Sequestration Would Hurt Rural Health Providers, Study Shows

by George Lauer, California Healthline Features Editor

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WASHINGTON -- Rural health care providers heard bleak predictions about the potential effects of sequestration at the National Rural Health Association's 24th annual Rural Health Policy Institute last week.

If Medicare reimbursement is reduced by 2% as specified in the sequestration process due to start in three weeks, 63 rural hospitals will no longer be profitable and 482 rural health care jobs will be lost nationally, according to estimates by iVantage Health Analytics.

California's rural hospitals won't be as hard-hit as those in the Midwest and South, according to the research, but all health care providers who treat Medicare beneficiaries will feel the pinch at some level, said Gregory Wolf of iVantage.

"This is going to have an impact everywhere -- urban, suburban, rural -- but I think it's fair to say rural will feel it more, especially small, remote providers," Wolf said.

The 2% Medicare cut is part of far-reaching reductions resulting from a failure of Congress and the White House to agree on balancing the federal budget according to the Budget Control Act of 2011. Over the next eight years, sequestration will result in automatic Medicare budget reductions estimated between $10.7 billion and $16.4 billion each year. According to a study last year by research firm Tripp Umbach, cuts to Medicare will cause 496,000 jobs to be eliminated this year and a loss of 766,000 jobs by 2021.California rural health providers and stakeholders are concerned, but the worries are not limited to Medicare cuts.

"What happens when you factor in an increase in Medicaid patients?" asked John Blossom, director of the California Area Health Education Centers Program and president-elect of the national AHEC organization.

His question, asked in a session with about 450 rural health stakeholders last week, was followed by several seconds of silence. Researchers who compiled Medicare sequestration data looked at each other and shrugged.

"That question did kind of stump them, and I can appreciate that they weren't focusing on anything but Medicare, but there are other things happening as well," Blossom said after the meeting.

California hospitals and providers face a 10% reduction in Medi-Cal reimbursement. Medi-Cal is California's Medicaid program.

The cut, approved by the state Legislature and Gov. Jerry Brown (D), is being challenged in court. In addition to the estimated three million Californians expected to be newly covered by Medi-Cal under the Affordable Care Act, California plans to pursue an optional Medicaid expansion that could bring another 1.5 million into the system.

"It's great that so many more people are going to get coverage, especially in rural areas, but it's coming at a difficult time with possible cutbacks in Medicare and Medicaid," Blossom said.

Rural Providers Take Case to the Hill

The agenda for the rural health association's annual meeting includes a lobbying visit to legislators and staffers on Capitol Hill. The California contingent left feeling guardedly optimistic after this year's Hill visit.

"It's an uphill battle with so many people in the new generation not having historical ties or a feel for the differences in rural America," said Kelley Gentry, CEO of Surprise Valley Health Care District in Cedarville. The district, in the northeast edge of California, operates the state's smallest critical care hospital (four acute care beds and 22 long-term skilled nursing beds).

"I do think there is a generally receptive attitude [in Washington, D.C.] to the things we're saying, but I'm not so sure how that might translate into anything tangible," Gentry said.

Gentry pushed a couple of ideas on his visit to the Hill -- expanded online education for rural health care providers and increased cooperation between rural providers and the Veterans Administration and Indian Health Service.

"I think the federal government can do a better job of getting two fairly efficient systems to work together," Gentry said. "Connect the veteran population to the Native American population and get both to work more closely with rural health providers. I think there are lots of ways to increase efficiencies between all three."

A high percentage of veterans and Native Americans live in rural parts of the country, including in California, where 44 of the state's 58 counties are designated rural under federal guidelines.

Importance of Getting Word Out About Reform

"What came out most importantly for me after all the Californians finished walking around the Hill was that we're going to have to work hard to get people to register, to sign up for coverage," said Blossom, a family physician who runs California's 40-year-old AHEC program at the University of California School of Medicine's Fresno Medical Education center.

AHEC develops and supports population-based approaches to health professions education with special emphasis on community-based training in underserved areas.

"There is going to be resistance in getting some people to sign up in rural parts of California," Blossom said. "People in western Madera County where I live do not like Obama and a lot of them might see this as applying for welfare. There's going to have to be a major educational component to get people to overcome these negative feelings," Blossom said.

Rural Percentage Declining

Nationally, the percentage of people who live in rural America is declining, according to the U.S. Census Bureau. Generally considered to be about 20% for the past several decades, the estimate now is closer to 16%.

In California, it's even lower. About five million Californians live in rural areas, roughly 13% of the state's 38 million residents, according to census data.

"This doesn't make the problems of rural health care any less significant, but it does make getting your voice heard a little more difficult," USDA Secretary Tom Vilsack told Rural Health Policy Institute attendees. 

"The population of rural America as percentage of the country's overall population is lower than it's ever been. In some ways of looking at it, you could say rural America may have lost some of its political relevance. That's why it's so important for organizations like yours to be vigilant," Vilsack said.

Vilsack, chair of the White House Rural Council, refrained from predicting whether Congress would reach a compromise agreement before the March 1 sequestration deadline.

"I hope it doesn't get triggered, but we should be aware of what it will mean if it does," Vilsack said.


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