Health reform offers much for rural America but some rural hospitals fear its impact on them

Many of the rural Democrats who voted against the health-care reform bill this week cited its impact on rural hospitals, but some who voted for it said the law will help such hospitals. At least one expert in rural health policy believes the law will be a "net gain" for rural populations, but the effect on rural hospitals is still unclear. The impact might be greatest in the Southeast, where the "no" votes were concentrated.

Rep. Ben Chandler of Kentucky, a Blue Dog Democrat, told the Lexington Herald-Leader, "This bill still does not address the concerns I had about its effect on our seniors, rural hospitals, and the overall cost to taxpayers. Rural hospitals might be hurt by a cut in payments they receive for providing indigent care, and senior citizens might suffer from Medicare reductions, both of which the bill requires to help pay for its staggering cost."

But the effect may be different in other regions, states or congressional districts. Dr. Keith J. Mueller of the Rural Policy Research Institute at the University of Nebraska, said in an interview that rural hospitals, primarily in the Southeast, will feel the bite when Disproportionate Share Hospital payments, known as DSH ("dish") payments, are gone. But in other parts of the country, not so much.

Mueller explained that phasing out DSH payments is designed to occur in tandem with the increase in other forms of insurance. For areas that will have mostly privately insured or Medicare patients, losing the DSH payments will be inconsequential or financially advantageous. But the Southeast — with high unemployment, poor health and poor access to health care — the newly insured (based on the new criteria for eligibility, 33 percent above the poverty line) will likely be covered by Medicaid. Some believe Medicaid payments won't fully replace DSH payments, leaving hospitals holding the financial bag. And even with increased numbers of insured, 23 million people will still likely be uninsured. Someone will have to continue to pay for their health care, and hospitals assume it will be them.

Mueller also points out that with the reform, those folks who are newly insured will be more likely to see a doctor than when they were uninsured. Presumably, they will have better health care, but the question remains: Will the Medicaid payment cover the cost of service?

One important factor in rural health remains unchanged: Critical access hospitals, which are all rural, will continue to be funded as they are now. Their payment structure is based on a different regulation and will continue to be the cost of service, plus 1 percent.

Ultimately, Mueller says, the health reform act is designed with individuals and small groups in mind and the rural population is typically made up of individuals and small groups. "The is one more giant step towards universal coverage," he said, adding that while rural folks will not be a disproportionate share of the newly insured population, rural residents now uninsured should benefit greatly.