As the topic of health care reform moves back to the frontlines, one especially problematic area to be addressed is the challenge of providing health care in rural areas. Rural communities rely on their hospitals on many levels. In many cases, rural hospitals are the only source for care. They are also typically the largest or second largest employer in the community. A strong health care network also adds to the attractiveness of the community as a place to settle, locate a business or retire.
Yet despite the fact that rural hospitals are a vital lifeline to both communities and their residents, rural hospitals are facing a barrage of challenges and are in urgent need of practical, viable solutions to help them catch up, keep up and get ahead of the myriad of issues confronting them.
Unique Challenges of Rural Hospitals
Rural hospitals face unique challenges due to their often remote location, small size, limited workforce and constrained financial resources. Compounding these challenges, rural Americans are more likely to be uninsured and to have lower incomes. They are on average older and less healthy than Americans living in urban areas. Nearly half of rural residents report having at least one major chronic illness.
Patients often have to travel long distances to seek care, made more difficult by a lack of available or reliable public transportation. These issues contribute to their tendency to delay seeking care, which aggravates health problems and leads to more expensive interventions upon receiving care.
Rural hospitals typically are much smaller than their urban and suburban counterparts. Nearly half have 25 or fewer beds. Despite a smaller size and smaller base of patients, rural hospitals still have to maintain a broad range of basic services and purchase much of the same equipment of larger hospitals in order to meet the health care needs of their communities. Yet with fewer patients over which to spread fixed expenses, the overhead for rural hospitals is higher.
The lack of citizens covered by private insurers, the older age mix of population; in combination with the greater poverty levels in rural areas make rural hospitals highly dependent on public government insurance programs. Nearly 60% of rural hospital gross revenues come from Medicare and Medicaid, both of which have tight controls on hospital payments. With such an outsized dependence on government insurers, rural hospitals have less flexibility and fewer options for shifting costs.
Medicare began giving special payment treatment to rural hospitals in 1997. This was done in recognition of the vital role these hospitals serve in caring for older Americans and in recognition of the unique financial hardships rural hospitals face. Small hospitals with 25 beds or fewer that are located at least 35 miles away from the nearest hospital were classified as Critical Access Hospitals (CAHs). Unlike traditional Medicare hospitals that receive payments based on uniform fees and which typically cover only about 93% of costs of Medicare patients, CAHs are paid 101% of what they say it costs them to provide services to residents of remote areas.
Despite this preferential treatment, rural hospitals have negative margins on each of the services they provide to Medicare patients. Since rural hospitals are often the sole site for patient care in the community, they are also more likely to offer additional services that otherwise would not be accessible to residents. For example, many rural hospitals provide hospice, home health services, skilled nursing, adult day care and assisted living. Additionally, they many support broader social needs through subsidized programs such as meal deliver services, community health education, rural health clinics and other services. Often rural hospitals step in to offer these services out a sense of community responsibility, as stand-along providers may have trouble keeps their doors open in low-volume, isolated areas of the country.
Insufficient Medicare and Medicaid reimbursement is compounded by the problem of the uninsured in rural communities. Many rural employers are small or family businesses that do not provide health insurance.
Health care reform and health insurance marketing, no matter what form they take, will need to successfully address the challenges of serving rural areas.