The Value of Membership to Small or Rural Hospitals

A First Step Toward BBA Relief

In November 1999, President Clinton signed into law the Medicare, Medicaid, and SCHIP (State Children's Health Insurance Program) Balanced Budget Refinement Act of 1999. Working with rural hospitals and their communities, state hospital associations, and others, we made Congress and the Administration aware of the need to repair the unintended consequences of the BBA of 1997. The bottom line: AHA provided strong leadership on key issues that affect the nation's rural hospitals.

Our efforts mean that the BBA relief package provides a total of $1.3 billion over five years in additional funding specifically for small or rural hospitals. AHA also was able to convince Congress to shelve a so-called "Medicare modernization" proposal that would have cut Medicare hospital payments by another $3.5 billion.

Rural Hospital Provisions. . .The bill restored to rural hospitals $900 million in relief over five years.

• Sole Community Hospitals (SCHs) will receive the full market basket update for FY 2001. SCHs paid at the hospital-specific rate may elect to transition over a four-year period starting in FY 2001 to payment based on their FY 1996 costs. In FY 2004, and any subsequent year, SCHs would receive 100 percent of the rebased target amount.

• Medicare Dependent Hospital program is extended for five years until FY 2006.

• Critical Access Hospital (CAH) program has been substantially refined to increase program flexibility. Changes include:
  • Averaging the length-of-stay at 96 hours.
  • Permitting CAHs to continue billing hospital and physician outpatient services separately or submit a combined bill for cost-based hospital outpatient payment plus a fee schedule payment for professional services.
  • Granting CAH status to hospitals that have closed in the past 10 years or to those hospitals that have downsized to a health clinic or center.
  • Allowing CAHs to continue to provide long-term care services (swing-bed program).
  • Eliminating beneficiary coinsurance for clinical laboratory services furnished on an outpatient basis.
  • Extending CAH eligibility to investor-owned hospitals.

• Rural Reclassification provisions will permit remote urban hospitals to reclassify as rural through an appeals process if they are located in a rural census tract of an MSA; located in a rural area designated by state law; would otherwise qualify as a SCH or Rural Referral Hospital; or meet other criteria specified by the DHHS Secretary.

• Graduate Medical Education provisions will allow rural hospitals to increase the number of primary care residents. Rural hospitals will be able to add up to three full-time residents.

• Rural Health Clinic provisions impose a two-year moratorium on the phase-down of Medicaid cost-based reimbursement for Federally Qualified Health Centers and Rural Health Clinics. Rates will be frozen at 95 percent of costs for FY 2001 and FY 2002. The phase-out of cost-based reimbursement would resume at 90 percent in FY 2003 and 85 percent in FY 2004. In addition, the full repeal of cost-based reimbursement would be delayed one year from FY 2004 to FY 2005.

• New Grant Funding will provide grant funding of up to $50,000 to rural hospitals with less than 50 beds to help offset training and computer software expenses associated with implementing new BBA payment methodology.

• Medicare+Choice provisions encourage development of Medicare+Choice in rural and underserved areas through a series of adjustments to the average adjusted per capita cap. In addition, a bonus of 5 percent for first-year payments and 3 percent for second-year payments is provided to plans entering counties not previously served.

Outpatient Services. . .The bill restored to rural hospitals $400 million in relief by:

• Reversing the administration's decision to cut outpatient payments by 5.7 percent across-the-board to cover the costs of reducing beneficiary coinsurance. All hospitals benefit by not being subjected to this additional cut.

• Establishing a three-and-one-half year transition to outpatient PPS for nonprotected hospitals. Hospitals that were likely to face losses will have those losses limited.

• Protecting completely rural hospitals with fewer than 100 beds from any loss as a result of implementation to outpatient PPS. These rural hospitals may also keep any gains under outpatient PPS.

Other Provisions

• Skilled Nursing Facilities. . .The bill restored approximately $500 million to hospital-based SNFs. It also includes a 4 percent increase in payment for all SNF cases in FY 2001 and FY 2000.

• Home Health. . .The bill restored approximately $450 million to hospital-based home health agencies through a one-year delay of the scheduled FY 2001 15 percent reduction.

