Why We Need a Federal Standard for Health Care Access and Provider Viability

By: | May 5, 2020

Les Williams, CRM, is Co-Founder and Chief Revenue Officer of Risk Cooperative. He holds a B.S. in Mechanical Engineering from the University of Virginia and an MBA from Harvard Business School. Prior to joining Risk Cooperative, Les served in various institutional sales positions at SoHookd, JLL, and IBM.

While the COVID-19 pandemic has caused health care facilities to rethink their operational strategy, the government has been supportive in the form of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

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According to the U.S. Department of Health and Human Services website, CARES provides $100 billion in relief funds to hospitals and other health care providers on the front lines of the coronavirus response.

This funding will be used to support health care-related expenses or lost revenue attributable to COVID-19 and to ensure uninsured Americans can get testing and treatment for COVID-19.

While the $100 billion will have a major impact on the operations of health care facilities across the country, a bigger risk must be addressed before the next pandemic occurs, namely ensuring Americans have quick and easy access to these facilities and health care more generally.

Critical Minutes for Critical Care

A recent New York Times article detailed that approximately 8.6 million Americans live greater than 30 minutes from the nearest acute care and critical access hospitals. Most of this population lives in rural communities with already-high rates of underlying health issues such as diabetes and obesity.

The pandemic highlights the need for quick access to health care, especially since many COVID-19 patients have symptoms that rapidly intensify and can be lethal if not treated in a timely fashion.

Making matters worse, the article states that people are less likely to visit a hospital, regardless of how serious the condition, if they need to travel over a long distance.

The pandemic creates a proverbial vicious cycle, the limited bed capacity at most rural hospitals means that patients would be rerouted from these facilities to others, further reducing time needed for critical care.

Forbes reported that a study released by the Chartis Center for Rural Health found that since the beginning of the year, 120 hospitals in rural communities have closed over the past decade. Given that there are currently 1,844 rural hospitals, the closure of 120 represents approximately 7%, a material number of closures.

Money Matters

In January, Bloomberg Businessweek shed light on some of the reasons why these facilities are closing at an alarming rate.

As Americans leave rural communities to live in more urban locations, the demand for hospitals in these communities has plummeted. This, coupled with the lack of qualified medical doctors available and profitable medical procedures performed at lower-cost outpatient facilities, has further sealed the fate of these rural facilities.

Large health systems, such as Community Health Systems and Quorum Health Corp, have also contributed to the growing number of rural hospital closings.

Bloomberg reported these health systems are looking for ways to improve their margins, given factors such as rising debt on their balance sheets, high concentration of rural hospitals dependent on Medicaid and Medicare, and higher-revenue medical procedures being performed at cheaper outpatient facilities, are all eroding profitability.

To stem the closure of these vital facilities in rural communities, perhaps the federal government can take a page from its playbook for the auto industry, the Corporate Average Fuel Economy (CAFE) Standards.

A Potential Road To Recovery

The National Highway Traffic Safety Administration (NHTSA) CAFE standards were developed in 1975 to regulate how far vehicles must travel on a gallon of fuel (also known as the fuel economy of a vehicle).

While the CAFE standards were rewritten in 2012, the original guidelines separated cars and trucks and mandated that all automakers must meet the same average fuel economy number across all of their vehicles produced.

While larger cars and light trucks/sport utility vehicles (SUVs) can be sold at higher profit margins than their smaller counterparts, their fuel economy tends to be lower, meaning automakers must produce more fuel-efficient and small vehicles to offset this factor.

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Perhaps a CAFE standard can be created for health care facilities, where more profitable hospitals can be viewed as the lucrative large car/light truck/SUV market and the rural hospitals can be treated like smaller vehicles.

This metric would make large health systems, like Community Health Systems, rethink how they determine which hospitals they close and keep open.

If health systems were under the auspices of CAFE-like standards, The Hospital Economy Average Revenue Target (HEART) Standards, then some of these rural hospitals could be saved.

While the HEART Standards would not prevent the closure of all rural facilities, it is a step in the right direction.

HEART Standards would encourage discussion in the boardrooms of health systems over which lower-revenue producing hospitals would need to remain on the books in order to remain compliant. More lives can be saved regardless of location, and that is a bottom line all hospitals can be proud of. &

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The R&I Editorial Team can be reached at [email protected]