Rural Hospitals Concerned About Future After Government Report

By: Jason Tarr Email
By: Jason Tarr Email

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Monday, September 16, 2013

Dozens of rural Kansas hospitals say they're worried about their future after a report by the inspector general of the U.S. Department of Health and Human Services.

They say if the recommendations in the report are acted on by Congress, the result would be devastating.

"There are a lot of hospitals that would essentially be put out of business," said Jeremy Armstrong, CEO of St. Luke Hospital in Marion, Kan.

In a proposal to cut costs, the inspectors recommended that Congress change a law that would allow them to reassess the designation of hospitals classified as "critical access."

According to the report, there are 83 critical access hospitals in Kansas and more than 1300 across the nation.

The "critical access hospital" designation, created by Congress in 1997 with the passage of the Balanced Budget Act, helps small rural hospitals stay open by allowing them to receive favorable Medicare payment rates. It was originally designed only for hospitals more than 35 miles apart.

But until January 2006, state governors could also give the designation to hospitals that did not meet the distance requirement but were seen as "necessary providers."

The recommendation in the inspector general's report is to rollback those exemptions and go by the original distance requirement.

The Kansas Hospital Association says 72 of the 83 critical access hospitals in Kansas would be affected. According to the inspector general's report, 849 of the nation's critical access hospitals, nearly two-thirds of them, would not meet the law's original distance requirement.

According to the report, they estimate that if they removed the "critical access hospital" designation from those facilities, it would save more than $400 million.

But major hospital organizations are challenging those numbers. And rural hospitals, like St. Luke in Marion, Kan. are highlighting the tremendous cost there would be to rural health care.

Jeremy Armstrong, CEO for St. Luke, says the hospital would be affected because it is less than 35 miles from two hospitals: Hillsboro and Herrington. He says losing the "critical access hospital" designation would cost the St. Luke Hospital at least $1.1 million.

"It would fundamentally change our operations here," Armstrong said.

The change would include the elimination of services and jobs.

"I don't see that there's a scenario that we could consider where we wouldn't have to cut staff," Armstrong said.

He says the negative effects wouldn't stop at the doors of the hospital. He says St. Luke is a top employer in the small town of Marion and he says the hospital generates about $15 million for Marion and surrounding communities each year.

"It would fundamentally change the general economics of this community as a whole," Armstrong said.

The proposal is only in its infant stages. It would take congressional action to make the fears of the rural hospitals a reality.

The Obama administration has its own proposal on the table. That proposal would remove the "critical access hospital" designation for facilities less than 10 miles from another hospital.

But even though these are simply proposals, Armstrong and other rural hospital leaders say they're not taking the threat lightly.

"We know we are on the radar a lot more and we need to be concerned about it a lot more," Armstrong said. "We need to make sure our voice is being heard at the state and national level."

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