The AHA recently published a fact sheet on the state of rural hospital funding that is meant to get the attention of lawmakers in Washington, D.C. The below is a summation of that document.
Background
Medicare pays most acute care hospitals under the inpatient prospective payment system (IPPS). Some of these hospitals receive additional support from Medicare to help address potential financial challenges associated with being rural, geographically isolated and low volume. These programs are Low-volume Adjustment (LVA), Medicare-dependent Hospitals (MDHs) and Sole Community Hospitals (SCHs).
Without action from Congress, the enhanced LVA and MDH programs will expire Dec. 31, 2026.
Program Importance
The network of providers that serves rural Americans is financially fragile and more dependent on Medicare revenue due to the high percentage of Medicare beneficiaries who live in rural areas. Rural residents also tend to be older, have lower incomes and higher rates of chronic illness than urban counterparts. This greater dependence on Medicare may make certain hospitals more financially vulnerable. In fact, Medicare only pays 82% of hospital costs on average, according to the AHA’s latest analysis. Additionally, over 150 rural hospitals have closed or converted to other provider types since 2010.
Low-volume Adjustment
Certain factors beyond providers’ control can affect the costs of furnishing services, including patient volume. This is particularly relevant in small and isolated communities where providers frequently cannot achieve economies of scale like larger hospitals. Congress established the LVA program in 2005 to help isolated, rural hospitals with a low number of discharges. To take advantage of the program, a facility must be more than 15 miles from another IPPS hospital and have fewer than 3,800 annual total discharges.
Medicare-dependent Hospitals
Congress established the MDH program in 1987 to help support small rural hospitals for which Medicare patients make up a significant percentage of inpatient days or discharges. MDHs are small, rural hospitals where at least 60% of their admissions or patient days are from Medicare patients. MDHs receive the IPPS rate plus 75% of the difference between the IPPS rate and their inflation-adjusted costs from one of three base years.
Sole Community Hospitals
The SCH program was created to maintain access to needed health services for Medicare beneficiaries in isolated communities. In order to be eligible for the program, SCHs must show that because of distance or geographic boundaries between hospitals, they are the sole source of inpatient hospital services reasonably available in a certain geographic area. They receive increased payments based on their cost per discharge in a base year.
To continue these programs, the AHA is calling on legislators in Congress to back the Rural Hospital Support Act (S.335) and the Assistance for Rural Community Hospitals (ARCH) Act (H.R.1805). The former bill includes the following important AHA-supported policies to ensure access to care:
- Permanently extends the enhanced LVA program, which would continue to allow hospitals more than 15 miles from another IPPS hospital and have fewer than 3,800 annual total discharges to be eligible.
- Permanently extends the MDH program and adds an additional base year that hospitals may choose for calculating payments.
- Adds a base year that SCHs may select for calculating their payments.
The ARCH Act helps rural hospitals continue to serve their patients and communities by extending the current LVA and MDH programs by five years. For those interested in supporting these measures, please contact your U.S. representative and senators. Do your part to ensure country folks can survive.