Balancing act: Alabama weighs the cost of rural hospital survival with inpatient closure plan

The Alabama Department of Public Health (ADPH) Thursday voted to solicit public comment on a set of rules that would give rural hospitals some financial relief, but only if they close inpatient facilities.

Rural hospitals now have this option through the federal Consolidated Appropriations Act 2021, which established rural emergency hospitals as a new Medicare provider. The program started in January and is administered by the Center for Medicare and Medicaid Services (CMS), which oversees Medicare and Medicaid.

Through the program, Medicare will pay for emergency hospital, observation and other services to Medicare patients on an outpatient basis in a rural emergency hospital.

“It’s essentially just a fully outpatient facility,” said Dr. Scott Harris, the state health officer. “They give up their inpatient beds and chained to that, the federal government pays them essentially a stipend.”

There are certain requirements for a rural hospital to convert itself into a rural emergency hospital, which is a new Medicare Part A provider type, such as a critical access hospital. They have to be staffed 24/7 and have an agreement with a hospital for transferring patients that need to start a treatment plan for an injury. These hospitals must be a Level I or Level II trauma center, meaning they can provide immediate surgical services or other specialties.

“I think the best description is it’s sort of a last gasp effort for hospitals that are really struggling and think they’re going to close,” Harris said. “It allows these rural communities to maintain health care facilities of some type in their community.”

Rural hospitals may not feel rushed to do this yet, he said. He estimated that only a “very small number” of rural hospitals could convert initially.

Danne Howard, deputy director of the Alabama Hospital Association, said that a handful of hospitals might look at this program as an option to stay afloat.

“Particularly in light of financial conditions right now, [rural hospitals] may explore and look into the financial viability of doing this,” she said. “Is it going to be a tremendous number? No, it won’t be.”

She sees this as an opportunity for rural hospitals when there is no other option to staying open.

“If their only option is to close and leaving communities without anything, this provides them another option,” she said.

But the program could be a double-edged sword. On one hand, it would prevent a rural community from losing all of its health care. On the other hand, Howard said that transportation in rural areas is an issue and getting to a facility with inpatient services would be an obstacle. Howard said that closing inpatient services put families further away from a built-in support system.

“Your family and friends, they are with you too, which is a very important part of the healing process and of care,” Howard said.

Dr. David Thrasher, member of the State Committee of Public Health, said during the meeting that partnering with trauma centers to provide inpatient care could alleviate financial problems.

“I really think that’s going to be the model going forward,” he said.

Howard sees this as one of the solutions. Making changes to the state’s low Medicare reimbursement rate and closing the coverage gap would also provide much needed relief for rural hospitals.

“So having something there is better than nothing, but we don’t think that this is a model that all rural hospitals need to convert to be,” Howard said.

If a rural hospital converts into a rural emergency hospital, they can always reverse the decision and reestablish inpatient services.

“Let’s say we’ve find a way to close the coverage gap, there are other avenues out there for better revenue streams and for better reimbursement, and the hospital finds itself in a position better, than they have the ability to go back to be a full service acute care hospital,” Howard said.

According to Rural Health Information Hub, a program supported by U.S. Department of Health and Human Services grants, rural emergency hospitals are required to provide 24-hour emergency services, laboratory services, diagnostic radiologic services, pharmacy or drug storage area, discharge planning by, or under the supervision of, a registered nurse, social worker, or other qualified professional.

They are also allowed to have additional outpatient services, including behavioral health, radiology, laboratory, and outpatient rehabilitation.

“We are a predominantly rural state and access to care is the foundation of economic development, economic activity in our state,” Howard said. “You have a business wanting to locate in a rural area in particular, the two things that they want to know about are education and health care. It’s a disincentive if you don’t have everything available for the employees that the business would attract.”