200 Rural Hospitals Benefit from Fiscal Cliff Deal

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Hospitals are still reeling from the impending consequences of this month’s fiscal-cliff deal that only helped them cover half the costs necessary to protect physicians from a 27 percent Medicare fee cut. However, the positives behind the deal keep revealing themselves, and 200 rural hospitals around the country have good reason to rejoice.

According to an article by Phil Galewitz of Kaiser Health News, the deal “extended for one year [the Medicare Dependent Hospital Program] that pays hospitals…up to several millions of dollars each year because they have fewer than 100 beds, are located in rural areas, and treat a high proportion of Medicare patients.”

As a result, facilities like Wayne Memorial Hospital in Honesdale, Pa., will “retain about $2 million in extra Medicare funding because of the program” extension, Galewitz writes, and Wellsville, N.Y.’s 70-bed Jones Memorial Hospital will receive at least $450,000 more in 2013.

In interviewing numerous rural healthcare executives, HCE Exchange has discovered that the main challenge these hospitals are facing is the tendency by bureaucrats to see rural healthcare services as playing on the same turf as urban hospitals. Nothing, however, could be farther from the truth.

As Galewitz points out, programs like the Medicare Dependent Hospital Program have led the charge in trying to equalize the playing field for rural organizations. Eric Zimmerman of the Washington law firm McDermott Will & Emery told Galewitz, “The theory is that some rural hospitals have such a high percentage of Medicare patients they are unable to get enough money from higher-paying privately insured patients to make up for the lower government reimbursements.”

So-called Congressional deficit hawks don’t see it this way. In an effort to cut federal spending on healthcare, they’ve begun to question the efficacy of programs like the Medicare Dependent Hospital Program, even going so far as to “let the program expire at the end of September 2012.”

However, Senators Charles Schumer (D-N.Y.) and Charles Grassley (R-Iowa) fought to reinstate funding for the program into the fiscal-cliff deal. Opponents of these programs often argue that they encourage rural hospitals to be inefficient.

But efficiency wasn’t their purpose, Alan Sager, professor of health policy and management at Boston University School of Public Health, told Galewitz. Their purpose was “to help hospitals survive in communities where patients have few if any other options.” He added, “Whether these hospitals are working as efficiently as can be needs to be determined on a case-by-case basis.”

Unfortunately, the program was only given a one-year extension, so its future is still up-in-air. Nevertheless, it gives a little bit of breathing room to 200 rural hospitals whose executives desperately need it.

-by Pete Fernbaugh

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