Hospital Issues

Rural hospitals are vital care providers and economic engines
Jason Harrington, President and CEO, Lakes Regional Healthcare, Spirit Lake
Chair, Iowa Hospital Association Board of Officers and Trustees

The nearly 1 in 5 Americans who live in rural areas rely on local hospitals and health systems as a critical – and often the only – source of care in their communities. But rural hospitals are more than just sites of the care. They serve a vital role for regional economies; jobs generated by rural hospitals support the tax base that funds public education, fire and police services, and road maintenance. In all, close to 60 million rural Americans depend on their hospital as an important source of care as well as a critical component of their area's economic and social fabric.

Unfortunately, too many rural hospitals struggle to keep their doors open and provide the care and other critical benefits communities need. A recent report from the Center for Healthcare Quality found more than 500 rural hospitals at risk of closure even before the public health emergency, including 40 rural hospitals in Iowa alone. Low patient volumes, sicker patient populations, geographic isolation, shifts in care delivery, increased regulatory burden and the opioid crisis all contribute to these bleak statistics.

The COVID-19 pandemic has only hastened these trends. Recent forecasts project that total hospital revenue in 2021 could drop by up to $122 billion from pre-pandemic levels. This sustained reduction in resources for hospitals could result in the slowdown of vaccine distribution and administration, continued pressure on caregivers and diminished access to care in rural communities like ours.

For these reasons and many others, we must do everything we can to ensure rural hospitals have the resources they need and the payment flexibility to avoid cash flow challenges that could force them to close permanently.

One of the more promising payment tools to emerge in recent years is the rural community hospital (RCH) demonstration model championed by Sen. Chuck Grassley. Designed with rural hospitals in mind, the RCH model is targeted to those facilities that lack economies of scale due to their size but may be too large to qualify for programs to help the smallest hospitals.

The RCH demonstration pilots reimbursement based on the actual costs for providing services in rural hospitals that have fewer than 51 beds and provide 24-hour emergency care services.

At Lakes Regional Healthcare in Spirit Lake, we already know this essential help for rural communities is working. We are a rural hospital that services approximately 60% Medicare patients. During a typical year, Lakes Regional Healthcare incurs losses with our Medicare patients of approximately $4-5 million. This has a great impact on a bottom line that, without the RCH program, runs close to break-even. Of the Medicare patient revenue generated, 25% is for inpatient care. The ability to be reimbursed at a higher level that covers the hospital’s costs for the inpatient care through the RCH demonstration allows the hospital to generate a modest net income. This net income is available to provide for new equipment needs and expansion in service lines to service the growing Medicare population in the area. In the absence of the RCH, the long-term viability of Lakes Regional Healthcare and other similarly situated hospitals would be in jeopardy.

You don’t just have to take my word for it though. A 2018 report to Congress from the Centers for Medicare and Medicaid Services (CMS) found that the financial benefits of participating in the RCH model saved many facilities from having to alter or downsize their operations, improved cash and financial security and facilitated the continued support of their local economies. In addition, the report shows that RCHs provided high quality care, so patients don’t have to sacrifice quality to stay at their local hospital.

Sen. Grassley just led the successful effort to extend this important program for another five years. Now we can build on the promising results we have seen so far, supporting patient access to care and helping keep our doors open when it is so sorely needed.

Rural hospitals and health systems have been on the front lines of the COVID-19 pandemic, working to provide quality care for patients, families and communities. Despite unprecedented financial and health care challenges, rural hospitals remain committed to ensuring local access to high-quality, affordable health care during the pandemic and beyond. Thanks to Sen. Grassley’s leadership in maintaining the RCH program, Lakes Regional Healthcare and other RCH hospitals in Iowa and around the country will continue serving as community anchors and lifelines of care.


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