Rural 'Critical Access' Hospitals on the Cut List
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Jenny Gold
Kaiser Health News
December 9, 2011

Hood Memorial Hospital is just the kind of health care facility where the federal government hopes to save money. The two-story brick hospital, about an hour north of New Orleans, hasn’t been full in at least two decades, and the yellowing hallways are lined with empty rooms.

CEO Hoppie Jones says that on an average day, fewer than four of the hospital’s 25 beds are occupied. Jones is a slight man in his 60s, and his face is creased with the stresses of his monumental task: keeping the doors of the hospital open despite losing money 11 out of the past 12 years.

Last year, the hospital had a $700,000 loss on its $7.5 million in total operating expenses, according to data provided by the American Hospital Directory based on the hospital’s Medicare filings.

One of the only bright spots on Jones' balance sheet is the extra money he receives from the federal government through a program for critical access hospitals —small, rural facilities that receive a higher Medicare reimbursement rate to help keep them afloat. But while Hood is in a small town, it is not geographically isolated: there are at least four other competitor hospitals within a 26 mile radius, including three other critical access facilities.

In the ongoing deficit reduction talks, critical access hospitals have been singled out at least twice as a program ripe for cutting: in President Barack Obama’s budget proposal and by the Congressional Budget Office.

The critical access program was created by Congress in 1997, after a wave of rural hospitals closures, to make sure Americans in isolated areas would still have access to health care. Hospitals with 25 or fewer beds that are at least 35 miles away from another facility, or 15 miles across secondary roads to account for difficult terrain such as mountains, rivers or snow, can qualify. The Medicare Payment Advisory Commission (MedPAC) estimates that in 2003, Medicare paid hospitals in the program an average of $850,000 more than the agency otherwise would have.

But there was also a loophole: states could waive the distance requirement and designate small hospitals considered "necessary providers" as critical access hospitals as well, even if they were close to other facilities. Governors were eager to provide their small, struggling facilities with extra federal dollars, and the program spread quickly until more than 1,300 -- nearly one in four acute care hospitals -- had been designated as critical access facilities. The federal government "was asleep at the switch" and simply let too many hospitals into the program, explains John Sheehan, a hospital Medicare consultant with BKD in St. Louis, Mo.

The growth of the program slowed in 2006, when Congress eliminated the exception, but hospitals like Hood that had already been given the designation were grandfathered. President Barack Obama's budget proposal recommends narrowing the definition of a critical access hospital to exclude those that are within 10 miles of another hospital – a move that has the potential to change the status of 61 hospitals, saving $4 billion.

Forty-one percent of hospitals in the program are already losing money, according to the National Rural Health Association, and the loss of funding could mean they will close. While some of these facilities may be redundant, closing any hospital, even one that is often empty, is painful for a community and can leave some rural Americans struggling to access care. 

Shirley Holden, 78, was an inpatient at Hood for a week in November while being treated for dehydration. Holden has been coming to Hood since it first opened in 1971 and argues that seniors in Amite need a hospital in town because "a lot of us just can’t afford to hire someone to take us to another hospital, and all of our families work."  If the hospital closed, she says, "mostly I’d stay at home. I would not be going to North Oaks or anywhere else unless I went on a stretcher."

When Holden started visiting Hood, it was a thriving full-service hospital that delivered babies, performed surgeries and had 45 inpatient beds. But the specialists who used to work at the hospital moved away to work for larger facilities.

Hood shrank to 25 beds and became a short-term acute care hospital. In 2003, it was designated by the government as a critical access hospital, which Jones says has allowed the hospital to stay in business. The old operating rooms are now used to store extra beds and old incubators. Patients in need of specialty care, including labor and delivery, are transferred to nearby facilities.

"Our function is to stabilize patients and send them out," explains Jones. "One of the best things we ever did was build a heliport." 

Lallie Kemp Medical Center is just eight miles away, but it's another critical access hospital with limited service options.  While the presence of this smaller facility could be what costs Hood its extra funding under the president’s plan, North Oaks Medical Center 22 miles away has proven to be the bigger threat to Hood’s financial stability.

North Oaks is a sprawling 60-acre medical campus in Hammond, La., which, compared to Amite, is a growing metropolis. The hospital has over 2,400 employees, including 200 physicians, compared to Hood’s 115 employees and six physicians. North Oaks’ parking lot is packed with cars, and the emergency room is over capacity, with extra beds lining the hallways to make room for more patients.