Call (866) 931-8882 17304 Preston Road, Suite 1400, Dallas, Texas 75252

Score One for the Rural Hospitals

Score One for the Rural Hospitals

Posted October 2016


There have been extensive evaluations of the differences between hospitals located in rural areas and their urban counterparts. As the national debt grew in recent years and focus on the high cost of healthcare was thrust into the spotlight, the value of rural hospitals was scrutinized closely. Some in the industry questioned their ability to match the quality of urban hospitals. Some proposed that they should be shut down if they could not stand toe to toe with the urban and academic centers on quality. The Department of Health and Human Services (HHS), recently handed the rural hospitals of America some much needed good news on that front.

To have a discussion comparing rural and urban hospitals, some background is essential. It must be understood that the playing field is not level. There are dramatic differences in the population served by a particular hospital depending upon the geographic setting.

Depending on the definition, somewhere between seventeen and twenty-five percent of Americans live in rural areas. Rural residents have lower incomes, less employer-based health insurance, higher rates of Medicare and Medicaid coverage, and are less likely of having Medicaid even when qualified. They have higher rates of poor health indicators like alcohol and tobacco use at a young age. They are more prone to accidents due to the rural life-style. Rural residents have a higher incidence of a number of specific disease states like hypertension and cerebrovascular disease.

Access to care can also be problematic rural areas. Rural residents typically must travel farther to see a physician or to reach a hospital. While nearly a quarter of the US population lives in rural areas, only ten percent of physicians primarily practice in these areas. There are only about thirty percent as many specialists available in rural areas.

It would appear that rural hospitals face a significant challenge caring for this patient population with fewer resources. However, there is good evidence that rural hospitals incur higher costs, yet still manage to charge less than their urban counterparts. Vulnerable populations are receiving significant value for healthcare.

Still the question of quality remained. Historically, rural hospitals had difficulty generating sufficient numbers of cases to get a true statistical analysis of quality measures. A single poor outcome would often skew the numbers in an undesirable direction. In this era of accountability and reporting, quality comparisons have become more manageable. Large aggregates can be used to get a more robust picture of quality.

The HHS report utilizes the data being collected through several programs for comparison. The bottom line is that rural hospitals were less likely to get penalized for poor performance on hospital-acquired conditions such as falls or infections. They also fared better on value-based purchasing measures which include quality scores and patient surveys. While rural hospitals did have slightly higher readmission rates, it was less than a one percent difference.

There have been a number of reasons postulated for the better performance on these measures. Most agree that it likely stems from established personal relationships between providers and patients, higher levels of trust, more focused attention and the better organizational agility of smaller hospitals.

This news is certainly a shot in the arm of many rural facilities that are working hard every day to do more with less resources that are quite successful.


For a number of years prior to 2015, physicians faced cuts to reimbursement by Medicare because of what was commonly referred to as the “flawed” sustainable growth rate (SGR). The SGR was indeed flawed and failed to keep pace with the needed adjustments for Medicare payments to physicians. Every year doctors would face a reimbursement cut, not just from Medicare, but from almost all payers who typically tie their reimbursements to the Medicare rate. Every year Congress would ignore the problem until the last minute (or even after) and push the cuts off for another year. Each year the potential cuts grew larger and more ominous. Physicians pleaded for some relief from the SGR debacle.

In April of 2015, the Medicare Access and CHIP Reauthorization Act (MACRA) was passed by Congress. Initially, this was touted as the “doc fix” because it repealed the SGR and created a new paradigm under which physicians would be paid. Now, may physicians find themselves “in a fix” because MACRA has complicated their lives immensely.

On the surface, MACRA represents the shift from “pay for volume” to “pay for performance”. In reality, volume is still (and will likely always be) a significant factor for reimbursement. The term “performance” on the other hand is going to be something of a headache for most providers.

Medicare (CMS) and Health and Human Services (HHS) have already launched several programs over the past several years aimed at improving quality and efficiency (lower cost of care). Some of the include the Accountable Care Organization (ACO) and the Patient-Centered Medical Home. The results of these endeavors have been largely mixed, but they did create a foundation upon which collaboration and data collection and reporting could be accomplished. For providers already in those programs, there will be a little less stress in this transition.

The basics of MACRA:

MACRA is an attempt by CMS to pay physicians who perform well on metrics considered important to CMS and HHS more and physicians who don’t perform well less. MACRA is limited to Medicare Part B (outpatient care). It is budget neutral, so the winners will only get increased by the amount by which the losers get decreased. There are two models that physicians and groups must choose. The first is the Merit-based Incentive Payment System (MIPS) and the other is the Alternative Payment Models (APM’s). Because APM’s are somewhat tailored and unique, the focus will be on MIPS.

There are four basic areas of interest for MIPS. Each has a specific area of “performance” upon which the provider is judged. Each is weighted. Over time the weights shift, putting more importance on efficiency and less on quality. For these areas, CMS has created a list of metrics which believes will improve quality and efficiency based upon good evidence.

The first area is quality. The quality reporting category actually folds in the Physician Quality Reporting System (PQRS) that many physicians already know. Physicians must choose metrics from an approved list that is somewhat relevant to their specialty. Additionally, they must choose one that is more broadly applicable to all providers.

The second area is resource utilization. This is calculated by CMS based on Medicare Part B claims data. Essentially, CMS tracks all claims for a patient throughout the year. The physicians caring for that patient will be accountable for those costs. This is true regardless of how much involvement they had in the delivery of the care or the generation of the charges. Obviously, the incentive is to have primary care providers have greater discretion in their referral patterns to keep cost down.

The third area is clinical practice improvement. This is where the physicians in an ACO or Patient-Centered Medical Home get a pass. Those providers will automatically maximally qualify in this category. For the rest, there will more metrics to choose and report. There is a list of “Clinical Practice Improvement Activities” from which at least three must be chosen and executed for a minimum of ninety days during the reporting period.

The fourth are is related to technology. Previously, this fell under “Meaningful Use”. Physicians must report measures based upon the existing “certified EHR technology” (CEHRT) program to attest that their electronic record system meets appropriate standards.

The moral of the story for many physicians…be careful what you wish for. In the case of MACRA, the CMS payment model was kicked down the road for years. Very abruptly it came to sharp curve in the road and many providers feel as though they have been thrown from the vehicle. A good deal of money, time, resources and education must be dedicated to capturing and reporting numerous measures to avoid increasing pay cuts. Many are scrambling to make decisions about joining ACO’s or other alternative payment model groups.

Ultimately, quality of care and efficiency must improve for the US healthcare system to remain viable. Physicians are smart, hardworking and resilient people who will find a way to navigate the turns…albeit on two wheels at times.