California Healthline | August 18, 2015

Background

According to Stateline/Los Angeles Times, 440 rural hospitals closed in the U.S. between 1983 and 1998, after Medicare changed its reimbursement model from covering the cost of care to providing a flat fee. Medicare then began reimbursing certain rural hospitals for actual costs again to prevent further closures, and about 2,300 rural hospitals remain.

Meanwhile, the recent recession “hit rural hospitals especially hard,” according to Stateline/Times. Further, Medicare reimbursement reductions in 2011 and 2012 disproportionately affected rural hospitals, which tend to serve older populations and rely heavily on Medicare payments.

In addition, many rural hospitals’ patients are low-income and cannot cover increasing copayments and other out-of-pocket costs, leaving hospitals to cover the bill.

Details of Arizona Rural Hospital Partnership

Tucson Medical Center earlier this year formed the Southern Arizona Hospital Alliance with four rural hospitals — Benson Hospital, Copper Queen Community Hospital, Mount Graham Regional Medical Center and Northern Cochise Community Hospital.

Together, the consortium allows members to purchase supplies, such as MRIs, at lower prices.

Keith Bryce, CFO for Mount Graham, said such an alliance allows his hospital to save “in the six figures” annually. In addition, the alliance is expected to lower members’ costs related to employee benefits, medical malpractice insurance and workers’ compensation.

The alliance also allows members to share in:

  • Health IT and telemedicine initiatives;
  • Medical training;
  • Physician recruiting; and
  • Surgical services.

Model Might Not Be Viable Everywhere

National Rural Health Association Senior Vice President for Member Services Brock Slabach said the model is promising but may not be viable everywhere. “You have to have willing partners willing to collaborate and provide assistance to each other,” he said, adding, “You need partners that share a cultural fit with you” (Ollove, Stateline/Los Angeles Times, 8/17).