Rural Hospital Support Act aims to offer additional financial assistance for rural hospitals and bolster health care access for rural communities

The Rural Hospital Support Act (RHSA) is a bipartisan bill currently under consideration by the U.S. Senate that would direct additional Medicare payments to rural hospitals by extending or enhancing certain reimbursement programs on a permanent basis. The bill’s sponsors have expressed concern that rural hospitals are more financially vulnerable than their non-rural counterparts. The sponsors have also emphasized that “rural hospitals are a lifeline to rural communities” and that “the closing of a rural hospital can mean the difference between life and death for people in the surrounding communities.” As such, the RHSA represents an effort to improve not only the financial stability of rural hospitals but to enhance access to health care services, including primary care services, for rural residents.

Background

The RHSA was first introduced in the U.S. House of Representatives in 2021 and again in the U.S. Senate in 2022, but it failed to get past committee referral either time. In March 2023, Sen. Bob Casey (D-Pennsylvania) and Sen. Chuck Grassley (R-Iowa) reintroduced the RHSA to the Senate in substantially the same form, which calls for amendments to the Social Security Act “to rebase the calculation of payments for sole community hospitals and Medicare-dependent hospitals, and for other purposes.” The RHSA aims to ensure that rural hospitals can remain financially solvent while also preventing hospital closures by modifying certain Medicare payments to such rural hospitals. The RHSA specifically addresses three primary areas of concern:

• The Medicare-Dependent Hospital (MDH) program
• The Medicare low-volume adjustment (LVA)
• Sole community hospitals (SCHs)

These designations aim to protect the financial viability of small, rural hospitals.

Under the RHSA, the MDH program would become permanent. The MDH program provides enhanced reimbursement to support hospitals that are generally rural and have at least 60% or more of inpatient days or discharges from Medicare patients. In particular, the MDH program allows eligible hospitals to receive the sum of their inpatient prospective payment system (IPPS) payment rate, plus 75% of the amount by which their cost per discharge exceeds the IPPS rate. Further, the RHSA would add an additional base year from which MDHs could choose when calculating payments. The MDH designation was created in 1989 and has been reauthorized 10 times, most recently in 2018. However, the program is currently set to expire Oct. 1, 2024.

Additionally, the RHSA would make permanent the Medicare LVA. The LVA provides financial assistance to hospitals in rural communities whose operating costs often outpace their revenue due to a low volume of discharges. Under the LVA, these rural hospitals receive a payment adjustment based on a sliding scale formula. Like the MDH, the LVA is currently set to expire on Oct. 1, 2024.

Finally, the RHSA provides additional support for SCHs. To be eligible for SCH classification, a hospital must show, among other eligibility criteria, that it is the sole source of inpatient hospital services reasonably available in a certain geographic area. Upon obtaining this status, SCHs receive increased payments based on their cost per discharge in a base year. The RHSA would allow SCHs to select an additional base year for calculating their fiscal costs (from fiscal year 2012 to fiscal year 2016). By allowing SCHs an additional base year to choose from in determining payment, the RHSA would enable such hospitals to tie reimbursement estimates to more recent cost trends, which may be more indicative of an SCH’s fiscal performance.

The RHSA parallels the increased emphasis on rural health care

The proposal of the RHSA further demonstrates an increased focus on rural health care providers, which has been prioritized in recent years. Notably, and in connection with this trend, the U.S. Centers for Medicare & Medicaid Services (CMS) recently codified a new provider category of “rural emergency hospitals” (REHs). REH services include emergency department services, observation care, and, at the option of the REH, other specified outpatient medical and health services that do not exceed an annual per patient average of 24 hours. Rural hospitals with not more than 50 beds and critical access hospitals enrolled in Medicare as of Dec. 27, 2020, may apply to convert to, and enroll in, Medicare as an REH. Medicare-enrolled REHs will receive monthly facility payments and enhanced outpatient payment amounts for REH services provided on or after Jan. 1, 2023. According to CMS, the new provider type promotes equity in health care for those living in rural communities by facilitating access to needed services.

Rural providers are often financially fragile and do not have the same economic advantages as providers in urban communities. These providers are generally more dependent on Medicare revenue due to the high number of Medicare beneficiaries living in rural areas. Individuals living in rural communities are often older, have higher average poverty rates, and maintain higher rates of chronic illnesses than residents in urban areas. Further, practitioner shortages and facility closures in rural areas present additional challenges to rural residents by impeding their access to care. Compared to urban hospitals, rural hospitals have lower average operating margins and are at increased risk of closure. Given that a significant percentage of rural hospitals continue to experience financial challenges, it is unsurprising that there is an increased emphasis on policies aimed to support these providers. The proposed policies in the RHSA and the new REH provider category are two examples demonstrating how the rural health care landscape is changing in response to such challenges. Providers involved in the provision of health care in rural areas will want to assess these policy changes more globally so that they can take advantage of the opportunities that are likely to be more beneficial for their organizations and communities.

Potential implications for primary care access

One of the key barriers to accessing care in many rural communities is provider availability. Rural areas have significantly fewer physicians per capita in comparison to metropolitan areas, and a lack of primary care providers remains a persistent problem. As such, the intent of the RHSA to offer additional financial support for rural hospitals underscores the federal government’s view in regard to the value of such facilities, including as primary care providers. Given the scarcity of health care providers in rural areas generally, rural hospital closures are more likely to exacerbate the availability of primary care services in such areas.

As has been widely discussed, telehealth increasingly is viewed as a viable means of improving access to care for patients in rural areas, and we have assisted clients with telehealth arrangements involving rural communities. Nonetheless, the RHSA highlights the continuing need for brick-and-mortar facilities, particularly for patients who are older, have more complex medical needs, or have difficulty using or accessing internet-based platforms. As such, the passage of the RHSA would likely correlate positively with access to primary care, in addition to other hospital-based health care services.

Final thoughts

The passage of the RHSA would be a meaningful step by Congress to shore up the financial stability of rural hospitals. Given the increased focus on rural health generally, the RHSA aligns with the federal government’s recent efforts to create policies aimed at addressing the disparities in rural health. The long-term trends in rural health suggest that, absent sustained efforts to address the precarious financial position of many rural health care providers, access to primary care and other health care services are likely to continue to decline in rural areas. As such, the RHSA offers an opportunity to implement policies intended to reverse those trends and improve health care access for rural residents.

Gabriel T. Scott is a partner in K&L Gates’ Research Triangle Park office. Katherine L. Rippey is an associate in K&L Gates’ Nashville office. This article is for informational purposes only. Nothing herein is intended or should be construed as legal advice or a legal opinion applicable to any particular set of facts or to any individual’s or entity’s general or specific circumstances.