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Kansas plan would convert many rural hospitals into primary health clinics

Seventy percent of rural hospitals in Kansas have negative operating margins.

Susan Morse, Managing Editor

Kansas summer wheat photo by James Watkins via Wikimedia Commons

As rural hospitals continue to struggle to stay afloat, the Kansas Hospital Association is hoping to persuade the Centers for Medicare and Medicaid Services to alter the way it reimburses so hospitals can focus more on outpatient and emergency services.

Current CMS rules mandate critical access hospitals, like the ones in the KHA, give around-the-clock emergency services. But the association wants primary health centers to replace some critical access hospitals, according to Melissa Hungerford, CEO of the Kansas Hospital Education and Research Foundation.

"We have developed the primary health center as an alternative for small, low-volume hospitals that are having trouble sustaining the critical access hospital," Hungerford said.  "We're hoping it will save money because we're not trying to sustain that inpatient service."

[Also: Are rural hospitals on the road to ruin?]

The hospitals within the association could continue to run their 24-hour facilities -- with or without transitional care -- or cut down to 12 hours. Both options would provide for ambulatory, urgent and emergency services.

Hungerford estimates the new plan would be the most attractive to the 20 to 30 smaller hospitals in the 128-hospital system.

"First we have to get waivers from CMS for some of the requirements to be a critical access hospital," Hungerford said. "We would need an entirely different payment mechanism."

Hungerford said she has counted 55 rural hospital closures across the country. While Kansas has seen relatively few closures because of local tax support, many of the 84 critical access hospitals in the association are operating at a loss and are at a breaking point. Communities would lose both a healthcare provider and what is often their largest employer.

[Also: 45 rural hospitals losing critical access status, must reapply]

"Our concern is the cost of sustaining a critical access hospital is increasing rapidly, we can't continue on that curve," Hungerford said.

Seventy percent of rural hospitals in Kansas have negative operating margins. On most nights, only one to three of the 25-hospital beds in each facility are filled.

The association also needs CMS to change its stipulation of a three-day inpatient stay before the patient can be transferred to a swing bed.

"Right now, Medicare is paying for three-day stay when a patient could be better served elsewhere," Hungerford said. "We need waivers for transitional care to allow patients to go directly to that level of care."

Hungerford helps lead the Technical Advisory Group of the association that has implemented a pilot program of the primary health centers at five hospitals.

"We're right now in the process of determining whether patients being seen now could be primarily treated in this kind of model," Hungerford said.

[Also: Community Health Systems spins off 38 rural hospitals to focus on regional networks]

The next step is finishing the feasibility study and pilot program,  and then taking their discussion to Medicare and Medicaid. That has yet to be scheduled, though Hungerford said they could be ready by the end of the year.

Kansas Hospital Association wants to go before CMS with a concrete plan, showing the new model can work, she said. They have had conversations with the state's Congressional delegation, she said.

"We also have to make changes to Kansas licensure laws," she said. "For right now to have an emergency room, you need acute inpatient beds. We would also need to make some changes to the way staffing is required."

Kansas has more critical access hospitals than any other state, as it was involved in creating that model in the 1990s, Hungerford said.

In 1997 Congress acted in response to a string of rural hospital closures by designating critical access hospitals for cost-based Medicare reimbursement.

The hospitals do not get paid for fee-for-service and are not part of the newer value-based models. Critical access hospitals are reimbursed for a little less than 100 percent of their costs, with most relying heavily on Medicare, according to Hungerford.

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With all the work involved, Hungerford said she doesn't have an idea of how receptive CMS will be to their ideas.

In coming up with their unique model, the Kansas Hospital Association looked at other states that are also trying to forge a new path for their rural hospitals such as Alaska, Georgia, Washington State and Colorado, according to Hungerford.

"We think this is right in line with the national movement and it has its benefits, but it's going to be very difficult for communities to think about a new model when they want what they've always had," Hungerford said. "If a community can't sustain its hospital and is facing closure, maintaining some kind of access is preferable to a closure."

Twitter: @SusanMorseHFN