the American Association of Colleges of Osteopathic Medicine

This analysis was prepared by Venable LLP, on behalf of AACOM.

On Thursday, May 16, 2024, the Senate Finance Committee held a full committee hearing discussing what Congress can do to maintain critical resources in rural areas to support rural communities. View the full hearing here.

WITNESSES

Panel 1:

Michael Topchik, Executive Director, Chartis Center for Rural Health
Jeremy P. Davis, MHA, President and Chief Executive Officer, Grande Ronde Hospital
Lori Rodefeld, MS, Director of GME Development, Wisconsin Collaborative for Rural Graduate Medical Education (WCRGME)
Keith J. Mueller, Ph.D., Gerhard Hartman Professor of Health Management and Policy and Director, Rural Policy Research Institute (RUPRI)

OPENING STATEMENTS

In his opening statement, Chairman Ron Wyden (D-OR) claimed that many providers, pharmacies, and hospitals are operating on a “knife’s edge” in rural communities. According to him, half of all rural hospitals operate in the red. Chairman Wyden told the harrowing story of one of the hospitals in his state that was forced to close its maternity ward simply because they could not afford to keep it open, leading many patients in a rural Oregonian community to go without these critical services. Unfortunately, Oregon is not alone. Between 2011 and 2021, one out of every four rural hospitals in America stopped providing obstetric services. Chairman Wyden also highlighted the critical role of telehealth in rural communities, which helps Medicare beneficiaries, who may be transportation- or mobility-limited, connect with a provider in the comfort of their homes. Last, Chairman Wyden lamented the difficulty of attracting healthcare professionals to rural communities to practice. He recommended updating the Medicare graduate medical education to ensure that rural and high-need urban areas can get the clinicians they need.
In his opening statement, Ranking Member Mike Crapo (R-ID) highlighted the significance of rural communities, noting that they are home to over 46 million Americans. He underscored the critical timing of the hearing, pointing out the impending expiration of telehealth flexibilities and financial support for rural hospitals and ambulance providers. Ranking Member Crapo cited statistics from 2022, revealing that nearly one-third of Medicare beneficiaries relied on telehealth services, highlighting its significance in bridging access gaps, especially in areas with clinician shortages. However, he cautioned against solely relying on telehealth and advocated for maintaining and expanding in-person options in rural communities. He also discussed the potential of creative workforce growth and retention strategies to bolster the number of health providers in rural areas, citing evidence that professionals trained in rural settings are more likely to remain there. He noted the financial strain faced by rural frontline providers and the economic importance of rural hospitals, lamenting the closure of over 105 rural hospitals since 2005. Ranking Member Crapo emphasized the need to prioritize the continuation of special reimbursement programs to preserve access to healthcare in rural areas. He highlighted the financial challenges faced by rural hospitals, particularly smaller ones, due to shifts in healthcare delivery toward outpatient services, and he acknowledged the need for reform in Medicare's payment structures to incentivize innovations in rural healthcare delivery. He advocated for data-driven modernizations and alternative payment models to address these challenges.
In his opening statement, Mr. Topchik noted the unique health challenges Americans living in rural communities face. They tend to be sicker, less affluent, and more likely to be uninsured. To make matters worse, since 2010, over 170 rural hospitals have closed and half of rural hospitals still operating are losing money. In states that have not expanded Medicaid, 55 percent of hospitals are operating in the red. Even when rural hospitals remain open, challenges in access remain, as many hospitals cannot afford to offer a full scope of services like obstetrics. According to the Chartis Center for Rural Health’s own analysis, 418 additional rural hospitals are at risk of closure. Mr. Topchik identified the three key challenges rural hospitals face. First, rural hospitals face high operating costs and low reimbursement rates from sequestration cuts and bad debt. To counter these financial hardships, 60 percent of rural hospitals are now affiliated with a large health system. Second, rural hospitals treat a low volume of patients, which is unsustainable as a business model. And last, rural hospitals are plagued with staffing shortages that threaten access to care for patients.
