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The Impact of COVID-19 on the Rural Health Care Landscape

Before the COVID-19 pandemic began, hospital closures were increasing in rural communities across the nation: 116 rural hospitals closed between 2010 and 2019. Over the past two years, federal relief has helped stabilize facilities, and the pace of closures slowed. However, this assistance was temporary, and rural hospitals continue to struggle financially and to recruit and retain nurses and other health care employees.

Against this backdrop, the Bipartisan Policy Center (BPC) conducted a series of interviews over the last year with rural hospital leaders from eight states—Iowa, Minnesota, Montana, Nebraska, Nevada, North Dakota, South Dakota, and Wyoming—as well as with health policy experts from federal and state government, national organizations, provider organizations, and academia. The goal was to gain on-the-ground insights into today’s rural health care landscape, where the population is older, sicker, and less likely to be insured or seek preventive services than in urban areas.

Today in rural America, roughly 1 out of every 3 individuals are enrolled in the Medicare program and nearly 1 in 4 individuals under age 65 rely on Medicaid as their primary source of health care coverage. Although all payers should be part of the solution in ensuring access to quality rural health care, this report largely focuses on strengthening rural health care delivery in Medicare and Medicaid given the outsized role these public programs play in rural communities.

RURAL HEALTH LANDSCAPE AND FINANCIAL OUTLOOK

Health systems in rural communities face ongoing challenges that threaten their financial well-being. Although federal support during the pandemic temporarily helped many struggling facilities, financial challenges remain
across rural health care systems. Notably, many rural stakeholders told BPC that once the federal public health emergency (PHE) ends and federal financial relief is no longer available, many of the rural hospitals that were struggling before the pandemic will once again be at risk of closure unless additional action is taken to shore up these facilities.

Among the hospital associations BPC interviewed, each indicated negative total operating margins over three consecutive years for at least some hospitals in their state, according to the most recently available cost report data. Hospitals experiencing persistent financial losses ranged from 6% in Nevada up to a high of 38% in Wyoming. An even greater share of hospitals experience losses on patient care alone, including half of Iowa’s 115 acute care hospitals over a three-year period.

BPC assessed financial vulnerability across multiple domains and found that out of 2,176 rural hospitals, 441 face three or more concurrent financial risk factors, putting them at risk of service reduction or closure (see Figure 1).5 Financial risk factors included: negative total operating margin, negative operating margin on patient services alone, negative current net assets, and negative total net assets.

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Figure 1: Financial stress affects a significant portion of rural hospitals, 2017-2020

A Minnesota Hospital Association executive said the situation is “simply unsustainable. Rural hospitals in Minnesota had a median operating margin of 1.4% in 2019 and about 30 hospitals reported negative operating margins.”

Stakeholders from Wyoming reported that financial health is always a challenge. All but two of the state’s 28 hospitals are classified as rural. Wyoming is considered frontier with a population density of six or fewer people per square mile and most hospitals are a 60- to 90-minute drive apart. In most cases, the Critical Access Hospitals (CAH) in the state have a 1% to 2% operating margin. A hospital association executive said, “Federal dollars have helped, but some rural facilities continue to sustain financial losses even amidst the federal relief.”

At the same time, over the past decade, most of the states had at least one converted hospital closure, where the facility closes its inpatient unit while continuing to provide other health care services, such as emergency, rehabilitation, or outpatient care. Approximately 83 hospitals have undergone a converted hospital closure nationally since 2005, compared with 98 hospitals that closed completely.

These conversions reflect a trend that is in line with broader federal efforts to offer rural communities other care delivery and reimbursement models that shift the focus away from inpatient care to emergency and outpatient services. One example is the Rural Emergency Hospital (REH) model that Congress created recently, which is discussed at length later in the report. This trend further highlights the need to provide rural providers with workable transformation opportunities that meet community or regional health care needs.

IMPACT OF POTENTIAL RURAL HOSPITAL CLOSURES

Rural hospital closures can significantly reduce access to health care services in the community, particularly in less densely populated places. According to a 2020 report by the U.S. Government Accountability Office (GAO), one-way travel time to health care services increased approximately 20 miles from 2012 to 2018 in communities with rural hospital closures. Travel times for less common services increased even more. For example, in some rural communities that GAO studied, the median travel distance for substance use treatment services rose from 5.5 miles in 2012 to 44.6 miles in 2018 following a closure. Closure of facilities also affects the availability of health care workers.

