Over 7% of care offered at critical access hospitals (CAHs) is uncompensated, compared to 5% at urban hospitals. In fact, more than 40% of rural hospitals report an operating loss, particularly in the South. More than 80 rural hospitals have closed since 2010.


Rural areas tend to have higher rates of poverty, less health insurance coverage, and longer travel times to access health care. As a result, CAHs are more likely to not be compensated for care for patients who tend to be older and sicker than those in urban areas. CAHs are especially vulnerable to bad debt compared to other rural and urban hospitals, which may make them less eligible for additional aid.


Critical access hospital financial models are fundamentally different from other models. For one thing, they have less in-house support, such as legal advice. Their size also affects how they operate—they cannot operate in the same way as a large urban hospital that’s part of a system.


What Challenges Do Critical Access Hospitals Face?


Uncompensated Care


Uncompensated care can be one of two types: charity care, or bad debt. Charity care occurs when the hospital determines a patient’s inability to pay, while bad debt is typically unforeseen and can include refusal to pay. Some bad debt comes from patients who are otherwise eligible for charity care, but who aren’t picked up by a charity care program.


Budget Cuts


President Obama’s 2014 budget proposal suggested that reimbursement for CAHs be reduced from 101% of costs to 100% of costs and recommended that qualifications for CAHs be revisited. After the “necessary provider” provision was removed in 2006, revisiting hospitals that are close to other hospitals, even in rural areas, seemed a logical next step. The Office of Inspector General recommended in a report on CAHs that CAHs in areas with high rates of poverty be allowed to retain the CAH designation, despite their location. However, advocates at CAHs argue that without Medicare reimbursement, many former CAHs would be forced to close their doors, limiting access to care for rural patients.


Lack of Specialization/Less Up-To-Date Technology


Remaining close to home to receive care can be difficult if the local hospital lacks specialists, such as psychiatric providers. However, specialists can be hard to attract and retain in rural areas. There are over 5,000 mental health provider shortage areas in the United States and not enough medical students are studying psychiatry to fill the growing need.


Lower Medicare reimbursement rates also can lead to less up-to-date technology in rural hospitals. Some hospitals respond to budget difficulties by closing their labor and delivery departments, which can create difficulties for expectant mothers in rural areas. About 45% of rural communities lack a hospital with dedicated maternity care.


Support for Critical Access Hospitals


Hospitals with a higher than average share of uncompensated care may receive payments from Medicare to help them keep their doors open. However, CAHs need to revisit how they identify and classify charity care and bad debt to avoid unnecessary costs and poor reporting.


Telehealth is another cost-effective solution that can improve access to specialty care in rural hospitals. Partnerships with urban hospital systems can connect patients at a CAH or other rural hospital with a specialist, eliminating the need to travel long distances for a consultation with a specialist and slashing time spent on a wait list for an overburdened urban clinic. This would allow specialists such as psychiatrists to serve both urban and rural areas without traveling long distances.


Telehealth can even be used to train physicians in rural areas, allowing primary providers to offer a wider range of care, including specialty care. Again, this allows patients to be seen without having to travel to see a specialist.


Preventative care can help reduce costs by preventing unnecessary hospitalizations and emergency department visits, but without the revenue from preventable hospitalizations or support from larger hospital systems, hospitals may close. A new system for providing comprehensive care is badly needed.


Another solution for support could be greater community engagement. By working directly in the community and becoming a part of all levels of health care, critical access hospitals can increase value for patients as well as patient loyalty and goodwill in the community.


Offering Care Close to Home


Critical access hospitals allow rural patients to receive care that is close to them. In an emergency, a CAH may be the only hospital which rural residents can reach quickly.


Allowing patients to stay in rural areas for their care benefits everyone, including payers such as insurance companies and Medicare. Rather than travelling to another facility in an urban area, which can be costly and result in more out-of-pocket costs since they may be seeing out-of-network providers, patients can receive care closer to home.


“Rural hospitals’ survival and their ultimate effectiveness benefit everybody, including payers,” said Don Lilly, senior vice president and clinical health development director at UAB Health System, as quoted in “Health Systems Pitch In to Protect Rural Providers” by Alex Kacik on Modern Healthcare In Depth. “Keeping patients in local markets and out of higher-end tertiary facilities saves money and improves quality.”


To read more about critical access hospitals, visit https://www.ruralhealthinfo.org/topics/critical-access-hospitals or https://www.ruralhealthinfo.org/resources/10536 for general information on rural health.


Katherine Hartner is Encounter Telehealth’s Social Media and Marketing Intern. She is studying journalism, with a concentration in PR and advertising, at UNO. She has written multiple articles for the Gateway, UNO’s student-run newspaper, and is active with MavRadio, UNO’s college radio station. In her free time, she enjoys writing fiction, gardening, and volunteering.