Jeri Judkins

What about the rural hospitals that can’t choose REH status?

July 10, 2023

Healthcare Industry, Rural Healthcare 7 Minute Read

Which of these options is more valuable to rural residents?

  • A hospital that offers a wide range of services close to home but that struggles to stay in business
  • A well-funded emergent care center can only do enough to stabilize patients in crisis before moving them to a larger facility

Hospital administrators may want to find out the answer if they’re considering a designation the federal government made available this year.

The new designation is called Rural Emergency Hospitals (REH). Congress established the category in 2021 to address a steady stream of rural hospital closures (120 since 2010 and 19 in 2019 alone); it went into effect on January 1 of this year. Eligible facilities include critical access hospitals (CAH) and rural hospitals with fewer than 50 beds that receive predetermined, fixed Medicare payments (the Prospective Payment System). Services are limited to emergencies, observation, and outpatient services that can be provided in fewer than 24 hours.

While those are the basic details of the program, what’s perhaps more relevant are the statements it makes about American healthcare and the questions it raises.

Here’s one. Are rural hospital closures a symptom of regional economic decline or are they a separate category driven by specific healthcare-focused business practices and payment models?

Depending on where the closure occurs, it could go either way.

A 2021 study by the North Carolina Rural Health Research Program (NCRHRP) determined that the hospitals most likely to convert to REH status are those in areas with declining and aging populations, many uninsured residents, high levels of unemployment, and low levels of high-school graduation.

In other words, a failing hospital is a symptom of local economic and social decline.

But then there is the fact that the hospital closures of the last dozen years or so have not touched roughly 20% of the 50 states, primarily in the Rocky Mountains and Pacific Northwest. Why is that? Have those states been immune to economic downturns?

And why, in trying to determine how many hospitals would convert to REH status, did the NCRHRP study determine that half of the 68-hospital estimate would come from just four states: Kansas, Texas, Nebraska, and Oklahoma? Is there a correlation between Tornado Alley and failing rural hospitals?

These are not easy questions to answer, and one could reasonably assume that the federal government’s goal was not to shore up rural hospitals in particular states but instead to put a finger in the shrinking rural healthcare dike before any more damage is done. The government is trying to do that by queuing up a potentially agonizing decision.

“On one hand, you have a massive incentive, a ‘Wow!’ kind of deal that feels impossible to turn down,” Harold Miller, president of the nonprofit Center for Healthcare Quality and Payment Reform, told the NY Times. “But it’s based on this longstanding myth that they’ve been forced to deliver inpatient services — not that their communities need those services to survive.”

Indeed, for many hospital administrators, the transition may feel like selling a birthright for a mess of pottage, even if the amount of money — monthly payments of more than $270,000 with increases for inflation and higher Medicare reimbursement rates than those given large hospitals — is anything but trivial.

Part of the equation may be just how far a hospital is from alternatives. As profiled in a NY Times article on the REH designation, Cascade Hospital in remote Idaho serves patients across a 2,800-square-mile area with some traveling as much as eight hours to receive care. It’s not unusual for area residents to recuperate in hospital after issues like a heart attack or serious accident.

Much further south, New Mexico’s Guadalupe County Hospital (GCH), a Medsphere client, is making the transition to REH status and sees the program as a lifeline.

“For years, we’ve been anticipating kind of our own demise, praying that a program would come along and make us sustainable,” hospital administrator Christina Campos told KFF Health News.

After losing around $1 million in the six months before the start of the REH program, and with Albuquerque a bit less than two hours away, it’s not hard to see why GCH made the switch. Indeed, while Cascade and GCH may seem similar at a high level, it is their noteworthy differences that decide to switch a Faustian bargain for one and a blessed event for the other.

And that’s how it will probably play out for most of the 68 hospitals — a vast minority of the more than 1,600 that are eligible — the NCRHRP study expects to go with the REH designation. (Other consultants believe many more hospitals will make the switch, but nowhere near a majority. Time will tell.)

If few eligible hospitals take the federal government’s offer, what does that say about rural care now and its prospects moving forward? In a nutshell, it says that the risks to rural care remain and that additional solutions are desperately needed.

Saying that it “strikes me as the first time we are saying, you know, maybe we can just take the beds away,” Assistant Professor Paula Chatterjee at Penn’s Perelman School of Medicine, added that “this feels like rearranging deck chairs on the Titanic.”

Indeed, most rural health organizations and analysts expect that the REH designation will appeal almost entirely to small hospitals with significant financial challenges and a binary decision to make between moving to emergency services only or going away entirely. For too many clinicians and administrators, the change in service level leaves local residents too vulnerable, especially with fresh memories of how beds were necessary when Covid was surging.

Also, given that states must adopt REH licensure and that only 10 states thus far have, many hospitals for whom REH is a good option may not get to choose it.

All of this serves as a reminder of how American federalism works and how much power individual states retain; that reality should serve as the backdrop for the creation of solutions that stem the tide of closures. Recall that the NCRHRP study estimated that half of all the hospitals that convert will be in just four states and that ten states have experienced no rural hospital closures in the last couple of decades.

Perhaps the reasons for hospital closures, while arguably always a byproduct of America’s larger rural decline, can be more specifically narrowed down to the economic realities that persist in specific towns and counties. None of that will change on the ground, even if the REH designation makes a difference for some.

I do not doubt that the Centers for Medicare and Medicaid Services have looked into why some states avoid closures and others regularly experience them. While the dollars to shore up rural care will mostly come from the federal government, the actual strategies the money pays for may have to be negotiated and tailored in individual conversations between and among Washington, DC, and various state capitals, and perhaps even county seats.

Yes, REH status is an effort to save rural care, yet it must be just the opening salvo because it’s not nearly enough by itself.

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