taxpayer money in a vast and costly federal bureaucracy.

At some point CMS will attempt some sort of review of CAHs. Before they do, they need a transparent and exhaustive review of the criteria they will use to determine which hospitals get to keep their critical access status, giving providers ample time for input, review, and feedback. A 35-mile yardstick should not by itself determine whether some hospitals can continue to serve their communities or must close.

Any review of critical access criteria should wait until the Medicaid expansion takes hold in more states. Resistance to the expansion, which was always based on politics and spite, is rapidly crumbling as the benefits are demonstrated by the states that were smart enough to take the money.

On the provider side, even the staunchest advocate for critical access hospitals would not claim that every hospital under that status should be immune from periodic review. If I were playing with house money, I'd bet that more than a few hospitals with questionable criteria jumped on the critical access gravy train when they had a chance. I don't blame them. There's money in that status.

The bottom line is that this issue will not go away. If you're running a critical access hospital, you should expect to defend your status. Are you ready?