Edelen says rural hospitals are top issue for rural U.S. and rural Kentucky

By Molly Burchett and Melissa Patrick

Kentucky Health News

BOWLING GREEN, Ky. – State Auditor Adam Edelen has finished his series of town-hall meetings across the state to get a better understanding of the struggles faced by rural hospitals, but this isn’t the last you will hear from him about the brewing crisis among these hospitals – a crisis that he says is not just a Kentucky problem but “the most important issue facing rural America.”

Hours before his last town hall, in Bowling Green on Sept. 19, Edelen told Kentucky Health News that the tour was not just about assessing the finances of these hospitals, because he has heard politicians in both parties say “We just have to give up on rural Kentucky. . . . I’m passionate about not giving up on rural Kentucky.”

Challenges faced by rural hospitals are very different than those faced by suburban or urban hospitals, Edelen said, so a “one-size-fits-all” approach won’t keep Kentucky’s rural hospital network in vibrant or sustainable.

He noted that Medicare and Medicaid reimburse hospitals at below the cost of providing care, with the expectation that they will make it up from private payers, but such payers are in short supply at many rural hospitals because the economic recovery is “nonexistent in rural areas.”

Changes in the health-care system

Some rural hospitals are expressing concerns about the expanding Medicaid rolls under the Patient Protection and Affordable Care Act, but Edelen said in the interview that most of the complaints he heard are about Kentucky’s move to put Medicaid under managed care in 2011.

He said in Bowling Green that Kentucky rolled out in six months what should have taken 18 months, creating a “extraordinarily complex” and costly Medicaid system that still has no-pay and slow-pay issues. Then came the PPACA, generally known as Obamacare, creating an unprecedented level of complexity.

The extra administrative overhead is particularly difficult for small hospitals and health-care providers, he said, and payment disputes with managed-care companies can be existential threats to community hospitals with small cash reserves. The Nicholas County Hospital in Carlisle closed in May.

“We’ve got a number of hospitals in Kentucky who have less than 15 days of cash reserves,” Edelen said. “One hospital in particular told me that leaders meet weekly to figure out about who’s getting paid and how much just to keep the doors open. . . . County officials are afraid they are going to lose their hospital, while the cabinet says all is well.”

Cabinet for Health and Family Services Secretary Audrey Haynes said in an email, “There is little doubt that Kentucky’s health-care industry has gone through tremendous transformation since November 2011.” She said managed care within and “many other important changes . . . have created a health-care delivery system with more accountability; increased focus on prevention and early detection; decreased use and high costs of our emergency rooms for non-medical emergencies; and are actually treating and managing both mental and physical healthcare of our Medicaid consumers to achieve healthier outcomes.”

Haynes added, “With the assistance of managed care, we saved Kentucky taxpayers $1.3 billion of state and federal funds in the last biennium budget ending June 2014,” while providers “had a record revenue year, receiving over $3.4 billion.” She concluded, “I realize the implementation of managed care has not always been easy for our hospitals and other health-care providers, but we continue to work closely with them and make adjustments and improvements.”

Edelen said in the interview that hospitals “know their business models have to change,” but health-access to care is still an issue, and if hospitals close, those issues will grow. He said he understands that not all rural hospitals can survive, but “You gotta try.”

He also said rural hospitals are needed to deliver on the promise of Obamacare: “What’s the good of having everybody insured if there’s no one to provide care?” What’s the government doing to soften the blow coming with these health-care changes?”

Kentucky is not alone

Kentucky has handled implementation of the reform law better than other states, Edelen said, but there are still big problems that no one is thinking about.

Like other rural hospitals across the country, community hospitals in Kentucky have long relied on federal subsidies of facilities with high numbers of Medicaid patients and uninsured people. Since the reform law was designed to cut the number of uninsured, it will also phase out Disproportionate Share Hospital (DSH) Medicaid payments to hospitals by 2020.

Kentucky’s DSH money shrank by 4.2 percent in the fiscal year that ended June 30. The allocation is determined federally, but state officials have considerable discretion in how the cuts are applied to individual hospitals.

“I fear that the disappearance of DSH payments could be a death knell for Kentucky’s rural hospitals,” which would have serious economic repercussions for their communities, Edelen said. “We have an opportunity to be a thought leader here because this is going on all over the nation.”

Nationwide, many rural hospitals are closing down just like the hospital in Nicholas County. Reuters reported that 24 rural hospitals have closed across the country since the start of 2013, double the pace of the previous 20 months, leaving whole communities without quick access to acute care.

“This needs to be an issue for rural America in the 2016 presidential campaign,” Edelen said. “Now that the Farm Bill’s passed, this is the most important issue facing rural America, and the competition’s not even close.”

Not just a health-care problem

Research shows rural hospitals contribute significantly to local economies. Health care accounts for 15 percent to 20 percent of all jobs in rural communities,  Dr. Mary Wakefield, now the administrator of the federal Health Resources and Services Administration, told a congressional hearing in 2000. Furthermore, health services and schools are important quality-of-life factors for attracting and retaining employers and retirees.

“When you lose your rural hospital you lose not only one of the primary employers in a county, but you tend to lose the leading corporate citizen,” Edelen said in the interview. “You lose things like ambulance services and providers networks and then the burden on health departments becomes more pronounced; that is not sustainable long term.”

For prosperity, a community needs an educated work force, a healthy economic environment and a network that provides health care, he said. “These are the things that are the non-negotiables in the 21st Century if you are going to bring prosperity to every part of Kentucky,” he said in Bowling Green.

Edelen told the audience of about 120 that he wanted them to go home and talk about this issue in their communities to make Frankfort, with its “fifteen-minute attention span,” pay attention. “Kentucky at its core is always going to be a state with a rural character,” he said.

The auditor’s office is compiling a report that will also include a financial “stress test” of 66 rural hospitals. Edelen said he aims to release it in November or December. “I want to clearly define the problem,” he said, “and then facilitate a conversation to solve the problem.”

He said in Bowling Green, “What this is really about in a nutshell is whether the political leadership in Kentucky is going to give up on rural Kentucky.”