KRMC copes as other rural hospitals crash in an era of low federal reimbursements

JC AMBERLYN/Miner<BR>
Dr. Ismail Bokhari (right), a cardiologist, and Rejeania Erwin, a radiologic technologist, operate on a patient at the Kingman Regional Medical Center Cardiovascular Center in this 2009 file photo.  Like other hospitals, KRMC is coping as best it can with federal insurance reimbursements that amount to pennies on the dollar for total charges.

JC AMBERLYN/Miner<BR> Dr. Ismail Bokhari (right), a cardiologist, and Rejeania Erwin, a radiologic technologist, operate on a patient at the Kingman Regional Medical Center Cardiovascular Center in this 2009 file photo. Like other hospitals, KRMC is coping as best it can with federal insurance reimbursements that amount to pennies on the dollar for total charges.

KINGMAN - Fifty-six rural hospitals have closed their doors since 2010 and 283 are in danger of closure because of underpaid Medicaid and Medicare reimbursements, a national health organization reported.

Access to necessary health care is at risk for more than 700,000 patients, according to the National Rural Health Association headquartered in Leawood, Kan.

More rural hospitals have closed since January 2013 than in the previous 10 years combined, including Cochise Regional Hospital in Douglas, which closed last month.

Kingman Regional Medical Center, a nonprofit, 235-bed hospital that serves a local population of about 50,000, is not among the financially troubled rural hospitals, Chief Executive Officer Brian Turney said Wednesday.

KRMC closed Hualapai Mountain Medical Center in 2011 after purchasing the 70-bed facility from MedCath for $31 million. It reopened and largely serves as an acute rehabilitation center while providing other medical services.

About 80 percent of KRMC patients are on Medicaid or Medicare, Turney said.

That makes it a little dicey to cover costs. For example, KRMC bills $1 of health care service and Medicare pays 17 cents to 18 cents, he said. It's even less for Medicaid patients, with about 13 cents to 14 cents paid for every $1 dollar billed.

That puts pressure on the other 20 percent of patients who are covered under private insurance, which typically pays 50 cents to the entire $1 for services, depending on the policy contract, Turney said.

In essence, patients with private insurance end up subsidizing Medicaid and Medicare.

"It definitely creates an extra challenge," the chief executive said. "Places where the payer mix is not that good, a lot of people don't realize that makes a significant difference on whether a hospital is financially successful in the long term."

Save the hospitals

NRHA supports bipartisan legislation introduced in July by U.S. Reps. Sam Graves, R-Mo., and Dave Loebsack, D-Iowa, that would save rural hospitals.

If Congress doesn't act quickly on the legislation, rural hospitals will be forced to lay off workers, cut wages, reduce services and close doors, said Maggie Elehwany, vice president of public affairs and policy for NRHA.

Lives will be lost, and local economies will suffer, she said.

"We're not asking for higher reimbursement," Elehwany said during a phone interview with the Daily Miner from Washington, D.C. "We are just asking for reimbursements we used to get. Stop the Medicare tax and give back the 35 percent reduction of write-off on bad debt."

Rural populations are generally older, sicker and poorer than their urban counterparts, and a higher percentage have chronic diseases, Elehwany said.

"We are all about emergency access to care," she said. "Maybe that type of care doesn't make sense in some areas. That's part of the bill, to create a new rural health model."

The bill accomplishes two things, Elehwany explained. It stops the number of cuts that are causing rural hospitals to close, and it creates the community outpatient clinic for hospitals that still can't make it even after those cuts are eliminated.

"We believe that will completely stabilize rural hospitals across the entire country," she said.

Tight management

Having the second- or third-worse payer mix in Arizona put pressure on KRMC to do a better job of managing cuts in AHCCCS, the state insurance system, which reduced the hospital's bottom line by millions of dollars, CEO Turney said.

"We didn't cry over the situation. We just do the best we can with the resources we have," Turney said.

In order to qualify for Medicaid reimbursement under the Affordable Care Act, the government mandated that Arizona expand AHCCCS to cover families with children. That actually helped KRMC because more people were covered.

Also, KRMC has never carried substantial debt, Turney said. The hospital took on some debt to finance expansion, and slowly paid it off.

"Part of our low cost structure is not paying a lot of interest for debt," Turney said. "We will actually be out of debt this fall, which makes you feel good about not having to pay bondholders."

KRMC looked at managing inventory more efficiently and tapping into its network connection with the Mayo Clinic to increase buying power, saving $3 million to $4 million a year on supply costs, Turney added.

Half the cost of running a hospital is labor, and while KRMC hasn't trimmed too tightly in direct care services, some of the support staff was cut. The hospital still has more than 1,600 employees.

"There's only so much you can do with that," Turney said. "We can't afford not to give good service. Then you're in a death spiral."

No measurable impact

Understanding the impact of closures on patient care and outcomes is critically important.

A study published in May in Health Affairs identified 195 hospital closures between 2003 and 2011 and found no significant difference between the change in annual mortality rates for patients living in areas that experienced one or more closures.

Nor was there a significant difference in the change in all-cause mortality rates following hospitalization.

"Overall, we found no evidence that hospital closures were associated with worse outcomes for patients living in those communities," authors from the Harvard School of Public Health wrote. "These findings may offer reassurance to policy makers and clinical leaders concerned about the potential acceleration of hospital closures as a result of health care reform."

However, Elehwany of NRHA cited instances of a 48-year-old woman who died of a heart attack while she waited for a helicopter outside a closed hospital in North Carolina, and an 18-month-old boy who died in Texas after being taken to a closed hospital.

The closure of rural hospitals is not a recent phenomenon. Policymakers began paying attention to it in the late 1980s.

The Office of Inspector General of the U.S. Department of Health and Human Services conducted a report in 1989 examining closures from a couple years earlier. Because there was so much interest, the report came out on an annual basis for a few years.

As the rate slowed in the late 1990s and early 2000s, interest waned until recently.

Most of the hospital closures cited by NRHA have occurred in small towns throughout the South and Midwest. Nearly 70 percent of those are in states that have declined to expand Medicaid under the federal Affordable Care Act, although some experts are hesitant to draw a cause-and-effect correlation.

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