Mobilizing Grassroots

AHA rural hospitals and health systems responded overwhelmingly to the call to get involved in the BBA relief campaign:

• Through case examples, testimony, and visits to small or rural hospitals, AHA communicated to Congress and the Administration that the BBA meant "Real Pain to Real People," and the hospitals that serve rural communities.
• Organized two separate advocacy days in Washington, DC, for almost 300 hospital representatives to request fixes to the BBA on behalf of the AHA and its small or rural membership.
• Over 240 small or rural members attended the section's breakfast held at AHA's Annual Membership Meeting in Washington, DC, featuring Sen. Thad Cochran, (R-MS) as speaker.
• Organized an advocacy luncheon with governing council members of AHA's Section for Small or Rural Hospitals and several congressional assistants and a representative of MedPAC. Governing council members also met with Sen. Kent Conrad (D-ND), a member of the Senate Budget and Finance Committees, and accounted for dozens of visits to members of Congress.
• AHA small or rural hospital members participated in AHA's policy-making process through participation in constituency section governing councils, regional policy boards, special committees, and conference calls.

Beyond BBA. . . What AHA Members Accomplished Together on the Regulatory Front

• Urged the FDA to exempt from its forthcoming policy on re-use of medical devices those items that have been taken from open packages, but not used; to develop consensus standards for reprocessed devices; and to consider that JCAHO, states, and hospitals are examining hospital reprocessing of single-use devices.
• Recommended that OIG in developing compliance guidelines for nursing homes not confuse facility compliance programs with quality assurance activities and assist small providers by identifying compliance priorities.
• Urged HCFA to obtain more accurate estimates of the incremental added visit time for average home health agencies and increase adjustment to the rates accordingly.
• Surveyed AHA small or rural hospitals for comments on HCFA's payment policies for physician pathology services provided by independent laboratories for hospital inpatients.
• Requested HCFA delay the effective date of the interim final rule on hospital conditions of participation related to restraints and seclusion for behavior management until completion of an impact analysis and evaluation of comments from the field.
• Delayed an expansion of the transfer provision to other DRGs for two years, restoring $400 million in Medicare payments.
• Convinced the Health Resources and Services Administration to withdraw a proposal that would have caused many rural hospitals to lose their designations as health professional shortage areas, saving rural hospitals $100 million over five years.
• Participated in negotiated rule-making on payment for coverage of ambulance services, supported a broader definition of rural for large counties, and opposed removal of $65 million from the baseline for the proposed fee schedule for ambulance services for the year 2000.
• Sought HCFA's recognition and reimbursement of the cost to hospitals of startup and ongoing data collection by converting to OASIS.
• Supported programmatic revisions of the rural health portion of the Universal Service program to subsidize telecommunications, making the application process less burdensome, broadening the number of eligible carriers, and implementing payment.
• Supported adding to the SNF consolidated billing exclusion list procedures performed in a hospital outpatient department under the order of a physician and out of the purview of a SNF.

Working Together

AHA and its Section for Small or Rural Hospitals governing council and membership expanded AHA's sphere of cooperation and influence through strategic partnerships and organizational relationships.

• Continued to work closely with state and regional hospital associations, AHA's key strategic partners. AHA, its Section for Small or Rural Hospitals, and the state associations have joined forces on rural advocacy, policy development, and grassroots activities and established a Rural Services Affinity Group under the auspices of AHA's State Hospital Association Executive's Forum.
• Conducted bimonthly conference calls with state association small or rural hospital liaisons to discuss key issues facing small or rural hospitals.
• Conferred via conference calls with dozens of small or rural hospital members for direction and advice on various regulatory comment letters, Y2K compliance strategies, and the final language of the Balanced Budget Relief Act.
• Continued to develop and forge an effective relationship with JCAHO through participation by staff and section members on the JCAHO Work Group on Accreditation Issues for Small or Rural Hospitals.
• Worked on key issues with several organizations, including the National Rural Health Association, American Academy of Family Physicians, and American Association of Homes and Services for the Aging.

Bringing You Ideas and Information

AHA and its Section for Small or Rural Hospitals meet members' needs through education, technical assistance, and information.

• Maintained the Section's web site at: http://www.aha.org/memberserv/smallrh.asp.
• Developed tools and resources on a variety of issues such as Critical Access Hospitals, including an updated Directory of Resources with a specific web site on CAHs at http://www.aha.org/memberserv/cah.asp.
• Developed several member advisories, including Prompt Payment Strategies; SNF PPS: The Final Rule and FY 2000 Update; Y2K Future Date Testing; Conditions of Participation: Notice of Patient Rights; and Improving Medication Safety; Home Health Prospective Payment-A Look at the Proposed Regulations.
• Published Update, the quarterly newsletter of the AHA Section for Small or Rural Hospitals.
• Bestowed for the ninth consecutive year the Shirley Ann Munroe Leadership Development Award, which recognizes outstanding leadership accomplishments of small or rural hospital CEOs.
• Planned four educational sessions and cosponsored NRHA's 22nd Annual National Conference on Rural Health.

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