Why most Oklahoma rural hospitals haven’t accepted Congress’ offer to save them
PERRY — When her sister’s blood sugar rose to a dangerous level, Elaine Bubb found comfort five minutes from home.
“If we had to go to Stillwater to take care of her blood sugar, it could’ve gone up, it would’ve been risky,” Bubb said last week while waiting for Marjorie Miccuci, a 62-year-old breast cancer patient, to be released from a Perry emergency room. “At the end of last month, I brought her in because she was running a 104-degree fever. We were transferred to Stillwater and by the time we got there, she was up to 106.”
With Miccuci’s blood sugar lowered and stabilized, the sisters were out by noon the next day, a 24-hour protocol Stillwater Medical-Perry must follow under a new arrangement aimed at saving rural hospitals.
Thirty-three hospitals in Oklahoma have shuttered because of financial strain since 2007. A dozen were in rural communities such as Frederick, Pauls Valley and Clinton, according to state Department of Health data. Since 2021, two Oklahoma facilities have chosen the federal safety net known as a Rural Emergency Hospital license in hopes of staying open.
The designation can be applied to licensed critical access hospitals, defined as rural hospitals with fewer than 26 beds that are located more than 35 miles from an acute care facility. Also qualifying are rural hospitals with general medical-surgical licenses and 50 beds or fewer. The Rural Emergency Hospital designation offers these facilities $3.2 million annually in federal funds adjustable with inflation and a 5% boost to Medicare reimbursements.
Those benefits, however, come at a cost. Hospitals accepted must give up inpatient care and — for facilities considered critical access — a slew of other revenue streams and savings provided by the federal government.
Limiting healthcare access to an emergency room and varying degrees of outpatient services, coupled with lower federal reimbursements, means a reduced capacity to care for critically ill patients long-term and less revenue. State healthcare experts say for most Oklahoma rural hospitals, voters’ 2020 decision to expand Medicaid provides a better lifeline. Top of Form
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The Problems With Transitioning
Transitioning to rural emergency hospitals was worth the trade-offs for Stillwater Medical facilities in Perry and Blackwell, said Courtney Kozikuzki, the system’s chief financial officer.
“Before we applied, we had independent third-party auditors do a deep dive,” Kozikuski said. “They took our cost report and carved out what inpatient services were providing financially to the facility and then added in the payments we would get for becoming a (Rural Emergency Hospital) to see what it would look like for us.”
She said the hospitals in Perry and Blackwell lost $400,000 to $2 million annually in 2021 and 2022 on patient services. The audit, Kozikuski said, determined the new license designation would put the two hospitals just above breaking even, which was enough to stay open and provide emergency and outpatient care.
The two facilities, previously licensed as general hospitals under a fixed-rate payment system with the federal government, averaged a daily inpatient census of no more than three people, she said, justifying eliminating that service and accepting the new payments.
“Each facility needs to do its own deep dive of what their financial situation is,” Kozikuski said. “For critical access hospitals, it may not make any sense at all because they’re getting paid costs, plus 1%.”
That means that for every $100 a critical access hospital spends on a patient, it gets $101 back from the federal government.
Janice Walters is an executive with The Rural Health Redesign Center, which assists hospitals considering the new designation. She said the financial feasibility is based on how a hospital’s reimbursement would change under the new designation.
Walters identified three other concerns hospital administrators have about transitioning: whether they can ever change back to critical access, their exclusion from a federal discounted drug program and having to give up swing beds.
She focused on the importance of rural communities having access to swing beds, an option primarily for older patients needing to stay admitted more than three days after they’ve received acute care. With services such as physical, occupational and speech therapy, wound care and vital sign monitoring, they are often temporary solutions to a lack of nearby nursing homes.
“A lot of our rural hospitals are the therapy provider in their community. There’s no other skilled nursing facilities, so swing beds are a big issue,” Walters said, “This is going to be a solution for the smallest of rural hospitals. Anybody that is dealing with any significant size of inpatient care, they’re not going to be able to make this transition.”
Medicaid Expansion as a ‘Lifeline’
The Center for Healthcare Quality and Payment Reform studies factors that put rural hospitals at risk of closure. Those factors include losses of patient services, losing money on private insurance and low financial reserves.
Many rural hospitals were losing money on patient services even during the pandemic, but were temporarily kept afloat with pandemic aid, said Harold Miller, president and CEO of the Center for Healthcare Quality and Payment Reform. Without that aid, these losses are hitting hospitals harder.
“Many small rural hospitals received fairly large grants that made them look temporarily profitable,” Miller said.
While hospitals at risk are now considering changing to the rural emergency hospital designation, Miller said it’s not a sound solution. In the switch from cost-based to prospective-payment reimbursement, some rural hospitals might see a decrease in revenue.
“It may only be delaying a problem, rather than solving a problem,” Miller said.
Oklahoma is among the 41 states that have voted to expand Medicaid eligibility. The best option for rural hospitals is to maintain their critical access licenses and rely on more people enrolling in state-provided health insurance to achieve operational profit margins, said Rich Rasmussen, CEO of the Oklahoma Hospital Association.
Rasmussen pointed out that the biggest source of revenue for most rural hospitals is the federal government. Without reimbursements for Medicare and Medicaid, many hospitals would not be sustainable, he said.
“As demographics began changing and states started pulling back on their support for Medicaid, critical access hospitals came under financial pressure,” Rasmussen said. “States that expanded Medicaid have found that the failure rate in those rural hospitals abated. States that didn’t expand will continue to have closures.”
Rasmussen said some hospitals are reluctant to switch to the rural emergency license because Congress overlooked some important details that only Congress can change.
“If Congress can address the issues, then I think you’ll see more conversions and those conversions will probably take place in non-Medicaid expansion states,” Rasmussen said. “The people of Oklahoma, in passing Medicaid expansion, they really have thrown out a lifeline to all of these rural communities.”