Where Care is Critical
By Nancy Jorgensen

Missouri’s rural hospitals get boost from the federal Critical Access Program.

John Richmond’s friends, family and co-workers recently gathered to celebrate his 25 years as president and CEO at Northwest Medical Center in Albany, Mo.

“The best thing I ever did was to move here,” reflected the Kansas City native. Albany, a town of 2,000 nestled between corn and soybean fields, proved a great place for him and his wife to raise their three sons.

And it turned out to be a great place to run a hospital. “It’s easy to succeed if you take care of your patients,” Richmond said.

Not everyone would agree that managing a rural hospital is easy. While the not-for-profit facility has remained financially healthy throughout Richmond’s tenure, many rural hospitals ran in the red until they became part of the federal Critical Access Hospital program. CAH guarantees hospitals a cost-plus-1-percent reimbursement for Medicare patients.

Congress created CAH in 1997 to support facilities that lie more than 35 miles from other hospitals, but allowed states to waive in additional hospitals based on critical community need. Today, more than 80 percent of CAHs nationwide lie closer than the 35-mile guideline, according to MedPAC, a federal advisory agency on Medicare.

The Missouri Hospital Association says that about 140 full-service hospitals operate in the state. Of that number, 36 are part of the CAH system, and many lie within the 35-mile limit. Albany, for example, is 17 miles from Bethany, home to another CAH facility.

Some local physicians expressed concern when Northwest Medical Center considered becoming a CAH. Participation required cutting back from 45 beds to a maximum of 25. “Would we have enough capacity?” Richmond wondered. Hospitals faced a 2005 deadline to become part of the program. “In the end, we based the decision on the trend toward less inpatient care. We have not regretted it.”

Today, in addition to the hospital, Northwest Medical Center operates four clinics and a home health agency, and partners with another system to operate a hospice. Some of the additions came before CAH, but the program helped.

“CAH has saved rural hospitals nationwide,” said Alan Morgan, CEO of the National Rural Health Association, which is based in Kansas City. “It keeps the doors open.” He explained that rural hospitals face several challenges (see sidebar). The Missouri Office of Rural Health confirmed that CAH remains important for Missouri, where 93 of the state’s 114 counties are considered rural.

Bottom line boost in Fairfax
Some 80 miles west of Albany, Myra Evans administers Community Hospital. She grew up nearby and returned to the family farm in 2000 to take the job in Fairfax, population 700. Her husband gave up his job of 23 years to join her; he now substitute teaches.

The private, not-for-profit Community Hospital became a CAH facility in 2000, one of the first in Missouri. The previous administrator traveled to the state capital to lobby for the program, which required state buy-in.

“CAH really helped our bottom line,” Evans said. “Without it, we could have either faced closing our doors, or we would not have been able to keep up with technology and wages.” In 1998, Community Hospital earned less than $20,000 in net income, compared to a post-CAH net income of $200,000 to $400,000. The hospital has used the added funds to add a hospital-wide computer system and a CAT scanner. CAH also allows for more competitive pay—important since rural hospitals face staff shortages.

The program made it possible to upgrade aging plumbing and wiring, make restrooms handicapped accessible, and install a sprinkler system for fire safety purposes. Soon, the facility will remodel to handle an increasing flow of outpatients. The hospital also operates a clinic and a home health service.

Back home in Milan
Like Evans, Martha Gragg also returned to her roots in northern Missouri. Ten years ago, she became CEO of Sullivan County Memorial Hospital in Milan. “I’m just a country person,” she explained about her desire to go back home. A single mom, Gragg bought a home next to the family farm so her parents could help care for her son, now grown. Gragg’s ties to the hospital go even deeper—she was born there, and her father died there recently following his third stroke.

She lobbied leaders in support of the program that allowed CAHs in the state, and Sullivan County Hospital was also among the first to sign up. “Without it, we would not have survived,” Gragg reported. After converting to CAH, the hospital improved lab equipment, refurbished the radiology department, added a CT scanner and plans to remodel to accommodate more outpatients. The hospital also offers a long-term care facility.

Gragg speculated on how care would be affected if the hospital shut down. “You can’t always travel 30 miles in an ambulance when you’re really sick,” she said. “More people would die in the time it would take to get to the nearest hospital.”

Can you make it on 1 percent?
Dave Dillon, vice president of media relations for the Missouri Hospital Association in Jefferson City, sums it up this way. “It’s hard to argue that CAH has been anything but good for rural hospitals and the patients they serve.”

Still, a 2005 MedPAC report stirred controversy by stating that CAH can “reduce hospitals’ incentives to control costs.” The report pointed out that cost-based payments for CAHs totaled about $5 billion in 2006, roughly $1.3 billion more than under the previous payment system.

Rural administrators bristle at the criticism. “CAH is not a gold mine,” Gragg argued. “We still have to maintain cash flow and provide a lot of services for a small number of patients.”

“We’ve grown steadily, but CAH brought no windfall,” Richmond agreed. While CAH helps, it’s community support that keeps Northwest Medical Center alive. As with many rural hospitals, matching federal funds helped build the center in the 1950s. “People went door to door to raise funds. Local people have left us a sizeable amount of money over the years. They still refer to it as ‘our hospital.’ You don’t see that to any extent in urban areas.”

