Federal cuts, financial instability and competition leave many rural hospitals fearing the future

Many rural hospitals could be forced to close because of cuts to the Critical Access Program and the fact that, according to the National Rural Health Association, , 41 percent of critical-care hospitals are losing money, reports Jenny Gold of Kaiser Health News. This would be devastating to many rural communities, with a great impact felt by low-income and elderly residents. "A small hospital is often one of the biggest employers in a rural town, and closures 'can have an outsized economic impact,'" Eric Zimmerman, a health care lawyer and Washington lobbyist, told Gold.

More than 1,300 U.S. hospitals and nearly one in four acute-care facilities are designated as "critical access," giving them slightly higher Medicare and Medicaid reimbursements in return for limits on care they can provide. Many such hospitals like Hood Memorial, about an hour outside New Orleans, are dealing with uninsured patients, inability to collect payments from patients, and fewer funds from federal and state agencies, Gold reports. Many of these hospitals "tend to provide lower quality care" and are "less financially efficient than other facilities, according to a 2010 study published in the Journal of Health Politics, Policy and Law. Hood, for example, had $700,000 in losses last year despite the higher reimbursements. "It's a lot of variables, and all of them right now are working against us," CEO Hoppie Jones told Gold.

To prevent closures of rural hospitals and ensure "Americans in in isolated areas would still have access to health care," the federal government started the critical access program in 1997. To qualify, hospitals had to have 25 or fewer beds and be at least 35 miles away from another facility. However, states could waive the distance requirement, and many did, leaving hospitals like Hood with at least four other competing hospitals "within a 26 mile radius," Gold reports.

Passport to lose exclusive contract for Louisville-area Medicaid at end of 2012; more choice needed, federal agency says

The exclusive contract the state has with Passport Health Plan, which provides Medicaid coverage for 170,000 people in Jefferson and 16 neighboring counties, has been extended until the end of next year. But after that, the state must adopt a different "delivery model that ensures adequate choice for Medicaid beneficiaries" in that area, a letter from the federal Centers for Medicare and Medicaid Services reads.

Since 1997, Passport has exclusively provided coverage for that population, reports Tom Loftus of The Courier-Journal. Gov. Steve Beshear said Tuesday the state will start looking at alternatives for how to provide choice for the area. In the rest of Kentucky, Medicaid recipients can choose from three managed care organizations.

Sen. Julie Denton, R-Louisville, said she is "very concerned" about the major changes that will be involved. "We don't know what's going to happen," she said.

A year ago, Passport received a scathing report from state auditor Crit Luallen, who found wasteful spending "and said it had improperly transferred millions of its reserves to the health care provider organizations represented on its board," Loftus reports. After an investigation by Attorney General Jack Conway, those providers paid $26.4 million to pay for the transfers. (Read more)