Two Kansas hospitals have been selected to take part in a federal demonstration program aimed at ensuring access to health care in underserved areas.
The two, McPherson Hospital in McPherson and Morton County Health System in Elkhart, were among 13 nationwide chosen for the demonstration project being conducted by the Centers for Medicare and Medicaid Services, or CMS.
The program, which began in 2004 and has been extended twice for five-year periods, has 17 already-participating hospitals, including three in Kansas: Mercy Hospital in Fort Scott; Geary Community Hospital in Junction City; and Bob Wilson Memorial Hospital in Ulysses.
The project aims to address the financial concerns of small rural hospitals by reimbursing them for the reasonable costs of their inpatient services. The hospitals must be located in a rural area, have fewer than 51 acute-care beds, provide 24-hour emergency services and be too large to be considered critical access hospitals, which are also eligible for cost-based reimbursement.
Rural hospitals face tough financial challenges, especially in states like Kansas that have not expanded Medicaid. More than 80 rural hospitals have closed since 2010, including Mercy Hospital in Independence, Kansas, which shuttered in 2015. Nearly 700 more — or about a third of rural hospitals nationwide — are at risk of closure, according to a 2016 study sponsored by the National Rural Health Association.
A study by the Henry J. Kaiser Foundation, which examined the closure of Mercy and two other rural hospitals, cited high poverty and uninsured rates, older and sicker populations and competition from bigger, newer hospitals as factors contributing to rural hospital closures.
Morton County Health System, one of the hospitals selected for the rural hospital demonstration program, typifies those challenges. Located near the borders of Oklahoma and Colorado in a county with a population of about 3,000, the 28-bed facility has two doctors on staff (one of them only recently recruited) and four physician assistants and nurse practitioners, according to CEO Richard Bergling. It averages two to three patients a day.
“The closest metropolis would probably be Amarillo [Texas], and it’s about two hours away. Getting people to come out here — we’re kind of in a desolate part of the country and it’s hard to recruit,” Bergling says.
The hospital has applied for critical access status, which would allow it to get cost-based reimbursement. But it does not meet one of the requirements for critical access designation, namely that it be located more than 35 miles from another hospital. The next closest hospital is 34.5 miles away.
“They won’t budge on that,” Bergling says, referring to health regulators.
Morton County’s acceptance into the program means it will now get reimbursed at cost for its in-patient services, which has the potential to boost its revenues.
“Under PPS [prospective payment system] reimbursement, it doesn’t amount to a whole lot,” Bergling says. “With cost reimbursement, it’ll be a huge difference.”
PPS is a Medicare method of reimbursement that pays hospitals a fixed amount for treating patients, regardless of the length of stay or the type of care received.
As Morton County Health System’s finances have deteriorated, it has been forced to lay off staff and cut back on services, Bergling says. With its acceptance into the demonstration program, he’s hoping the hospital can turn things around.
“Break-even would be great,” he says. “We’re not asking for the world.”
Terri Gehring, CEO of McPherson Hospital, the other new participant in the demonstration program, faces similar problems.
"It's difficult being a small rural hospital," Gehring says. "We're not critical access, so it's difficult to have a positive bottom line."
One of the dilemmas confronting administrators like Gehring is how to properly staff with an ever-fluctuating hospital census.
"One day we may have 15 patients on our medical surgical floor and the next day we may have five. How do you know how to staff for that?" she says. "And if you're constantly staffing down when you have the low census, you lose employees."
Gehring says the demonstration program is apt to have its biggest effect when it comes to the hospital's swing-bed patients — those who receive skilled nursing care and rehabilitation services in preparation for their return home.
"This could give us the opportunity, maybe, to bring patients in who are acute patients somewhere else. Maybe they had a knee replacement or hip replacement and they live in our community, and they could come to our facility to rehab," Gehring says.
"It is hard. Every rural hospital struggles," she adds. "You have to determine what you can afford to provide and what you can't. That's about what it comes down to."
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Dan Margolies is a senior editor and reporter for KCUR. You can reach him on Twitter @DanMargolies.
