Federal Legislative Update Maggie Elehwany NRHA Vice President of Government Affairs

1. Federal Legislative UpdateMaggie ElehwanyNRHA Vice President of Government Affairs

2. Today: Unprecedented political challenges continue for Critical Access Hospitals Administration • President’s Budget • HHS Inspector General Report Affordable Care Act America Recovery and Reinvestment Act Sequestration Capitol Hill • MedPAC • CBO

3. 2014 is an election year shaped by the recent politics.

4. 2014 is another partisan year. How does that impact rural patients and Critical Access Ho? Toxic climate in Washington continues

6. The challenges of the 113th Congress • Partisan politics have impacted rural programs that were once supported by strong bipartisan support. • National fiscal crisis. • Complexities of rural health funding and lack of “institutional memory” means education on Capitol Hill is critical. • Must overcome Hill attitude that rural providers: • “get bonuses simply because they practice in rural areas”; and • Rural providers “double dip” and abuse system.

7. Rural champions exit Congress Many other rural champions are also leaving or have left – Sen. Harkin (D-IA), Sen. Rockefeller (D-WV), Sen. Inouye (D-HI), Sen. Conrad (D-ND), Sen. Bingaman (D-NM), Sen. Lugar (R-IN), Sen. Snowe (R-ME). Senator Max Baucus (D-MT) leaves Chairmanship. Sen. Ron Wyden (D-OR) becomes new Senate Finance Chair.

8. Despite climate, rural victories were achieved Rural providers were to lose hundreds of millions in Medicare payments if Congress did not act by March 31. What was at stake? • For Rural Doctors: 27-32% cut in Medicare reimbursement rates • SGR expiration • GPCI expiration • For Rural Hospitals: • Medicare Dependent Hospital – 12% loss of Medicare revenue; need to make up 18% from private insurer. • Low Volume Hospital -- approx. $500,000 per hospital and can mean well-over $1 million. • For Rural Ambulance Providers – 22.6% reductions

9. Victory Specifics: Extended vital rural Medicare payments until March 31, 2015 • LVH • MDH • Rural and Super-rural ambulance payments • Therapy Caps • GPCI Importance: “Rural hospitals in Kentucky will close.” • Elizabeth Cobb , VP Kentucky Hospital Association 12-month delay of SGR cuts PLUS: • ICD–10 – one year delay of transition; • Two Midnight Rule - Delays enforcement of the CMS two-midnight policy for an additional 6 months (through Sept. 31, 2015); and prohibits recovery audit contractors from auditing inpatient claims spanning less than two midnights for the 6-month period.

10. What wasn’t in there? 96-Hr Rule, Physician Supervision NRHA Concerns over 96-hour rule Implementation of rule: • strangles CAHs; • impedes patient care; • exacerbates workforce shortages Capitol Hill strategy Administrative strategy Key Legislation: Critical Access Hospital Relief Act

11. Why didn’t a permanent fix happen? Weren’t the stars aligned? CBO Score Physician Groups – full court press Actual bipartisan and bicameral agreement on SGR replacement. Not quite: Election year - - pay- fors became a partisan fight. Reid has concern over making vulnerable Ds take a tough vote: Landrieu, Hagan , Begich and Pryor. Wyden is still trying to get a handful of Republican Senators to support his bill. However, CBO just re-scored the bill - - it now has a much higher price tag!

12. Let’s Focus on Challenges to Critical Access Hospitals 39 CAHs in Washington State Health Care Reform – $225 billion in cuts to hospitals/Exchanges/Medicaid expansion Sequestration Threats to cut more rural Medicare payments

13. Health Reform Goal: insure 36 million uninsured. Extreme registration problems. Enrollment numbers exceed expectations: 8 million; 35% 18-30 year olds. Big “PR” push by White House. Millions invested. Some private insurers rate hikes DSH and uncompensated care cuts Is it right from rural?

14. State Exchange Problems Oregon is the first state to abandon its attempts to run its own exchange. Now will join 34 other states in Federal Exchange. A confluence of technical, system, organizational and management problems blocked Cover Oregon from functioning normally since its scheduled launch in October 2013.

15. Are the Health Exchanges working in rural? National Rural Health Task Force Data 34 Federal Health Exchanges examined for 1) Availability; 2) Competitiveness; and 3) Affordability

16. Competitiveness 58.3% of rural counties only had 1 or 2 plan options 23.7% of rural counties vs. 5.5% of urban counties had only 1 plan option Over ¾ of urban plans had three or more choices of coverage Affordability: Residents of rural counties face slightly lower median premium costs for all levels of coverage than do residents of urban counties. “This multi-state conclusion may not apply in any single state.” :

17. ACA Exchanges - - Concerns for CAHs High deductibles result in high compensated care. Are rural providers being left behind? CAHs are deemed “essential community providers” but there has been difficulty/confusion. States choosing to not expand Medicaid creates new “donut hole.”

18. MEDICAID Disproportionately important to rural America (rural patients and rural economies). One-half of all newly insured under ACA will be covered by expanded Medicaid. (Estimates are 5 million in rural will be covered.) Supreme Court decision: Allowed states to “opt-out” or seeking waivers 20 states are opting out - - creating a new gap in coverage.

