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Medicare changes could help ailing
rural hospitals
ALGONA, Iowa
- Dr.
Stephen Richards' smile vanishes after his patients have left and the
conversation turns to the realities of running a small, farm-town hospital. Last
fiscal year, the 40-bed Kossuth Regional Health Center had a $3 million
budget and finished $680,000 in the red -- the biggest deficit in Richards'
quarter-century on its staff. "We're
able to keep the system running because we've tightened screws, become more
efficient and held costs down, but how much more can we keep doing
that?" Richards said. Some
relief may be just over the horizon. House
and Senate versions of Medicare prescription drug legislation would provide
$25 billion to $28 billion over the next decade to reduce the gap in
Medicare reimbursement rates between urban hospitals and rural ones. Under
a complex formula developed more than 20 years ago, hospitals in San
Francisco and New York get an average of 1.6 percent more for the same
procedures than those in Iowa, Montana or Kansas. A
separate formula that factors in malpractice premiums and regional cost and
wage differences also reimburses urban doctors at a higher rate than rural
ones. For
example, Medicare now pays a hospital in Bismarck, N.D., $3,988 for a heart
failure procedure. For the same procedure, a hospital in New York is paid
$6,460, according to Rep. Earl Pomeroy, D-N.D. The
differential is based on assumptions that it is cheaper to provide health
care in small towns than bigger cites. Lawmakers,
health experts and Medicare officials differ on whether those assumptions
are still valid. Malpractice
premiums, office rent and cost of living all tend to higher in urban areas,
according to the Centers for Medicaid and Medicare Services, a division of
the Health and Human Services Department. Urban hospitals also tend to have
higher hospitalization rates and longer hospital stays, and also offer a
wider variety of services. But
lawmakers from rural areas and some policy advocates point to examples where
costs are higher in the countryside. Rick
Pollack, executive vice president of the American Hospital Association, said
rural hospitals also lack the patient volume of big-city facilities that
helps spread the cost of services, new equipment, salaries and day-to-day
operations. Moreover,
smaller hospitals have been forced to raise salaries to compete with
better-paying urban hospitals, Pollack said. Richards said several veteran
nurses have left his hospital in the past 18 months for higher-paying jobs
in Minnesota; another flies to Hawaii every two weeks to work shifts at a
hospital there. "It's
no secret that those old formulas are unfair to rural doctors and rural
hospitals," said Republican Sen. Charles Grassley of Iowa. Aggravating
the problem are the much more rapidly aging populations of rural states.
Many young people are leaving the countryside for higher-paying jobs in the
cities, and rural hospitals are increasingly reliant on Medicare patients. In
2000, more than 50 percent of the nation's 2,200 rural hospitals reported
that Medicare made up more than half of their gross revenue, compared with
31 percent of urban hospitals, according to the AHA. Across
Iowa, Medicare patients represent about 16 percent of the population, a
figure matched by Maine, North Dakota, South Dakota, Arkansas, Alabama and
Pennsylvania. Only Florida and West Virginia have more at 17 percent. "We
are dependent on Medicare, and that makes us vulnerable," said Scott
Curtis, administrator at Kossuth Regional, where more than 60 percent of the
patients last year were Medicare beneficiaries. Seventy-five
members of the newly formed Congressional Rural Caucus obtained the extra
money for rural health care after threatening to vote against the
prescription drug bill. Grassley
said the $25 billion for rural providers would be paid for with savings and
cuts in other Medicare programs and freezes in payments to update medical
equipment. The House version calls for $28 billion. Lawmakers
from urban areas have gotten assurances that Medicare payment rates for
their health care providers would not be reduced. Both
versions of the legislation would raise the base rates small and rural
hospitals receive to the same level as large urban hospitals and adjust the
wage index used in calculating payments. Whether
that will actually occur remains uncertain. The House and Senate bills have
widely different approaches to the bigger issue driving the bill -- a
looming fiscal crisis for the Medicare program as the baby boomers reach old
age. There are doubts the two versions can be merged into a compromise, even
with a nudge from President Bush. "I'm
really skeptical," said Keith Mueller, director of the RUPRI Center for
Rural Health Policy Analysis at the University of Nebraska. "The key
differences in the entire bill are pretty fundamental and philosophical, not
partisan." Copyright ©
2002 Global Action on Aging
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