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Rural hospitals brace for sequestration

Rural hospitals are girding for harsh impacts from a 2 percent decrease in Medicare reimbursements under federal spending sequestration, set to take effect in March, by taking advantage of how they already operate, a new report suggests.

Of the country's 2,022 rural hospitals, 63 are likely to be sent into negative profit margins because of the rate decrease and 12,000 jobs could be lost, according to iVantage Health Analytics, a business intelligence company.

[See also: Health groups oppose $11B in potential sequestration Medicare cuts]

Already 1,237 rural hospitals are operating in the red, the report noted, with an average annual operating profit margin of -5.6 percent, compared to the -1.4 percent average for urban hospitals.

iVantage has been tracking health reform's implications for rural providers and exploring ways rural providers, like critical access hospitals, can reinvent themselves with value-based contracting and accountable care organizations.

Noting that rural hospitals generally mirror urban providers in federal quality metrics, iVantage argues that the recent emphasis on primary care for rural hospitals leaves them well positioned to support older populations across large geographic areas – aside from the impact of cuts due to the sustainable growth rate formula, which a number of lawmakers and healthcare groups are trying to repeal

"Value in healthcare is created by doing a few things well, not by trying to do everything. The rural findings may just suggest that by natural selection, rural has figured out what it does well and has optimized those services for the patient's benefit," iVantage wrote in the report, "Rural Relevance Under Healthcare Reform."

[See also: Medicare providers warn sequestration could cost 500K jobs in first year]

iValue also argues that rural hospitals have gotten short shrift in their perception and funding. Although it's expected that rural patients will receive physician care or outpatient services at the local facility while seeking complex treatment at urban health systems, the report says that doesn't necessarily lead to better outcomes.

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