A Nebraska Hospital Association representative conveyed the impact of a 2021 closure, the state’s first closure since 2014, this way: A main driver of the closure was the low daily inpatient volume, which forced the hospital to reduce inpatient care. That reduction, in turn, led to further financial losses and placed the hospital under greater stress. “When the hospital closed, roughly 35 hospital employees lost their jobs. Post hospital closure, patients in the community must drive 17 to 20 miles to seek hospital-based services,” the representative said.

PROPOSALS TO HELP IMMEDIATELY STABILIZE RURAL HEALTH SYSTEMS

BPC recommends several short-term policies aimed at immediately stabilizing and strengthening access to CAHs and other small rural hospitals and rural health clinic services. The proposals are designed to serve as a bridge as health care systems exit the pandemic and move toward longer-term reforms. Policy recommendations include:

  • Providing rural hospitals full relief from across-the-board Medicare spending reductions, known as sequestration, until two years after the federal PHE ends.
  • Taking rural facilities out of the ongoing “extender” and “needing to be renewed” budget cycle, including by permanently authorizing the Medicare Dependent Hospital (MDH) program and making rural low-volume payment adjustments permanent.
  • Updating or rebasing Sole Community Hospital (SCH) and MDH payment structures to ensure reimbursement is in line with current costs.

STRENGTHENING THE R EH MODEL AND ADVANCING OTHER RURAL DELIVERY TRANSFORMATION MODELS

BPC also recommends advancing and refining new rural care delivery models, including, most notably, the REH model that Congress passed in December 2020 and which becomes available to rural hospitals in 2023. The U.S. Department of Health and Human Services (HHS) is considering how to implement this model. Although the REH model is consistent in many ways with BPC’s previous recommendations, additional steps are needed to ensure its success.

BPC received extensive feedback from rural stakeholders, health system leaders, and rural policy experts about the areas of the REH model that hold promise and areas that require refinement or additional consideration. Not every community or hospital will benefit from the REH model, but improvements to this delivery option would likely result in a higher participation rate among communities and facilities. A primary area of concern for stakeholders is how to structure the new, additional facility payment. Although payments would be made available to REH participants to cover services and supports beyond the typical Medicare reimbursement structure, stakeholders worry that such payments may be set too low or be too restrictive to prove useful to REHs.

The report also highlights other rural health care delivery models that are undergoing testing in certain communities by the Centers for Medicare and Medicaid Innovation (CMMI); examples include the Community Health Access and Rural Transformation (CHART) model and the multipayer global budget initiative that Pennsylvania is testing—the Pennsylvania Rural Health Model—which provides participating rural hospitals a fixed amount of revenue from Medicare and other payers, paid in advance, to cover all inpatient and outpatient care. As CMMI tracks progress for these models and similar programs, BPC encourages the secretary of HHS to use lessons from the initiatives to establish multipayer global budget initiatives that are tailored to rural communities and to provide additional opportunities for rural providers to transition to value-based care.

PROPOSALS TO ENSURE AN ADEQUATE RURAL HEALTH CARE WORKFORCE

Addressing rural workforce challenges, which were significant even before the pandemic but have worsened over the past two years, is also a priority. Rural health care systems consistently report that retaining workers and ensuring adequate staffing levels is one of their most vexing challenges.

Key problems during the pandemic include staff burnout, the need for providers to leave the workforce to care for family members, and wage pressures that made it difficult for financially strapped rural hospitals to compete with other employers.

Recommendations in this report would extend the capacity of the existing health care workforce and improve the retention of providers in rural areas. Discussed later, BPC outlines several recommendations, including leveraging federal tax credits to encourage health care workers to remain in rural communities and improvements in the rules that allow practitioners trained outside of the United States to practice in underserved areas. Additionally, BPC considers opportunities to reduce administrative burdens, improve reimbursement for rural providers, and restructure health professionals’ scope of practice regulations.

PROPOSALS TO SECURE ACCESS TO VIRTUAL CARE IN RURAL COMMUNITIES

Finally, the report sets forth recommendations aimed at further advancing the use of virtual care in all communities, including rural and frontier areas, beyond the temporary federal PHE flexibilities.

