Why federal money for rural hospitals is vulnerable to budget cuts

Jun 12, 2013

hospital room
Credit Fotos GOVBA / flicker

  Compared to their urban counterparts, rural hospitals serve a population that tends to be older, sicker, uninsured and have less income. Rural hospitals provide a lot of uncompensated care and run on more narrow profit margins.

To stay open, these hospitals depend on special federal designations that give them a higher rate of reimbursements from Medicare and Medicaid. For example, when a hospital designated as a critical access hospital, Medicare reimbursements can make up to a third of its entire revenue

But as lawmakers scramble to trim the U.S. budget, these reimbursement funds are vulnerable to cuts. The Congressional Budget Office has recommended getting rid of the special federal designations for rural hospitals. And the sequestration reduces  Medicare reimbursements by 2 percent – which amounts to about $11 billion of cuts in one year. These cuts have been predicted to disproportionately affect rural hospitals because of their narrow profit margin

David Lee is the D.C.-based policy manager for the National Rural Health Association. He's one of the association's registered lobbyists. On his recent trip to Columbia, I got a chance to talk with him about the challenges of advocating for rural health on Capitol Hill as the government is trying to tighten up the budget. He said some legislators don't understand the specific issues that rural health care providers face:

Folks think that rural health care is urban health care on a smaller scale. But it's really not. Folks engaging in rural health care face a number of additional challenges and alternative challenges that really necessitate different payment methodologies, different efforts, different things to help maintain access to rural communities.

Lee also gave some historical context to why some organizations or lawmakers might believe that rural hospitals can do fine without special federal designations:  

I think one of the issues is that we haven't had the cataclysmic number of closures that we had during the 80s and the 90s. During the 1980s and 1990s, over 400 rural hospitals throughout the nation including some here in Missouri did close because of the financial challenges they were faced with, because of older populations that couldn't pay for the services they were receiving. These financial challenges really led to more than 400 hospitals closing throughout those two decades.  A lot of folks believe that we've just gotten to a point that the crisis of care in rural America has been fixed and we don't need that help with that process.