Senate Hearing Shines Spotlight on Rural Health Care Challenges

  ​When we examined the rural health care landscape in 2016, the overarching challenges were affordability and accessibility. Two years later, those challenges persist, as was evident in the Senate hearing on September 25 titled “Health Care in Rural America: Examining Experiences and Costs.”
The hearing featured the Subcommittee on Primary Health and Retirement Security, and testimony from Tom Glause (Commissioner, Wyoming Department of Insurance), Morgan Reed (Executive Director, the Connected Health Initiative), Alan Levine (CEO, Ballad Health), and Deborah Richter, MD (Family Physician).
The hearing presented a unique perspective on what is currently preventing hospitals and doctors from delivering affordable and accessible health care in rural areas. More importantly, the hearing also provided insight on possible solutions to these issues with the goal of creating an environment where hospitals thrive in rural areas, and as a result, residents have access to affordable quality health care.
Defining Rural The U.S. Census Bureau identifies two categories of urban areas: the first is an urbanized area of 50,000 or more people, including cities and metropolitan areas; the second is an urban cluster of at least 2,500 and less than 50,000 people, including suburbs and large towns. Rural encompasses all population, housing, and territory not included within either of the designated urban area definitions. According to 2010 census data, approximately 20% to 25% of the U.S. population lives in rural areas.
Typical demographic trends of rural areas include lower median incomes, a high proportion of seniors, higher acuity levels and lower life expectancies. There are also specific ailments that impact these communities at a higher rate than urban communities. Obesity, lung cancer, chronic obstructive pulmonary disease (COPD) and heart disease are statistically more common in rural areas. Finally, the gap between urban and rural life expectancies is growing. According to a 2014 study published in American Journal of Preventive Medicine, consistent overall increases in U.S. life expectancy were noted during the past 40 years, from 70.8 years in 1970 to 78.7 years in 2010. However, the study reveals the rural-urban gap widening from 0.4 years in 1969 to 1971 to 2 years in 2005 to 2009, with those in urban areas living longer.
Challenge One: Access to Health Care Access remains the primary hurdle for health care in rural America: it is too difficult for residents to obtain and for hospitals to provide. There are inherent features of rural settings that contribute to this issue, such as geography and number of facilities. Hospitals are few and far between in rural areas, and reliable transportation services (e.g., buses, taxis, etc.) are not available to help overcome this. To illustrate this point, consider that only 24% of rural residents can reach a top trauma center within an hour, according to Glause’s testimony at the Senate hearing.
Aside from physical distance and lack of facilities, several other factors further constricting rural America’s access to health care were discussed at the hearing. Two notable items included workforce shortage and the outdated “brick and mortar” approach to rural hospitals.
Workforce shortage – It is no secret that rural America struggles to attract and retain talented workers, and the health care industry is no exception. According to Glause, rural areas make up 57% of the primary care health professional shortage areas. There are some fundamental reasons that contribute to this shortage, including the urban-centric nature of the current health education system and the general draw of opportunities in urban areas. Workforce shortage exacerbates the access issue, as it lessens the supply of doctors, nurses, and other health professionals able to care for residents in rural areas.
Brick and Mortar – The traditional standardized hospital does not cater to the unique health problems in rural communities. For example, diabetes, heart disease, curable cancers, and drug overdoses disproportionately affect rural Americans relative to the general population, according to Levine’s testimony. Thus, not only do rural residents have fewer hospital options, but those they do have are further away with less doctors and nurses. Further, the ones that do exist are not properly tailored to their needs.
Challenge Two: Affordability Affordability continues to be a double-edged sword preventing the obtainment and delivery of quality health care in rural America. Rural residents have very limited coverage options and rural hospitals struggle to implement a cost structure that could spur more affordable services.
Rural areas have fewer insurers in the market, which increases premiums that residents are ill-equipped to afford. In fact, “nearly 30% of rural residents report delayed care or report they did not receive care in the previous year due to cost,” said Glause in his testimony. It is not just the private insurance market that contributes to affordability issues. In Wyoming for example, Medicare reimbursement covers only 65% of the hospital’s costs, which according to Glause shifts more costs to the non-Medicare population. This is a deliberate feature of the current system as both government and private insurer payment policies are “designed to contain or even reduce per-unit reimbursement,” says Levine.
Fewer patients and tighter reimbursement directly leads to less revenue. This hinders a hospital’s ability to deliver high quality health care and cover its fixed costs. According to Levine, more specifically, with less revenue to cover fixed costs such as debt service, increased compliance imposed by Medicare and Medicaid, and general overhead, cash flow takes a severe hit. This inhibits employee recruitment and retention, equipment and technology updates, and capital investments, all of which can reduce the quality of care to rural patients. Unfortunately, it does not stop there – if cash flow continues to suffer, bankruptcy and closure begin to enter the picture. Hence, 85 rural hospitals have closed down between January 2010 and July 2018.
Solutions The hearing was not all doom and gloom though, as many ideas and interesting solutions were discussed. These included strategies such as increasing telehealth availability and opening rural clinics to augment an existing facility. Other notable solutions include:

• One solution suggests creating a federal grant program to help both hospitals and insurers to reduce cost and increase quality of care in rural areas. For example, according to the Glause testimony, if the grants funded assistance to hospitals, new technology and transportation services, the cost would not be passed to the insurers, which would lower premiums, and in turn the rates for consumers.
• Another possible solution involves tailoring hospital services to the specific needs of communities. For example, renewable block funding based on estimable costs could enable hospitals to create new jobs and repurpose old assets. For example, according to Levine’s testimony, two rural hospitals in Green County, Tennessee consolidated the inpatient acute care services at one hospital, and then repurposed the other to focus on specific outpatient services particular to that community.
• Finally, another proposed solution involved shifting from the traditional fee-for-service model to a pay-for-value that would better align doctor and hospital incentives. This could potentially attract more physicians to the area, as they “would be able to diversify their income to include the upside of the hospital’s financial performance,” says Levine. Additionally, such alignment would likely lead to consistency between doctor, hospital, and community as all focus on managing chronic conditions, rather than performing a reimbursable procedure.

Capital Considerations In terms of cost savings, a thoughtful capital structure is still an important point to consider. Therefore, rural hospitals should be examining all financing programs and options as it pertains to bolstering much needed cash flow. This would allow rural hospitals to reinvest in their facilities, open specialty clinics, upgrade equipment and technology, and ultimately increase the affordability, availability, and quality of health care for rural America. Specific programs that can assist in this manner include the USDA Community Facilities Program (USDA CF) and the Federal Housing Administration (FHA) Sec. 242 mortgage insurance program. USDA CF is reserved for rural nonprofit organizations, including hospitals and skilled nursing facilities, and provides below market fixed-rate, long-term, non-recourse financing for construction and refinance. The FHA’s Sec. 242 program provides agency-insured, long-term, fixed-rate debt at relatively high leverage points.
A holistic approach to these challenges, one that includes careful consideration of both financing and operational options, will help to ensure that hospitals are doing all they can to mitigate risk and provide quality care for their communities. As is evidenced by the hearing in Washington, this is an issue that is on the minds of not just operators, but legislators as well. As the political landscape affects organizational decisions, it is important to stay aware of both changes and potential solutions available to rural facilities that will align a facility’s operations with best practices that maximize financial stability.

​Contributed by Lancaster Pollard - Authors Brett T. Murphy and Husam Atari