During the COVID-19 public health emergency, Congress, the administration, and states temporarily eliminated many historical barriers to telehealth; these policy changes paved the way for unprecedented utilization of telehealth. Most notable for rural areas, CMS waived the clinical site requirement allowing all beneficiaries, regardless of clinical diagnosis, to access telehealth services from their homes. Medicare also began reimbursing telehealth services at parity with in-person care. Many Medicaid agencies and private payers followed suit.

Stakeholders consistently reported that temporary telehealth flexibilities helped sustain access to clinical services during the public health crisis and will continue to be a valuable tool if certain flexibilities remain in place. This report includes a series of recommendations to build on this success to ensure that rural and frontier communities can continue to benefit from virtual care advancements.

Policy Recommendations

1. Provide Immediate Stabilization for Rural Hospitals, Rural Health Clinics (RHC), and Federally Qualified Health Centers (FQHC) (Page 28)

Provide Immediate Stabilization for Rural Health Systems

  • Congress should provide full relief to rural hospitals from Medicare sequestration payment reductions until two years after the public health emergency (PHE) ends.
  • Congress should increase reimbursement for Medicare CAH services by 3% starting in FY2023.
  • HHS should re-establish the CAH “necessary provider” designation process.
  • Congress should allow additional flexibility in CAH eligibility criteria.
  • Congress should update the Medicare base payment rate for Sole Community Hospitals (SCH) and Medicare Dependent Hospitals (MDH) to ensure that reimbursement reflects current costs.
  • Congress and HHS should make available to rural hospitals capital infrastructure grants or loans that they can use to modify service lines or improve structural or patient safety.

Make Certain Rural Hospital Designations or Payment Adjustments Permanent

  • Congress should take rural facilities out of the ongoing “extender” and “needing to be renewed” policy cycle.
  • Congress should make the MDH designation permanent.
  • Congress should make permanent adjustments for rural hospitals receiving low-volume payments.
  • Congress should allow SCHs to permanently receive additional payment for outpatient services.

Ensure Continued Access to Care at RHCs

  • HHS and Congress should monitor and evaluate the impact of establishing a uniform payment rate for independent and hospitalowned rural health clinics to ensure continued patient access to critical RHC services.

2. Strengthen the REH Model and Advance Other Rural Care Delivery Transformations (Page 34)

Ensure Adequate Funding Levels and Allow Flexible Use of Additional Facility Payments (AFP)

  • Congress and HHS should evaluate to what extent higher funding levels or phased-in funding for the AFP would more effectively incentivize rural hospitals’ conversion to the REH model. Consider phasing in the AFP with perhaps a higher payment for the first number of years until REHs are fully established in the community.
  • HHS should provide REHs the flexibility to use new AFPs to offer extra medical and social support services, such as wellness and preventive care; mental health care; substance use disorder services; oral health services; end-stage renal disease care; and transportation, including for maternal care services and for food or housing assistance.

Consider Alternative Payment Pathways for REHs and Evaluate the REH Reimbursement Structure on an Ongoing Basis

  • Congress and HHS should allow or test alternative payment pathways for eligible REHs to increase program participation and access to care for rural residents. One pathway could allow REHs to receive enhanced outpatient payments, plus a per member per month (PMPM) payment, based on the number of anticipated patients, as an alternative. The HHS secretary may also wish to consider some form of cost-based reimbursement—akin to how CAHs are currently paid—for certain services provided at REH facilities. HHS should also provide REHs the opportunity to participate in global payment models that the department is testing or implementing that combine funding from Medicare and other payers.
  • Congress and HHS should evaluate the REH reimbursement structure on an ongoing basis to ensure it can support sustained transformation among rural hospitals, particularly in communities that are most at risk of losing all hospital services if the local facility closes.

Determine the Role of Medicaid

  • HHS should clarify whether REHs would be eligible to receive Medicaid Disproportionate Share Hospital (DSH) supplemental payments. The department should also assess whether losing access to such payments would pose a barrier for struggling rural hospitals to transform to an REH.
  • HHS should evaluate the role Medicaid reimbursement will play in the REH program.

