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'Critical access' designation may be in danger for hospitals in your area Date: 11/07/13

In rural areas, the federal Centers for Medicare & Medicaid Services designates more than 1,300 hospitals as being “critical access hospitals.” So designated, these facilities get a bit more in reimbursements to ensure that Americans outside of cities and suburbs can get the care they need without having to travel too far. In August, a report from the Office of Inspector General of the federal Department of Health and Human Services recommended that 80 percent of these facilities be decertified.

When he learned of the report, David Wahlberg, a health/medicine reporter for the Wisconsin State Journal, interviewed administrators at critical access hospitals in Wisconsin and found that the administrators believed closing these hospitals would have a detrimental effect on care for Medicare patients. The issue of payment for these facilities is important in every state, but particularly in Wisconsin, which has 58 critical access hospitals, more than most states. Wahlberg also found that, while critical access hospitals will not be decertified soon, they could be in the future.

If any of these facilities are decertified, he writes, reporters are likely to find that hospital administrators will complain that they need the extra funds (despite some having healthy operating margins) and that their patients are older and sicker than those in other hospitals. Health care journalists also will hear that the local economies need these facilities in part because they are among the largest employers in small towns.

One more point: If the United States has more hospital beds than it needs, as Modern Healthcare has reported, then health care journalists are likely to hear these same issues (our patients are older and sicker and our local economy needs this facility) about hospitals in rural and suburban areas and each issue is worth exploring in depth.

David Wahlberg
David Wahlberg

By David Wahlberg

All but five states have critical access hospitals, which receive additional payments from Medicare to sustain services for rural Americans.

But nearly two-thirds of the country’s 1,329 critical access hospitals are not at least 35 miles from another hospital or 15 miles away on mountainous or secondary roads, the distances required for a critical access hospital to receive these payments under the Balanced Budget Act of 1997.

Those hospitals were granted critical access status through state exemptions, which were allowed until 2006. Now, the hospitals could lose the status along with the additional payments (101 percent of Medicare) under a recommendation from the federal Department of Health and Human Services’ Office of the Inspector General.

The potential effect of this proposal is worth examining in almost any health care reporter’s geographic area.

When an OIG report in August recommended stripping critical access status from the exempt hospitals, I took a few basic steps to look at what this could mean in Wisconsin. The state has 58 critical access hospitals, more than all but five states: Kansas, Iowa, Texas, Minnesota and Nebraska. At least 42 of the Wisconsin hospitals could lose the status under the OIG proposal.

It’s no surprise that officials such as Steve Brenton, president of the Wisconsin Hospital Association, oppose the OIG proposal. “These recommendations would decimate 20 years of health care stability and access to care for Medicare beneficiaries in rural communities across America,” Brenton said in a statement responding to the OIG report.

Some critical access hospitals lose money or struggle to stay in the black. But from work I did for a 2010 series, “Out of reach: The rural health care gap,” I knew some of the hospitals have healthy operating margins. Since critical access status costs Medicare and its beneficiaries $1.3 million per hospital per year, according to the OIG report, it seemed worth asking why hospitals that generate significant amounts of additional revenue need these payments.

My first step was to look at hospital financial reports, which the Wisconsin Hospital Association is required under state law to make public. (You can also request such reports from hospitals or look up their IRS Form 990s if they are nonprofit facilities).

It’s best to look at more than one year when assessing individual hospitals’ operating margins and I found two critical access hospitals in my coverage area that lost money during a recent three-year period. I found three others that made more than the national average of 5.1 percent for all hospitals during the same period. I calculated that figure from information on the American Hospital Association’s website.

My next step was to interview administrators of these hospitals. Regardless of whether their hospitals made or lost money, they generally said the patients they serve are sicker and older than those at urban hospitals. This is a common claim by administrators at facilities who believe their reimbursements should be higher. Working on deadline, I didn’t have time to examine this issue in more depth, but the “sicker” part, at least, might be arguable. These administrators also said they rely on the special payments to provide important services and keep their facilities up to date.

An administrator at one hospital that had an average annual operating margin of 12.8 percent suggested the hospital might have to cut back on programs such as dental screenings and suicide prevention in schools if it lost the payments.

I also interviewed the head of the Rural Wisconsin Health Cooperative, which represents half of the state’s critical access hospitals. He stressed the importance of rural hospitals to the economic viability of rural communities, a point many rural health authorities make.

That point raises a broader question: Is it Medicare’s role to bolster rural economies? This question is worth more time and attention than I was able to give to this story.

Marilyn Tavenner, administrator for the federal Centers for Medicare & Medicaid Services, supports the proposal to remove critical access status from “necessary provider” hospitals, those exempted by states. The federal government would reassess these facilities.

Nearly three-fourths of critical access hospitals are “necessary providers,” including 53 in Wisconsin. Most of them, including 42 in Wisconsin, wouldn’t meet the government’s distance requirements if required to re-enroll. Those hospitals were the focus of the OIG report.

Even if HHS does not accept the OIG’s recommendations, changes could be coming to this program. The Obama administration’s 2014 budget would eliminate critical access status for 71 hospitals within 10 miles of another hospital. Also, the federal budget would pay critical access hospitals 100 percent of costs instead of 101 percent.

Given the attention the OIG has brought to this issue and the Obama administration’s plan to eliminate critical access status for some hospitals, it’s a good time to pay attention to any critical access hospitals in your area.


David Wahlberg (@davidkwahlbergis a health/medicine reporter for the Wisconsin State Journal. He previously has written for AHCJ about patient-safety problems and offered advice based on the worst day of his career