Federal aid possible for rural hospitals that become ERs only

The Biden administration must prioritize and make use of a new measure to aid struggling rural hospitals before more close, U.S. Sens. Chuck Grassley and Amy Klobuchar say.

On Thursday, the Iowa Republican and Minnesota Democrat sent a letter to the Centers for Medicare & Medicaid Services asking the federal agency to prioritize implementation of a new Rural Emergency Hospital designation. "If nothing is done, more hospitals and rural Americans will continue losing access to essential medical services resulting in poorer outcomes and higher costs for patients and taxpayers," the senators wrote.

The measure sponsored by Grassley and buried in the almost 6,000-page stimulus act signed late last year has garnered little attention so far. But it provides a potential lifeline for rural hospitals, which have struggled to stay afloat for years against declining and aging populations.

The Iowa Hospital Association reported in 2020 that 17 Iowa hospitals were already at financial risk even more than a year before COVID-19 hit the state.

A Sheps Center for Health Services Research database at the University of North Carolina shows that 19 rural hospitals closed in 2020 and that 137 have closed since 2010 because of financial problems. None of last year’s closures was in Iowa, but one was close: the Mayo Clinic Health System’s hospital in Albert Lea, Minn. Albert Lea residents recruited Mercy-One North of Mason City to replace lost services, such as obstetric care.

It's a bipartisan crisis, as the senators’ letter reflects, and both senators represent largely rural states.

At issue are thousands of facilities that serve some of the nation's most vulnerable patients. The new measure culminates years of effort to address the wave of rural hospital closings.

“Senator Grassley and I know that we must move quickly to get rural hospitals the resources they need, which is why we’re urging CMS to ensure the new Rural Emergency Hospital Medicare designation established by our bipartisan legislation is swiftly implemented,” Klobuchar said in an emailed statement, calling the facilities “lifelines” that employ thousands.

The measure requires small rural hospitals that qualify to shutter their inpatient operations, which often lose money, and revamp as stand-alone emergency rooms with some outpatient services. Hospitals that receive the status get increased funding.

“It gives a chance for these hospitals to exist,” said Spencer Perlman, director of health care research at Veda Partners. “It’s a choice between what you have now and nothing.”

Perlman estimates hospitals could receive around $750,000 on average in additional funding under the program, adding that the amount could vary widely depending upon how CMS calculates payments.

The stakes are high. Almost two-thirds of U.S. hospitals are rural, said James Wesp, principal of health care consultancy Oasis, and a closure can have wide-ranging effects, not only because hospitals are major employers but because “a hospital is a node,” around which a variety of medical service providers locate. They may scatter if a facility closes, he said.

But the new status would mean that patients who need to be admitted will have to travel even longer distances for care. Rural hospitals with fewer than 50 beds can apply for the new designation, which takes effect in 2023.

“It might be something we could use,” Bert Cunningham, city manager of Bowie, Texas, said of the new program. “ER in these communities is the most vital part of the hospital.”

Bowie's hospital shut down early last year and is now up for sale. The closest hospital is about 20 miles away, though patients have to travel to another facility 30 miles from Bowie for heart attacks or strokes.