Address the Need for Additional Capital Infrastructure Investments and Technical Assistance and Support

  • To support REH transformation, HHS should ensure the hospitals are eligible for capital infrastructure funding that would enable them to update their facilities and ensure safe and high-quality care.
  • Congress and HHS should make technical assistance available to support hospitals in transitioning to an REH and to support ongoing REH operations.

Ensure Continued Access to Inpatient Hospital Care and Allow Communities to Maximize Local Infrastructure and Workforce

  • Congress and HHS should allow REHs to have a minimal number of inpatient beds or a specified number of enhanced observation beds in communities with little or no access to inpatient care.
  • Congress and HHS should expand REH program eligibility to CAHs or rural hospitals that closed within the past five years, but otherwise meet the REH criterion.
  • Congress and HHS should allow the establishment of REHs in areas that previously lacked a rural or critical access hospital, if establishment of such a facility could improve access to health care in the community.
  • HHS should establish guidance on how REHs can transform back to another hospital model if the REH model is no longer financially viable or appropriate in the community.
  • HHS should allow REHs to establish visiting provider programs to ensure adequate access to critical health care workers.
  • HHS should permit co-location of services to increase patients’ access to clinical and service offerings.
  • The Health Resources & Services Administration (HRSA) should expand eligibility for the National Health Service Corps (NHSC), the Nurse Corps, and other loan repayment programs to REHs to help address rural workforce needs.
  • Congress should also consider increasing funding for HRSA scholarship and loan repayment programs.

Ensure Quality Rural Hospital Care and That New Rural Models Meet Community Needs

  • To increase accountability and improve care in rural communities, Congress and HHS should require hospitals, including new REHs, to report at minimum on a narrow set of rural-relevant quality indicators. When possible and appropriate, such indicators should be risk-adjusted for social determinants of health and include access to care measures.
  • Congress and the HHS secretary should evaluate the feasibility of establishing a quality reporting program for RHCs to ensure quality care.
  • HHS should encourage communities to complete a community needs assessment—with full participation from stakeholders—to ensure that transformation to new delivery models will improve access to high-quality care in the local area and assist rural communities in taking the findings to develop a hospital transformation action plan.

Ensure Access to Ambulance Care, Virtual Care, and Behavioral Health, and Address Gaps in Maternal Care Services

  • The secretary of HHS should allow REHs to tailor emergency medical transfer agreements to meet the local community’s needs.
  • The secretary should clarify rules on ambulance reimbursement within the REH model, and ensure such reimbursement supports the transformation to the REH model and continued access to these critically important services.
  • HHS should evaluate the REH reimbursement rate and structure to ensure REH providers can maintain strong virtual and telehealth service capabilities.
  • HHS should ensure REHs are eligible to deliver all outpatient mental health and substance use services, as well as support additional service needs that surface during the community needs assessment.
  • HHS should ensure funding is made available to REHs from HRSA programs, such as the Title V Maternal and Child Health Block Grant program. In addition, it should encourage states to provide enhanced Medicaid reimbursement for maternal care services that can be provided appropriately in the outpatient REH setting.

REH Alternatives

  • The secretary of HHS should use lessons from current demonstrations to inform the establishment of additional multipayer, global budget initiatives that are tailored to rural communities and have the potential to improve care coordination and quality of care while reducing health care costs, where possible.
  • Congress and the secretary should establish an Extended Rural Services program that leverages local FQHC or RHC infrastructure.
  • The secretary should develop new models that promote increased coordination and integration of rural hospital and clinic services.

3. Ensure an Adequate Rural Health Care Workforce (Page 59)

Improve Utilization of the Currently Available Workforce

  • To expand access to behavioral health services, CMS should consider permanently adding behavioral health provider types to the list of Medicare-covered providers (such as peer support specialists).
  • To extend the existing workforce’s capacity, Congress and the administration should remove federal regulatory and legislative barriers that prevent non-physician providers from practicing at the top of their license.
  • Congress and the administration should support ongoing funding for Project ECHO, a distance-learning telementoring model designed to help primary care clinicians provide expert-level care to patients where they live.

