Health reform brings both challenges and opportunities for small and rural hospitals. On the positive side, the expansion of coverage will improve access to care for millions of Americans in regions fraught with uninsured and underinsured communities. The law includes various Medicare payment protections that enhance reimbursements to certain hospitals. And it seeks to curb the rural workforce shortage through incentive programs and changes to graduate medical education resident placement.

Yet rural hospital executives are still worried. “We don’t know enough about how health care reform will affect rural providers,” says Brock Slabach, senior vice president for member services of the National Rural Health Association. “There are lots of positives, but also a lot of uncertainty.”

Most of the questions revolve around delivery system changes, particularly the formation of accountable care organizations. The Centers for Medicare & Medicaid Services has said that hospitals that elect to form ACOs must serve a minimum of 5,000 Medicare beneficiaries. “It’s too early to tell, but conventional wisdom suggests it will be difficult for small and rural organizations to participate in ACOs because of the population requirements,” says Tom Bell, president and CEO of the Kansas Hospital Association. However, he adds, “In some ways, they may be better suited because their patient populations are more homogeneous.”

Whether the workforce provisions in the reform law will be enough to increase the pool of employees for small and rural organizations remains to be seen. The American Academy of Family Physicians estimates a nationwide shortage of 44,000 adult care generalist physicians by 2025. Delivery system changes will increase the need for primary care physicians nationwide, notes Marty Fattig, CEO of Nemaha County Hospital, a 20-bed critical access hospital in Auburn, Neb. “It’s already more difficult for small and rural organizations to recruit [these providers] and it will likely be more so once health care reform is up and running.”

Then there’s the need for robust information technology. “The future of health care is linked to better IT systems,” Bell says. But rural hospitals tend to lag in IT adoption, notes Chantal Worzala, the American Hospital Association’s director of policy. Still, she adds, “Small and rural hospitals are committed to using electronic health records to support clinical care and address population and community needs.”

Case Studies

North Texas Medical Center, Gainesville
North Texas Medical Center, a 60-bed hospital about 60 miles north of Dallas, is thinking big picture when it comes to reform. “Health reform forces us to run a much better organization, keeping costs down and quality up,” says Kelly Hayes, chief financial officer. The organization is examining how coverage expansion and delivery system changes will affect its operations. “It’s pretty obvious that quality has to be the No. 1 priority,” says CEO Randy Bacus. Technology will play a central role. North Texas is adopting an electronic health record to improve safety and efficiency and enable information exchange with other providers in the community. Although not part of the reform law, meeting meaningful-use objectives is critical. “The law could change,” says Hayes. “Our goal is to meet meaningful-use objectives as early as possible to take advantage of the incentives.” The hospital also has invested heavily in clinical technology to help keep patients in the community for their care.

Tulare (Calif.) Regional Medical Center
One of the biggest concerns for Shawn Bolouki, CEO of Tulare Regional Medical Center, is providing care to newly insured members of his community. An assessment conducted prior to passage of reform identified the need for 16 primary care physicians. The 112-bed hospital is in the midst of an expansion project. Coupled with delivery system changes, the number of needed primary care physicians likely will increase. California restricts hospital employment of physicians, making it difficult to align hospital and physician incentives. “We need to completely rethink our system, the way we provide care to the community,” Bolouki says. IT will play a big role in coordinating care, he adds. The organization is exploring the ACO concept, but “there are many details not resolved,” Bolouki says. “It makes it difficult to plan systematically.”

Nemaha County Hospital, Auburn, Neb.
A 20-bed critical access hospital, Nemaha is feeling optimistic about reform. “They kind of left critical access hospitals alone,” says CEO Marty Fattig. “I think that’s a good thing.” Fattig’s optimism is due, in part, to his organization’s early adoption of an electronic health record. “We already have what we need to achieve meaningful use,” he says. Many CAHs don’t have that advantage, he acknowledges, adding, “The gap between the haves and have-nots is getting larger and that scares me.” Fattig does express concern about the unknowns surrounding reform. And he’s not sure how ACOs will benefit small and rural organizations. If an organization is able to meet the requirement of a minimum of 5,000 Medicare beneficiaries, it still may not be enough to mitigate the risk. “An organization has no control of where its patients go,” he says. “It will be difficult to control costs and behaviors.”

Unique Hurdles

Although reform provides a number of provisions to assist small and rural hospitals, it also presents numerous challenges. Here’s a look at the law’s implications.

»Primary Care Physician Shortage
The availability of primary care providers remains a major concern for many small and rural organizations. About a quarter of Americans live in rural areas, but only 10 percent of physicians practice there. The expansion of coverage under health care reform will further challenge access to primary care in rural areas.

Primary care providers remain a critical need for rural communities. Low compensation, limited time off and scarcity of jobs for spouses often lure primary care providers away from rural settings.

DATA: Primary care physicians by location, 2005

Source: WWAMI Rural Health Research Center Policy Brief, April 2009

»Access for the Uninsured
Rural Americans are more likely to be uninsured than their urban counterparts. As more Americans gain insurance under health care reform, rural facilities must ensure they have the resources necessary to care for an influx of new patients.

DATA: Uninsured rates in urban and rural areas

Source: Maine Rural Health Research Center, Research and Policy Brief, July 2009

»Information Technology Staff
As with primary care providers, small and rural organizations face challenges in recruiting IT professionals, and a projected nationwide shortage of IT professionals won’t help matters. The issue is of critical importance under the health care reform law, which promotes increased use of electronic health records and health information exchanges.

DATA: National HIT workforce shortage projections

Source Year/goal of projected shortage Projected shortfall
Bureau of Labor Statistics 2018 35,000
HIMSS Analytics HIMSS EMR Adoption Model Stage 4 41,000
Office of the National Coordinator 2015 50,000

Source: U.S. Healthcare Workforce Shortages: HIT Staff, CSC Healthcare Group, 2010

»Meaningful Use Penalties
IT will play a critical role in small and rural hospitals’ efforts to meet reform objectives. However, due to limited resources, these organizations are less likely to have implemented EHRs or are in the early stages of doing so. As a result, some hospitals expect to incur a financial penalty for failing to achieve meaningful use by 2015.

DATA: Percentage of hospitals that expect to incur financial penalty for failing to demonstrate meaningful use by 2015

Source: American Hospital Association analysis of survey data from 795 nonfederal, short-term acute care hospitals collected in January and February 2010. *Excluding critical access hospitals. Note: Hospital responses based on meaningful use as defined in the proposed rule released by the Centers for Medicare & Medicaid Services in January 2010.