Opinion | A Chance to Strengthen Rural Healthcare

In the 1980s, small, rural hospitals were facing increasing financial pressure related to low occupancy rates, weak local economies, and unsustainable levels of uncompensated care, among other issues. These combined pressures contributed to roughly 200 rural hospitals closing between 1980 and 1988. To stave off these closures, Congress created the Critical Access Hospital model in 1997. This new care delivery model was tailored to serving small rural populations, with a limited number of inpatient hospital beds and was structured to ensure that at least one hospital would be available within local rural communities. The Critical Access Hospital model also offered important financial protections to participating hospitals. Today, there are roughly 1,350 of these small hospitals serving rural communities across the country.

Now, decades later, the rural healthcare delivery system is at another inflection point. Between 2010 and 2019, 116 rural hospitals closed. During the pandemic, the pace of closures slowed significantly as federal funding relief provided extra resources to help bolster struggling health systems. However, that aid masked the fact that the underlying finances of rural hospitals continued to deteriorate, especially with new financial pressures brought on by the pandemic. Our recent analysis found that about 20% of rural hospitals, or 441, face three or more concurrent financial risk factors and could be at serious risk of closure or service reduction in the coming years.

Fortunately, a new rural care delivery model is on the horizon, providing hope for transforming and stabilizing access to rural healthcare.

Congress established a new Rural Emergency Hospital (REH) model in late 2020, which offers rural areas a new option for care delivery. Slated to start in 2023, it is targeted toward smaller communities and focuses on ensuring local access to 24-hour emergency services and outpatient care. Recent analysis by the North Carolina Rural Health Research and Policy Analysis Center projected that roughly 68 struggling rural hospitals may elect to participate in this new model, while 1,605 would not. This number could be higher if the REH model is further refined to work for more struggling hospitals.

A new report by the Bipartisan Policy Center — The Impact of COVID-19 on the Rural Health Care Landscape — offers a series of recommendations to ensure REH is successful across rural America. Over the past year, the Bipartisan Policy Center interviewed a range of rural stakeholders about key policies and programs that have the potential to strengthen access to rural healthcare, including the REH model. The report included feedback from hospital leaders in eight states — Iowa, Minnesota, Montana, Nebraska, Nevada, North Dakota, South Dakota, and Wyoming — as well as health policy experts from federal and state government, national organizations, provider organizations, and academia.

In these conversations, rural stakeholders identified several factors that will impact a hospital’s decision on whether to participate in the Rural Emergency Hospital model, chief among them being how REHs will be reimbursed within the new model, particularly related to a new additional facility payment.

Increasing the additional facility payment that REHs can receive and allowing them to use these payments to cover a range of services — wellness and preventive care, social supports, and transportation — will be critical to the program’s success. Policymakers should test other payment pathways for REHs in order to increase participation in the REH program and rural residents’ access to care. Stakeholders also highlighted the importance of monitoring the REH program on an ongoing basis to ensure that it supports the transformation of rural hospitals.

Another key factor is the role of Medicaid payments for REHs. The Bipartisan Policy Center agrees with stakeholder views that the HHS secretary should determine whether REHs are eligible for Medicaid disproportionate share hospital payments, which go to hospitals that serve high numbers of low-income patients. Loss of access to disproportionate share hospital payments significantly changes the calculation hospitals are making as they consider converting to an REH.

Rural residents should also continue to have access to inpatient hospital care. Policymakers should allow communities to leverage their local infrastructure and workforce as much as possible by, for instance, allowing REHs to have a minimal number of inpatient beds or enhanced observation beds in communities with limited access to inpatient care. Further, Congress and HHS should expand REH program eligibility to small rural hospitals that closed within the last 5 years or in communities that previously lacked a rural hospital to further leverage this new model. Hospitals will also need guidance on whether they can transform back to another hospital model if the REH model is no longer financially viable or appropriate in the community.

Policymakers should also ensure that REHs can receive capital infrastructure funding to update their facilities, if necessary, to support transformation and ensure safe and high-quality care. They also should make technical assistance available on an ongoing basis to support hospitals transitioning to and operating as REHs.

Finally, all rural hospitals, including REHs, must meet community needs by, for instance, reporting on at least a narrow set of rural-relevant quality indicators to increase accountability and quality of care. Historically, rural hospitals have held back from quality reporting because of statistical issues involving low-volumes or a lack of rural-relevant quality measures. However, rural hospital quality measure reporting has increased in recent years and the National Quality Forum continues their work to update a list of key rural quality measures.

On June 30, CMS released the first proposed rule related to the REH model, which focused on conditions of participation for REHs as a new Medicare provider type. Additional rulemaking for the REH model is expected later this summer and will address payment and enrollment policies for REHs.

If done well, the REH model holds great promise to be another milestone moment for the delivery of rural healthcare, much in the same way the Critical Access Hospital program transformed healthcare delivery more than 25 years ago.

Julia Harris, MPH, MIA, is a senior policy analyst at the Bipartisan Policy Center.