Streamline Licensure Requirements

  • Congress should permit any physician with a medical license in good standing to deliver services via telehealth to Medicare beneficiaries residing in any state, similar to the exemptions allowed by the U.S. Department of Veterans Affairs.
  • Congress should authorize telehealth services for Medicare beneficiaries based on the location of the provider, rather than the location of the patient. This authorization could apply to issues of licensure and provider liability.
  • Congress should provide additional federal incentives to increase state participation in licensure compacts, such as increased Medicaid Federal Medical Assistance Percentage (FMAP) funding.

Strengthen the Rural Workforce by Leveraging the Federal Tax System and the Immigration System

  •  To improve retention of the workforce, Congress should establish a federal tax credit for providers practicing in rural areas.
  • Congress should exempt Indian Health Service (IHS) loan repayment funds from federal income tax, as is already done for other federal loan repayment programs.
  • Congress should reauthorize and expand the “Conrad-30” J-1 visa waiver program for physicians practicing in rural areas.
  • U.S. Citizenship and Immigration Services (USCIS) and the U.S. Department of State should expedite processing H-1B visas and green card petitions for individuals employed in Health Professional Shortage Areas (HPSAs) and Medically Underserved Areas (MUA).

Strengthen the Health Resources & Services Administration’s Rural Workforce Programs

  • Congress should appropriate funding for the National Health Care Workforce Commission to perform a comprehensive evaluation of the current workforce landscape, develop policy recommendations to ensure federal education and training programs meet critical needs, and provide oversight of federal workforce programs.

Improve Reimbursement for Providers Practicing in Rural Areas and Reduce Administrative Burdens

  • CMS should provide a nominal payment update for rural providers reporting data under the Quality Payment Program (QPP) and extend bonus payments for new Advanced Alternative Payment Model (APM) participants.
  • CMS should exclude enrolled Accountable Care Organization (ACO) beneficiaries when determining the regional benchmark in rural areas.
  • CMS should evaluate Merit-based Incentive Payment System (MIPS) data to ensure that rural providers are not disadvantaged by the program’s structure.
  • CMS should utilize readily available claims data to assess quality performance.
  • CMS should decrease qualifying participation thresholds for rural providers operating under APMs, RHCs, and FQHCs.

4. Secure Access to Virtual Care in Rural Communities (Page 76)

Ensure Effective Broadband Implementation and Collection of Accurate Broadband Data

  • Congress should ensure the effective implementation of the Infrastructure Investment and Jobs Act to make certain broadband access is delivered equitably throughout rural America.
  •  Congress and the National Telecommunications and Information Administration (NTIA) should ensure effective implementation of the Broadband DATA Act and monitor whether the broadband data collection effort by the Federal Communications Commission (FCC) improves the accuracy of mapping broadband access.

Ensure New Modalities for Service Access Are Permanently Available in Areas Without Broadband

  • Congress should make access to audio-only telehealth services permanent for beneficiaries with established in-person provider relationships.
  • HHS should evaluate which services should remain available via audioonly to beneficiaries, especially for those without broadband access and for those with digital literacy or other technology-related barriers.
  • HHS should expand asynchronous (store-and-forward) services beyond Alaska and Hawaii demonstrations for Medicare beneficiaries.

Remove the In-Person Visit Requirement Before Accessing Telemental Health Services

  • Congress should repeal all in-person visit requirements for telemental health services for Medicare beneficiaries living in rural areas and for those needing crisis services.

Permanently Expand the List of Authorized Sites of Service and Remove Geographic and Site of Service Restrictions

  • To ensure equitable access to services, Congress should permanently remove geographic and site of service restrictions for telehealth and audio-only services.
  • Congress should permanently authorize FQHCs and RHCs to serve as distant sites by amending section 1834(m) of the Social Security Act.

Extend Telehealth Flexibilities for Two Years Post-PHE and Evaluate the Impact

  • Congress should grant the HHS secretary the authority to waive telehealth and audio-only regulatory requirements for two years following the end of the PHE and require the secretary to analyze the impact of the PHE waivers on telehealth and audio-only utilization, health outcomes, and cost across beneficiary populations.
  • HHS should develop a payment methodology for audio-only and nonfacility- based telehealth services (for example, telehealth services accessed from a patient’s home), specifying whether reimbursement for services would be appropriate at in-person payment rates.
  • HHS should develop additional guidance for the billing of telehealth and audio-only services to ensure appropriate coding and improved data quality.
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