Rural hospitals walk financial tightrope, struggle to buy IT
As finances head south, more small facilities are at risk of closing, and tech investments are on hold.
The financial sustainability of America’s rural and critical access hospitals is weakening, making it difficult for facilities to enhance their information technology portfolio. In fact, lagging IT is among the factors that will make it hard for small facilities to stay open.
During the last five years, rural hospitals have seen an erosion in crucial reimbursement mechanisms, particularly falling Medicare payments that dropped because of the congressional sequester that implemented across-the-board funding cuts, says Michael Topchik, senior vice president at iVantage Health Analytics, a data analytics and decision support vendor.
Since 2010, iVantage has annually analyzed the status of rural hospitals, using about 70 performance metrics. It collaborates with the Rural Health Policy Institute, which shares the analysis with legislators, policymakers, advocates and hospital leaders.
The iVantage analysis shows that 67 rural hospitals have closed since 2010, but rising economic pressures are putting more facilities on the brink, leaving a growing percentage of the nation’s 2,200 rural hospitals at risk of closing, Topchik says. Last year, 283 rural hospitals were vulnerable to closing; this year the figure jumped to 673, with 210 of them most at risk, he said.
And it’s becoming hard for rural facilities to break even, data show. Some 35 percent of rural hospitals are losing money, and almost two-thirds of all rurals operate at a negative operating margin, meaning that without financial assistance from other sources, they would be losing money. Just about every rural hospital is struggling, even though 60 million individuals are depending on them for medical services.
Many rural hospitals are delaying or eliminating capital outlays just to keep the lights on, the analysis shows. That limits their ability to make new investments in improvements, including health information technology.
Also See: Bill seeks to expand Medicare reimbursement for telehealth
While most rural hospitals have electronic health record systems—having implemented them to get funding from the EHR meaningful use program—many now are finding it difficult to afford maintenance or updates, which are expensive, Topchik says. And now, federal EHR incentives are winding down, so it’s likely that federal funds won’t be available to help rural facilities optimize EHRs and acquire other IT tools needed to deal with emerging economic pressures from population health management approaches.
Moving clinical data to cloud services, and creating interfaces to support interoperability and population health are expensive—particularly the interfaces. The importance of interoperability in rural areas to connect far-flung providers with hospitals cannot be overestimated, Topchik says. “EHRs don’t talk well with each other, even within the same EHR suite of software in a hospital.”
But Topchik wonders who will pay for next-generation patient portals to support patient engagement and new population health management applications. He believes the federal government needs to create a new incentive program to help fund the post-EHR adoption of information technologies.
Additional help also has been introduced in Congress during the current session, but has not yet been enacted. Sen. Charles Grassley (R-Iowa) introduced S. 607, the REACH Act, which among other goals, would create an alternative delivery model for small-volume hospitals, particularly critical access hospitals. The legislation, which passed the Senate and recently was sent to the House for consideration, would enable elimination of inpatient units, but give inpatient reimbursement-level payments to keep hospitals’ emergency departments open.
Rep. Sam Graves (R-Mo.) in July 2015 introduced H.R. 3225, the Save Rural Hospitals Act, which would reverse sequester-driven spending cuts to rural hospitals and unwind cuts to reimbursement of bad debt, among other issues. The bills has 23 co-sponsors and has been referred to four committees, but it has yet to be formally considered.
During the last five years, rural hospitals have seen an erosion in crucial reimbursement mechanisms, particularly falling Medicare payments that dropped because of the congressional sequester that implemented across-the-board funding cuts, says Michael Topchik, senior vice president at iVantage Health Analytics, a data analytics and decision support vendor.
Since 2010, iVantage has annually analyzed the status of rural hospitals, using about 70 performance metrics. It collaborates with the Rural Health Policy Institute, which shares the analysis with legislators, policymakers, advocates and hospital leaders.
The iVantage analysis shows that 67 rural hospitals have closed since 2010, but rising economic pressures are putting more facilities on the brink, leaving a growing percentage of the nation’s 2,200 rural hospitals at risk of closing, Topchik says. Last year, 283 rural hospitals were vulnerable to closing; this year the figure jumped to 673, with 210 of them most at risk, he said.And it’s becoming hard for rural facilities to break even, data show. Some 35 percent of rural hospitals are losing money, and almost two-thirds of all rurals operate at a negative operating margin, meaning that without financial assistance from other sources, they would be losing money. Just about every rural hospital is struggling, even though 60 million individuals are depending on them for medical services.
Many rural hospitals are delaying or eliminating capital outlays just to keep the lights on, the analysis shows. That limits their ability to make new investments in improvements, including health information technology.
Also See: Bill seeks to expand Medicare reimbursement for telehealth
While most rural hospitals have electronic health record systems—having implemented them to get funding from the EHR meaningful use program—many now are finding it difficult to afford maintenance or updates, which are expensive, Topchik says. And now, federal EHR incentives are winding down, so it’s likely that federal funds won’t be available to help rural facilities optimize EHRs and acquire other IT tools needed to deal with emerging economic pressures from population health management approaches.
Moving clinical data to cloud services, and creating interfaces to support interoperability and population health are expensive—particularly the interfaces. The importance of interoperability in rural areas to connect far-flung providers with hospitals cannot be overestimated, Topchik says. “EHRs don’t talk well with each other, even within the same EHR suite of software in a hospital.”
But Topchik wonders who will pay for next-generation patient portals to support patient engagement and new population health management applications. He believes the federal government needs to create a new incentive program to help fund the post-EHR adoption of information technologies.
Additional help also has been introduced in Congress during the current session, but has not yet been enacted. Sen. Charles Grassley (R-Iowa) introduced S. 607, the REACH Act, which among other goals, would create an alternative delivery model for small-volume hospitals, particularly critical access hospitals. The legislation, which passed the Senate and recently was sent to the House for consideration, would enable elimination of inpatient units, but give inpatient reimbursement-level payments to keep hospitals’ emergency departments open.
Rep. Sam Graves (R-Mo.) in July 2015 introduced H.R. 3225, the Save Rural Hospitals Act, which would reverse sequester-driven spending cuts to rural hospitals and unwind cuts to reimbursement of bad debt, among other issues. The bills has 23 co-sponsors and has been referred to four committees, but it has yet to be formally considered.
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