How One Small Wisconsin Hospital Was Saved Amid a Statewide Rural Health Crisis

Guidehouse's Dave Mosley spoke with Wisconsin Public Radio about the rural hospital crisis

Nationwide, 155 rural hospitals have closed in the past 15 years, according to the North Carolina Rural Health Research Program. Nearly half of the remaining rural hospitals lose more money than they make, says Michael Topchik, national leader of the Chartis Center for Rural Health, a Chicago-based consulting firm.
The federal Critical Access Hospital designation is vital for many small rural hospitals. If hospitals meet requirements, including 25 or fewer inpatient beds, 24-hour emergency care, and located more than 35 miles from another hospital, Medicare reimburses them at 101 percent of allowable cost, although the number is closer to 90 percent in reality because of cutbacks and what is deemed allowable, Topchik says.

That higher reimbursement is the only thing keeping some rural hospitals open. But it also locks them into a model of inpatient-focused care that no longer makes sense, says Dave Mosley, managing director of Guidehouse. Mosley says several hospital leaders have told him the only reason they maintain inpatient beds is to keep their critical-access designation.

Most rural and urban hospitals operate on a traditional fee-for-service model. Revenue is based on such items as the number of cases of pneumonia treated, broken arms fixed or vaccines administered.

Compared to urban hospitals, rural hospitals treat more patients with government insurance, which generally pays less than private insurance, or without any insurance at all.

In Wisconsin, a private insurer will pay the hospital nearly three times what Medicare would pay, according to a 2019 Rand Corporation study. Medicare pays hospitals 88 cents for every $1 spent, while Medicaid pays 90 cents for every $1 spent on average. States set Medicaid reimbursement rates, and they can range from 81 percent to 130 percent of cost, according to a 2016 Medicaid and CHIP Payment and Access Commission report. And many uninsured cannot pay at all.

Technology has made health care easier and faster to deliver. For example, detecting a disease like colon cancer requires analyzing a strand of DNA from a stool sample. And where a full hip replacement would have meant a five-day hospital stay in 1985, it now can be done as an outpatient procedure, Mosley says.

But such technological advances can push rural hospitals into financial distress. In 2010, 71 percent of a hospital’s revenue came from inpatient care while just 21 percent came from outpatient care. Five years later, that number had nearly flipped, with 60 percent coming from outpatient services, which bring in less revenue per patient than hospitalizations.

"So if you have Medicaid that pays less than cost, and you have Medicare that pays less than cost, in most cases, and then you have uninsured individuals, how exactly is the hospital supposed to make money? And the answer is: They very often cannot," Mosley says.


Excerpted from Wisconsin Public Radio 

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