Good afternoon. I am honored to be here to help celebrate rural hospitals–in particular, the 20th anniversary of the first generation of Critical Access Hospitals. While CAHs are a critically important Medicare innovation, I am also here to say that rural hospitals are fundamentally not defined by a collection of federal or state regulations or payments.

Rural hospitals are defined by the communities we serve; if we don’t match that vision, they vote with their feet whether or not the hospital is a non-profit, locally governed or part of a larger system.

CAHs were by no means created overnight. Their creation in the Balanced Budget Act of 1997 was the result of over a decade of advocacy and hard work triggered by the ill-conceived application of Medicare’s Prospective Payment System to lower-volume rural hospitals.

As most of you know, PPS led to the rural hospital closure crisis in the mid 1980s and early 1990s. Along the way, a widespread acceptance developed that the design of PPS was flawed and that it negatively impacted on rural hospitals in ways that made neither professional nor political sense.

For the communities that lost a local hospital, it was very personal. It meant a loss of jobs, a blow to pride in their local community, less ability to attract new job-creating businesses and, above all, the loss of local care during a medical emergency.

For the rest of us it created a strong feeling of being undermined by our own government, and it reinforced the myth that rural wasn’t very important − that we didn’t need local rural health care. Not unlike the feeling that many of us have today with the unjustified Medicare cuts and urban-centric regulations that still remain in place.

It really should not have been a surprise that PPS would be a disaster for rural communities. It started by carving rural hospitals out from all other hospitals and giving them their own lower national base rate. They then added a flawed wage adjustment to further lower rural reimbursement as well as a system of individual payment groups “driven by diagnosis” that needed large hospital volumes to smooth over its rough edges.

Building the awareness that PPS didn’t fit rural took time, many advocates and multiple attempts. But our mission was clear; we were fighting for equity, for local access to care and for local jobs. One of our longest and most effective PR campaigns in Wisconsin was entitled “Medicare − Same Tax, Different Benefit.”

People often know that business relocation decisions are influenced by the cost and quality of the health care available locally. But as or more importantly, rural health has the same economic impact as export commodities like milk, soybeans or rural manufactured goods because of its own ability to bring dollars and jobs into our rural communities.

Rural insurance premiums and taxes only come back to circulate in the community and create jobs if there are local health care providers there (and people use them) to attract those dollars. For every two jobs created (or lost) in rural health care, the number of jobs in other local businesses increase (or decrease) by one-plus jobs.

To give our cause further visibility, the National Rural Health Association sponsored a class-action suit against the Department of Health and Human Services. The claim was that the relatively lower PPS payment rates for rural hospitals constituted a “taking without just compensation,” a violation of the Due Process guarantee of the Fifth Amendment to the Constitution by unconstitutionally burdening a class of rural hospitals with the cost of subsidizing Medicare operations at their respective hospitals.

While our constitutional challenge was eventually dismissed on technical grounds, it was very clear at the time that the credible pursuit by NRHA of this lawsuit played a significant role in focusing attention on the seriousness of the structural defects in PPS and the need for Congressional action.

While there have been and undoubtedly will continue to be changes to what constitutes the provider type Medicare calls a CAH, there is one thing that will not change and that is what is a rural hospital.

While some have tried to rewrite history, it is my certain memory that when CAHs began, there was a limit on how many beds a CAH could have but there was no minimum number of beds required. Yes, you heard me right, the original CAH concept included the idea that a rural hospital could have no inpatient beds. Even back in the early days of NRHA, we understood that there was a need for flexibility and the ability to right size a hospital to a community.

A rural hospital is not defined by the government but by the friends and neighbors the hospital serves and by the people who govern or advise the provision of local care. This definition may include beds or not and increasingly includes partnership with the community outside of the walls of the hospital to make the local population healthier. Additional models such as proposed in the Save Rural Hospitals Act make sense over the long run.

But first we must continue to advocate to reverse the death by a thousand cuts that rural hospitals have sustained in recent years:

  • Elimination of Medicare Sequestration for rural hospitals.
  • Reversal of “bad debt” reimbursement cuts.
  • Permanent extension of current low-volume and Medicare-dependent hospital payment levels.
  • Reinstatement of Sole Community Hospital ‘hold harmless” payments.
  • Extension of Medicaid primary care payments.
  • Elimination of Medicare and Medicaid DSH payment reductions.
  • Establishment of Meaningful Use support payments for rural facilities struggling to maintain MU compliance.
  • Permanent extension of the rural ambulance and super-rural ambulance payment.

And last but not least, assurance of full funding under the 340B and Swing Bed Programs.

Bottom line, if we speak with one voice, we have a strong future.

Tim Size is executive director of Rural Wisconsin Health Cooperative, Sauk City. RWHC is owned and operated by 40 rural hospitals, including Tomah Memorial Hospital. Size presented this speech in Washington, D.C., before the National Rural Health Policy Institute, Feb, 6.


Tomah Journal editor

Steve Rundio is editor of the Tomah Journal. Contact him at 608-374-7785.

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