PIERRE | Twenty-six rural hospitals in South Dakota are threatened by a federal agency's proposal that could take away the extra payments they get for service to Medicare patients, a move that might even force some hospitals to close, a state official said.
State Health Secretary Doneen Hollingworth said the proposal is a long way from being approved, but state officials plan to fight the proposed change in the way rural facilities designated as critical access hospitals are reimbursed for care provided to Medicare patients.
"There would be a big hole, a big gap, if some of these facilities weren't able to stay open because of reimbursement policy," Hollingsworth said.
Critical access hospitals generally have to be 35 miles away from the nearest other hospital, but South Dakota and other states previously were allowed to designate other facilities that did not meet that distance requirement as critical access hospitals.
The Office of Inspector General in the U.S. Department of Health and Human Services recently recommended that Congress be asked to let federal officials re-examine hospitals within 35 miles of their closest neighbors, keeping critical access status and the higher payments only for those that serve patients who otherwise would not have reasonable access to hospital services.
The report said nearly two-thirds of the nation's 1,329 critical access hospitals would not meet the 35-mile distance requirement, and Medicare would save substantially if eligibility requirements were changed.
Critical access hospitals are reimbursed for 101 percent of their costs of treating Medicare patients, a much higher rate than other hospitals receive. The difference in 2011 was about $860,000 per rural hospital, according to the inspector general's report.
In a response, the federal Centers for Medicare and Medicaid Services generally supported the recommendation, but said it specifically supports President Barack Obama's more limited proposal to eliminate critical access status only for hospitals less than 10 miles from another hospital and to cut the reimbursement to 100 percent of reasonable costs.
Hollingsworth said she interprets the inspector general's report to threaten the 26 South Dakota hospitals the state designated as critical access hospitals even though they are less than 35 miles from other hospitals. Another 12 rural South Dakota critical access hospitals are not threatened because they are more than 35 miles from their closest neighbor.
The rural hospitals need the higher Medicare payments because they cannot make ends meet at the lower rate paid to larger hospitals, Hollingsworth said. Those smaller hospitals don't have enough other patients to subsidize losses on Medicare, she said.
Hollingsworth said she doubts Congress will accept the proposed change, but state officials will work with South Dakota's congressional delegation and others to fight the proposal.
"Believe me, we'd be weighing in loud and clear," she said.
Mark Thompson, chief financial officer of Regional Health, said he doesn't know if the proposed change would lead to the closure of the system's hospital in Deadwood. But the loss of critical access status would cost the Lead-Deadwood Regional Hospital about $500,000 to $750,000 a year because Medicare reimbursements outside the program are about 70 percent of what critical access hospitals get, he said.
Reimbursements to critical access hospitals already have reduced from 101 percent of costs to 99 percent because of the automatic federal budget cuts, Thompson said.
"If you're going to further reduce the hospital reimbursement, it would make it difficult to provide the same level of service in these communities, if not impossible," Thompson said.
Mike Burket, CEO of the Platte Health Center, located about 29 miles from the nearest other hospital, said his facility's existence would be threatened if it lost the higher Medicare reimbursement. Not only Medicare patients, but also others would have to travel farther for care if the hospital closed, he said.
"It would have catastrophic effects for health care," Burket said.
In nearby Parkston, Avera St. Benedict Health Center CEO Gale Walker said his hospital might survive the proposed change because it also operates a nursing home, assisted living center, a medical clinic and other facilities. But he said the hospital would have to cut back on community services like health screenings and education and might look at staff cuts.
Dave Hewett, president of the South Dakota Association of Health Care Organizations, said he doubts the proposed change will get approved, but he's worried it could lead to a compromise that that would still cut funding to rural hospitals.
"There's no middle ground on this, and we will basically defend our critical access hospitals as long as we have to," Hewett said.