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Hospital Closures, Cuts Mean Fewer Options for Rural Patients

Aug. 11, 2020, 9:50 AM

The renewed Covid-19 outbreak and the aftershocks from the first wave of infections are forcing hospitals to make tough financial decisions as they prepare to absorb roughly $120 billion in losses through the second half of 2020.

Hospitals are resuming elective procedures that were halted during the early months of the pandemic and are slowly rebuilding lost patient volume and revenue. But they still face an uncertain future as ripple effects from the outbreak continue to force closures, job cuts, and service cutbacks.

Those financial decisions threaten to reduce competition and patients’ access to care—especially in rural areas, where hospitals were already struggling and where patients sometimes have to travel great distances to see a health-care provider.

Over the last 30 days, U.S. hospitals have continued to see increases in inpatient admissions, observation visits, and emergency visits, according to data from Strata Decision Technology, which provides financial analytics for the health-care industry.

Hospital outpatient visits were down 48% in April compared to 2019. As of July 25, they’re now up 27% from 2019, according to Strata’s latest patient encounter data from 237 hospitals in more than 40 states.

But the rebound in patient volume has been spotty and the numbers alone don’t tell the complete story. While patients are returning to hospitals for elective care in the Midwest and Northeast as the outbreak stabilizes, inpatient admissions at Southern hospitals are spiking mainly due to a resurgence of the virus.

“That’s all across the South,” said Steve Lefar, executive director of the data science division at Strata. “We may be hearing just about Texas and a couple of other states, like Florida, but it’s happening all over the South.”

Federal pandemic relief funds have helped hospitals weather the loss of elective procedures, but a new national surge of Covid-19 patients could jeopardize their recovery, said Chip Kahn, president and CEO of the Federation of American Hospitals.

“If your beds are filled with Covid patients, even with the Medicare-plus-20% and some of the other payment adjustments, you’re still behind because the Covid patients are so expensive that their costs aren’t covered by those payments,” Kahn said.

Elective, or scheduled procedures, can include anything from minor surgeries to the removal of a cancerous tumor. They are the financial engine for most hospitals and can account for up to 75% of a facility’s revenue, according to the American Hospital Association.

Cuts, Closures

Traditional Medicare paid an average of $25,255 per Covid-19 hospitalization in the first half of 2020, claims data show. One-third, or 33% of those hospitalizations lasted eight to 15 days, 15% lasted 16 to 30 days, and 5% were for 31 days or longer.

The inpatient unit at Saint Luke’s Cushing Hospital in Leavenworth, Kan., closed its doors July 17. The entire hospital will close Oct. 1. The shutdown comes after the Saint Luke’s Health System invested more than $20 million over the last five years to improve the building and its emergency services to better serve the area.

When the pandemic hit, the hospital boosted protective gear and staffing to gird for a surge of cases.

But the “increased expense came at the same time we had to defer elective procedures,” the heath system said in a recent statement. “These factors resulted in significant financial strain and ultimately led to the decision to close.”

Saint Luke’s Health isn’t alone:

  • Children’s Healthcare of Atlanta, which operates three hospitals, began furloughing nearly 400 clinical and support staffers in June due to financial strains.
  • First Texas Hospital Cy-Fair, a boutique 50-bed facility in Houston that featured “an epicurean kitchen” and “onsite chef,” closed its doors on July 26 after less than four years of operation.
  • Four days later, Bluefield Regional Medical Center in West Virginia ceased operations as an acute care hospital after nearly 50 years of service.

Adeptus Health, which owns First Texas, didn’t provide a reason for the closure nor respond to a request for comment.

Princeton Community Hospital, which owns Bluefield, said in a statement that declining patient volume, low Medicare and Medicaid payment rates, and “the unexpected and dramatic effects of the COVID-19 pandemic” forced that facility’s closure.

Bluefield and Cushing are the 12th and 13th rural hospitals to close in 2020, according to the Sheps Center for Health Services Research at the University of North Carolina.

Even before the pandemic, nearly half of rural facilities were operating at a loss following a record 18 closures in 2019, said Maggie Elehwany, vice president of government affairs and policy at the National Rural Health Association.

“What I am so concerned about is just keeping rural providers’ doors open so that they’ll be there when the pandemic hits,” she said.

Requests for Help

Elehwany said rural providers should get 20% of future pandemic relief funds since they care for 20% of the nation’s population.

Kahn wants Congress to relax hospitals’ loan repayment terms under Medicare’s Accelerated and Advance Payment Programs, which provide hospitals up to six months advance payment on their Medicare billings during emergencies. Since March 28, when the program was expanded, it’s provided more than 21,000 loans totaling $59.6 billion to Medicare providers, including hospitals.

But after a four-month grace period, hospitals are supposed to begin paying the loans back. If they don’t, Medicare can garnish 100% of their future reimbursements until the money is repaid. If the money isn’t paid within a year, the facilities must pay interest of about 10%, Kahn said.

The repayment start date on many loans began in early August. But many hospitals, still struggling with the financial strain of the pandemic, aren’t able to repay the money yet, he said.

The federation wants Congress to extend the repayment start dates into 2021 and reduce the amount that Medicare can garnish from 100% of reimbursements to 25%.

“Our top priority is to work out new terms for the Medicare Advance Payment program,” Kahn said.

To contact the reporter on this story: Tony Pugh in Washington at tpugh@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Brent Bierman at bbierman@bloomberglaw.com

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