In his opening statement, Mr. Davis discussed the challenges his independent critical-access hospital faces serving patients in rural Oregon. Of the patients his hospital treats, over 60% are covered by government payers, with 41% covered by Medicare and 23% covered by Medicaid. For rural hospitals, the substantial portion of patients covered by Medicare and Medicaid underscores the importance of adequate reimbursement from these programs. However, he emphasized that this is only a part of the challenge. He claimed that the COVID-19 exposed vulnerabilities at his hospital and raised costs. Mr. Davis also expressed deep concern about chronic staffing shortages as well as the growing fear surrounding cyberthreats. He praised the benefits of telehealth in helping connect his patients with specialists and urged the Committee to permanently codify the telehealth flexibilities established during the COVID-19 pandemic. Last, he called on the Committee to remove the 96-hour rule for critical-access hospitals to allow them to serve patients for longer periods of time, re-establish swing bed flexibilities that allowed hospitals to offer long-term care services to patients that do not require acute care, and waive the 3-day hospital stay rule for patients requiring discharge to a skilled nursing facility.
In her opening statement, Ms. Rodefeld highlighted innovative approaches to solving the rural healthcare workforce crisis. To address the doctor shortage in rural communities, Ms. Rodefeld asserted that the evidence strongly supports rural-based residency training. Unfortunately, the growth of rural training has not kept pace with the growth of graduate medical education (GME), and it is estimated that only 2 percent of residency training takes place in rural areas, although 20 percent of the U.S. population lives in rural areas. Ms. Rodefeld dispelled myths that rural hospitals do not have the resources or infrastructure to train medical residents, noting the emergence of several GME training programs at rural hospitals across the country. Furthermore, states like Wisconsin and Minnesota have taken advantage of special programs that allow the use of Medicaid dollars to go toward training physicians as well as other health professionals like community health workers, social workers, and paramedics.
In his opening statement, Dr. Mueller explained how the role of rural hospitals has evolved over time — acting as comprehensive care centers, with a much higher percentage of total activities and revenues being tied to outpatient services. He argued that additional capital investments in information systems, including cybersecurity and new technology, can stretch the capabilities of small hospitals that operate on thin margins and lack the reserves for larger investments. Dr. Mueller then shifted to discussing Medicare Advantage (MA), which has seen a significant increase in enrollment, with 45.1% of all rural Medicare beneficiaries choosing to enroll in an MA plan. While Medicare beneficiaries now have access to additional benefits through MA plans like dental, vision, hearing, and fitness coverage, MA reimbursements to rural hospitals are set through contracts rather than the typical Medicare pricing system. Consequently, MA plans routinely employ prior authorization requirements and invariable deductibles and copayments, which can raise costs and delay timely access to care. Last, Dr. Mueller noted that the number of Accountable Care Organizations (ACOs) has risen from 456 in 2023 to 480 in 2024, and included 276 low-revenue ACOs, a jump from 252 in 2023. An analysis conduct by RUPRI found that ACOs positively impact rural hospital revenues.

