"Because of sequester and because 'allowable costs' eliminate a lot of things that are necessary costs, nobody in the CAH world is making money on Medicare," he says.
"Why should you make money on the government? Well, I can understand that mindset, but really for a hospital to remain viable, they need to make in that 3%–4% range to replace equipment and update facilities and add services. If you are just breaking even you are going to fall behind."
The National Rural Health Association says that more than 40 rural hospitals have closed since 2010. Putnam says most CAHs already lose about 5%–7% on Medicare.
"If the president's budget is to reduce 101% of allowable to 100% you will see we will lose 6% to 8%," Putnam says. "We face an impending clear threat to an income stream that doesn't allow us to help make a smooth transition to that value piece. There is no plan you could put forward that says, 'this is where we will make it.'"
We should not fault the Obama administration or the OIG too greatly for trying to reduce inefficiencies in healthcare delivery. Any entity that takes taxpayer dollars should be required to account for how they spend it. Too often, however, the cost cuts we're seeing reflect only the bottom line for a particular service, examined in isolation.
Before anyone proposes additional cuts to critical access hospitals, it is not unreasonable to ask that they understand what these hospital do, the challenges they face, and why they were granted "critical access" designation in the first place.
John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.