When Congress packaged $50 billion for rural healthcare inside HR-1, it offered a number large enough to generate headlines and excitement. But the distribution of funds, planned over five years, has raised questions.
The Rural Health Transformation Program arrived in challenging sector; last year at least 15 closed and more are in danger of closing. At the time, critical access hospitals considered a 4% operating margin a stretch goal, and where the loss of Medicaid funding, state directed payments, and ACA subsidies are all hitting simultaneously.
The money was welcomed. The mandate attached to it is generating considerably more skepticism due to the lack of standard federal guidance for states administering the funds.
“Each state is translating how to implement this Rural Health Transformation fund,” said Sommer Kleweno Walley, associate vice president of medical affairs at the University of Washington and CEO of Harborview Medical Center, during a panel discussion at the Becker’s 16th Annual Meeting in April. “I’m very much worried that it’s not going to be transformative in nature. There are so many hospitals that are in so much trouble from a stability standpoint. I’m not sure it’s going to do what it’s trying to do because they can’t transform right now when they can’t pay the payroll.”
Transformation requires stability to build from and most rural hospitals are in the black. Across conversations with rural health leaders this at the conference, a consistent concern emerged: the hospitals most in need of the fund’s dollars are the least positioned to access them, because the transformation the program envisions — alternative payment models, value-based care contracts, digital infrastructure — assumes organizational capacity that financially distressed rural providers don’t have.
Medicaid cuts also unveiled as part of the HR-1 legislation last year will hit rural healthcare facilities hard, as many rural communities have a high percentage of people on government payers.
“I feel like it was kind of a cherry that was put out there,” said Ms. Kleweno Walley. “Put the cherry on top of a healthcare bill, and now there’s not good oversight of it.”
One in three rural hospitals is at risk of closure right now and many don’t have an immediate lifeline to keep operations running. Leaders are used to thin margins, but they’re nervous about the future and searching for additional revenue streams.
“The reality is that the rural transformation fund does not make up for the loss of state directed payments, MCO taxes and provider taxes,” said Stephen Parodi, MD, executive vice president of external affairs, communications and brand at The Permanente Federation and The Permanente Medical Group. “We’re talking about orders of magnitude of billions of dollars of cuts. I’m extremely worried about the rural safety net in this country writ large.”
If hospitals can’t make payments, their closures have a ripple effect on the community; patients lose close access to care and employees lose their jobs. Rural hospitals are often an economic force in their communities but don’t have the funding sources to withstand upcoming cuts.
“In a state where we’ve got a footprint, we’re seeing significant risk for hospital closures regardless of what this rural transformation fund’s about,” Dr. Parodi said. “There’s no way the states can make that up. There’s a bunch of advocacy that’s going to need to occur from the healthcare industry and that needs to come from multiple sectors, whether you’re talking about plans, hospitals or provider groups.”
One of the biggest challenges for rural healthcare is tackling the digital divide. There are areas of the country without strong internet access and bandwidth to connect people virtually to their healthcare providers. Hospitals are operating on aging EHR systems and unable to make routine updates, let alone incorporate advanced AI into their operations.
“A lot of the things in rural healthcare rely on technology, but when you get into rural areas, the technology is not available,” said Craig Glover, EdD, president and CEO of Family Health Centers in Charlston, W.Va. “I live in Charleston, the capital city. I have gig internet to my house, but if I get in my car and drive 15 or 20 minutes, I’ll get to some places where my cell phone doesn’t work. I would like to see policies around building the technology infrastructure in rural areas so that we can take advantage of some of those things. “
Van Loskoski, CEO of Stevens County Hospital in Toccoa, Ga., said the state is using about a quarter of the funds in a single year to provide technical support to move providers to an alternative payment model. Other states are taking different routes, prioritizing certain projects to build for the future or upgrading technology.
But there’s also no guarantee that the funds go to rural hospitals or health centers.
“There’s a big opportunity there, but there’s also a big opportunity for assistance to be missed,” said Mr. Laskoski. “Make no mistake; it is not called the Rural Hospital Stabilization Program. It’s called the Rural Health Transformation Program, and that means, in title and intention, that pool of funds is intended to change the way that healthcare is delivered in rural areas.”
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