QUESTION AND ANSWER

Chairman Wyden said he wants to provide extra financial support to rural hospitals so that they can provide key specialty services like maternity care. However, he said he is worried the large hospital systems will take advantage of this heightened reimbursement without providing the requisite services in exchange. Chairman Wyden asked Mr. Topchik how Congress can address this problem. Mr. Topchik replied that hospital systems play a key role in investing in rural communities and that they should be encouraged to operate in these communities because they have the financial means to provide comprehensive specialty services to rural Americans. Later in the hearing, Senator John Barrasso (R-WY) echoed the sentiments shared by Chairman Wyden regarding rural health and emphasized the need to train more providers in rural communities. Research shows that providers are five times more likely to practice in a rural community if they train in a rural community.
Senator James Lankford (R-OK) mentioned that three decades ago, the United States was in the process of opening many rural hospitals across the country. Today, many rural hospitals have closed or are on the verge of closing. He wanted to know what changes have occurred in the past thirty years that have led many rural hospitals to shut down. Mr. Topchik replied that rural hospitals primarily rely on Medicare and Medicaid reimbursement to cover their operating expenses, and these reimbursement rates have not kept pace with the rate of inflation. He stated that reimbursements have been declining relative to operating expenses. Senator Lankford then discussed the recently finalized nursing home staffing mandate, which he argued would draw away the limited number of nurses in rural hospitals to nursing homes. He asked Mr. Topchik how Congress can work to solve the staffing shortages occurring in rural communities. Mr. Topchik answered that he was pleased that the nursing home staffing rule recognized the unique challenges rural nursing homes face and that it provides hardship exemptions to rural nursing homes that are unable to comply with the staffing mandate.
Senator Debbie Stabenow (D-MI) highlighted her efforts to expand access to telehealth through the 2024 Farm Bill, which she recently introduced in the Senate. She further discussed the graduate nursing demonstration project she secured under the Affordable Care Act (ACA), which led to a 54 percent increase in advanced practice registered nurse (APRN) enrollment and a 67 percent increase in graduation. Senator Stabenow said she wants to make the demonstration project permanent and asked Mr. Davis if he thought it was a good idea. Mr. Davis replied that any efforts to help stabilize the nursing workforce are needed to help rural hospitals continue to provide care. He added that permanency of the demonstration project provides certainty to providers.
Senator Chuck Grassley (R-IA) mentioned his interest in improving maternal and child health, and he highlighted his legislation, the Healthy Moms and Babies Act, which seeks to improve the economics of maternity care by establishing a home health model and encouraging maternity care providers to adopt new technology. Senator Grassley then noted that over 600 rural hospitals would benefit from the Rural Hospital Support Act, which would permanently extend the Medicare Dependent Hospital and Low Hospital Volume programs. He asked Dr. Mueller why these key programs should be made permanent. Dr. Mueller explained that without permanency, many rural hospitals will have to redirect resources to prepare for operations without this extra financial support and make future reimbursement rates uncertain. Senator Grassley noted that the Centers for Medicare and Medicaid Services (CMS) is currently distributing 1,200 GME slots, with 400 of them already having been distributed. However, he said he is worried that CMS is not meeting the rural and underserved threshold as is required by law. Senator Grassley asked Ms. Rodefeld if rural hospitals are receiving a fair number of GME slots. Ms. Rodefeld responded that CMS is not prioritizing rural hospitals in this program due to broad language contained within the statute that classifies certain urban hospitals as rural hospitals. She added that many rural hospitals are struggling to apply and that many are required to be located in a Health Professional Shortage Area (HPSA) to receive GME slots.
Senator Bill Cassidy (R-LA) said he is concerned that poor payer mixes in rural communities are preventing rural hospitals from updating their information technology systems, making them vulnerable to cyberattacks like the one that hit Change Healthcare recently. He asked Mr. Davis about the challenges rural hospitals face in ensuring that their technology is up to date. Mr. Davis replied that his hospital’s cybersecurity insurance premiums have increased over 600 percent in recent years and that a cyberthreat would shut down the MRI and other critical technologies needed to provide care. Senator Cassidy asserted that Medicaid expansion was not sufficient for the finances of rural hospitals and that many depend on Medicaid Disproportionate Share Hospital (DSH) payments and the 340B program to subsidize the cost of care.
Senator Ron Johnson (R-WI) lamented the recent closure of two rural safety-net hospitals in his state after a private equity-owned hospital system moved to the area and siphoned off privately insured patients from their payer mix. As a result, these two rural hospitals were left with a poor payer mix of Medicare and Medicaid patients that did not offer adequate reimbursement. Senator Johnson expressed excitement with new direct primary care models that allow patients to pay cash prices to see a primary care physician. He believes that this model is superior to a government payer system like Medicare, which he said is saddled with regulations and offers low reimbursement rates.
Senator Sheldon Whitehouse (D-RI) said he wants to bar prior authorization requirements from being used by ACOs and other value-based models of care. He argued that prior authorization is needed in the Medicare Fee-For-Service (FFS) system to combat the incentives of providers to “run up bills” by ordering expensive, unnecessary treatments. Senator Whitehouse asked Dr. Mueller if he agreed that prior authorization requirements should be eliminated for ACOs. Dr. Mueller concurred, noting that the incentives under ACOs focus on keeping utilization low while trying to provide high-quality care to patients. Dr. Mueller added that removing prior authorization requirements from ACOs would allow researchers to note whether utilization spiked or if value-based care is effective. Senator Whitehouse then asked Mr. Davis if Congress should extend telehealth waivers established during the COVID-19 pandemic, particularly for patients suffering from opioid-use disorder. Mr. Davis replied that Congress should extend telehealth but emphasized that payment parity is needed for telehealth visits. Later in the hearing, Senator Marsha Blackburn (R-TN) lamented the fact that urban healthcare facilities receive $195 per telehealth visit compared with just $95 for rural health clinics and federally qualified health centers (FQHCs). Senator Blackburn said she wants to increase reimbursements for telehealth visits.
Senator Tom Carper (D-DE) highlighted his efforts to champion the hospital-at-home waiver program established during the COVID-19 pandemic under Medicare. He touted the benefits of the program, which allow patients to receive hospital-level care in the comfort of their own homes, while simultaneously lowering healthcare costs and improving health outcomes. Importantly, the program has high patient satisfaction. Despite this, the hospital-at-home program is set to expire at the end of the year. Senator Carper said he is working to reauthorize the program for an additional five years. He asked Mr. Topchik how the hospital-at-home program has benefitted rural communities. Mr. Topchik answered that hospital-at-home prevents patients from having to travel miles to get the care they need and that it keeps extra hospital beds available for patients who desperately need them.
Senator Maggie Hassan (D-NH) briefly mentioned that she is working on a bill to implement site-neutral payments that account for the unique needs of rural hospitals. She said she is submitting a question on this for the record.