His and other rural hospitals continue to hold regular fundraising events, but many still need outside capital, and CAH status helps. FitchRatings, a service that analyzes public institutions such as county hospitals, published a report on CAH in 2006. While warning that small rural hospitals remain more vulnerable than their urban counterparts, the report read, “CAH designation enhances the ability of a small rural hospital to receive an investment grade rating.”

Evans conceded that CAH might have allowed some hospitals to add “fluff.” But, she added, “The extra 1 percent you get from Medicare patients doesn’t give you a lot of room. We still have to control costs, and we must also accommodate and compete for our insured patients.”

From 50 to 70 percent of the patients in the Fairfax, Albany and Milan hospitals receive Medicare. For other patients, the hospitals must negotiate payment with health insurance companies, which generally covers cost plus 10 percent. In addition, hospitals must treat indigent patients who can’t afford to pay a thing.

Keith Mueller directs the Center for Rural Health Policy Analysis, an arm of the Rural Policy Research Institute based in Omaha, Neb. “By stabilizing the finances of many of the CAHs, the program has created a new management environment in which CEOs can plan for the future instead of constantly worrying about meeting payroll,” he said.

Rural elderly prefer local care
Rural hospitals are going beyond just staying alive. They have joined the movement toward measuring and improving quality of care.

Community Hospital in Fairfax became one of the first in Missouri to adopt a balanced scorecard program that assesses quality. “We’ve always had a low infection rate, and our customer satisfaction rate has always been good,” Evans said. “But this program helped us find ways to improve our processes.”

Evans maintained that rural care can be better than that found in the city. On average, the Fairfax hospital beds about 10 patients each night in both acute and skilled care. The small bed count allows nurses to spend more time with skilled care patients.

“The data shows that people in rural hospitals have better outcomes,” added NRHA’s Morgan. “There’s more accountability when you see your patient at the Dairy Queen and at church.”

Richmond speaks of Northwest Medical Center’s patient satisfaction surveys with pride. Looking past the statistics, he recalled situations that have proven to him how much his staff cares for patients. A few years ago, a tornado ripped through the hospital, tearing off the roof, blowing open the vacuum doors and sending Richmond flying down the hall. “Through it all, the nurses did a great job—no patients were injured.”

Last year, Richmond developed cancer, forcing the removal of a kidney. After receiving care at a large regional hospital, he couldn’t wait to get back to his home hospital where he was more comfortable. “The quality of care in rural hospitals may not necessarily be better, but elderly [patients] adjust better,” said Richmond, now in remission. “They know the staff, there’s more family around, and they can look out the window and see green grass and the town water tower.”

Is your hospital here to stay?
In rural areas like Albany, Fairfax and Milan, agriculture stands as the most important segment of the economy. But the hospital and the school often vie as the largest employers. If the hospital closes, you lose more than convenient healthcare, and direct jobs.

As Richmond said, “You might get by without a hospital. But then you’ll lose all or most of your physicians. Then the pharmacists.”

Other local businesses would be hurt as well. Since Community Hospital’s volume doesn’t always justify buying wholesale, it purchases a lot of supplies from the local grocery and the hardware store. “If someone wants a banana, we go to the store and buy one,” Evans said.

NRHA’s Morgan believes that with strong local support for hospitals, CAH will continue to fare well. “CAH is a rare success story among federal programs—both Republicans and Democrats support it.”

The March 2007 fedgazette newsletter published by the Federal Reserve Bank of Minneapolis reported that nationwide, the program involves less than one-quarter of hospitals. But these hospitals cumulatively treat less than 5 percent of patients, and subsidy payments to rural hospitals add less than one-half of 1 percent to total Medicare spending.

Evans offered her perspective. “When you look at the overall Medicare budget, CAH costs a pittance. I think we have enough rural support in Congress to keep the program.”

Richmond has been in the hospital business for a long time. He remembers the 1980s, when some predicted that just 10 percent of rural hospitals would survive to the end of the century. In fact, he knows of only one Missouri hospital closure in the last 10 years.

“Rural hospitals are like coyotes and cockroaches—we learn to adapt, and we’ll be the last ones standing,” Richmond concluded. “People will do anything to keep their rural hospitals.”

Next month, watch for Today’s Farmer article on the shortage of rural healthcare workers.

Why rural hospitals deserve a break

The National Rural Health Association fought to get Congress to give rural hospitals CAH support. Here’s why:

• Rural hospitals draw from a smaller base of patients, yet pay high maintenance costs on their aging buildings.

• Since rural areas host a higher elderly population, rural hospitals see a larger percentage of Medicare patients. Medicare pays less than health insurance.

• Rural residents tend to be poorer, and a larger percentage lack health insurance or Medicaid.

• While emergency response rates in urban areas average eight minutes, they run 18 minutes in rural places due to longer distances and a larger percentage of volunteer responders.

• Rural America suffers a shortage of health care workers. 

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