20. Uncompensated Care Cuts “Health care’s $85 billion challenge – uncompensated care in the Obamacare age” “An Estimated $84.9 Billion In Uncompensated Care Was Provided In 2013; ACA Payment Cuts Could Challenge Providers” Health Affairs

21. Sequestration – mandated 2% cuts to Medicare providers extended AGAIN. Loss of over $1billion in CAH revenue. Tens of millions of dollars lost for rural PPS hospitals. 41% of rural hospitals operate at a financial loss; sequestration will force many more into the red. SGR Patch – pay-for; extends non-discretionary sequestration years. Result: * Rural Job losses; * Rural revenue lost * Rural patient services cut * Possible rural hospital closures

22. Rural and Urban Comparison of Operating Margin

23. Congressional Outlook There does NOT seem to be any significant push on the Hill to eliminate sequestration to mandatory spending. NRHA has and will continue to try to exempt rural providers from these devastating cuts.

24. Hospitals have absorbed nearly $122 billion of new cuts since 2010 Sequestration - $58.3 billion MS-DRG Coding Cuts - $35.3 billion Two-Midnight Offset - $2.4 billion Long-Term Acute Care Hospitals - $3 billion Medicaid DSH - $16.6 Bad Debt - $2.1 billion Impact on rural hospitals is detrimental.

25. Attacks on Rural Hospitals President’s Budget CBO HHS OIG MedPAC Congressional Leaders Reduce CAH payments from 101% to 100% of reasonable cost. Eliminate CAH designation for hospitals that are less than 10miles from the nearest hospital. Eliminate CAH program all together and convert hospitals to PPS. Remove Necessary Provider permanent exemption from the distance requirement.

26. OIG Report Attacks CAHs 846 CAHs would not meet the distance requirement if required to re-enroll 306 were located 15 miles or fewer to a nearest hospital. 235 were between 10-14 miles from nearest hospital. 71 were less than a 10-mile drive. If fully implemented; complete crippling of the rural health system. 70%, 80%, even 90% of rural hospitals in certain states impacted.

27. Headway made with Press and Congress “NRHA, AHA Slam OIG Report Urging Cuts To Critical Access Hospitals” Inside Health Policy “Deep cuts to Medicare funding ‘would effectively kill rural healthcare’.” Modern Healthcare

28. New Research/ Rural Hospital Financial Distress Important series of reports by Sheps Center for Health Research analyzing proposed cuts to rural providers. Overall: Urban hospitals paid under PPS had consistently the highest profitability. Rural hospitals paid under PPS and Critical Access Hospitals generally had the lowest profitability . Sheps Center for Health Research

29. If proposed cuts occur If Congress acts on any of the proposed cuts to CAHs, there will likely be a reduction of 20-30% in Medicare payments (depending upon proposal). If 20% reduction: 72% of CAHs would operate in negative financial margins; 39% would be at high or mid-high financial risk. If 30% reduction, 80% of CAHs would operate in negative financial margin; 45% would be a high or mid-high risk of financial distress. CAHs in the south see the sharpest increase in risk. “Such a substantial reduction in financial viability could lead to an increase in the number of CAHs experiencing insolvency, bankruptcy or closure, with deleterious effects on the health and economic well-being of these communities.”

30. CAH Financial Distress by Region

31. The headlines are already here… “10 Alabama hospitals have closed in the last 3 years: Will yours be next?” “Rural hospital closing hurts more than just the hospital” “Another Rural Georgia Hospital Closing”

32. Rural Hospital Closures: 20 in 2013-14 State breakdown: Alabama 3 Nebraska 1 Georgia 4 Pennsylvania 1 Kentucky 1 Mississippi 1 North Carolina 1 Tennessee 1 Texas 4 Virginia 1 The impact…

33. Critical Access Hospitals are not immune… CAH REIMBURSEMENT CUTS – (President’s budget) ELIMATION OF CAH STATUS FOR NEARLY 50 HOSPITALS (President’s (budget) SEQUESTRATION - 2% CUT TO ALL RURAL HOSPITALS PROPOSED CUTS IN FLEX AND OUTREACH GRANTS PROPOSAL TO ELIMINATE ALL CAHs (CBO budget proposal) 35% CUT UNCOMPENSATED CARE PROVIDER TAX CUTS 41% of CAHs operate at a financial loss. Medicare cuts will mean reductions in services, job loss, or worse, hospital closures - - jeopardizing rural seniors’ access to care.

34. How do we fight back? We tell our story. Our message is powerful. An investment in rural health: 1. Protects patients; 2. Protects the rural economy; and 3. Protects taxpayers

35. Protecting rural patients… “Access to quality health care is the number one health challenge in rural America,” Rural Healthy People 2010 and 2020 “Rural Americans are older, poorer and sicker than their urban counterparts… Rural areas have higher rates of poverty, chronic disease, and uninsured and underinsured, and millions of rural Americans have limited access to a primary care provider.” (HHS, 2011) Disparities are compounded if you are a senior or minority in rural America.

36. Death by Zip Code University of Washington Study, July 2013 Largest report on status of America’s health in 15 yrs. Health equates to wealth and geography. The study found that people who live in a wealthy area like San Francisco, Colorado, or the suburbs of Washington, D.C. are likely to be as healthy as their counterparts in Switzerland or Japan. Those who live in Appalachia or the rural South are likely to be as unhealthy as people in Algeria or Bangladesh. For example: • Women in Marin County, California, where the median household income is $89,605, have the highest life expectancy -- 85 years • Women in Perry County, Kentucky, with median income $32,538, have the lowest life expectancy – just under 73 years.

38. A half century of political efforts… Owsley County is a county located in the Eastern Coalfield region of Kentucky. As of 2010, the population was 4,755. According to the 2010 Census reports, Owsley County is the "poorest county in the United States.” Robert F. Kennedy famed poverty tour highlighted the malnutrition of eastern Kentucky (field hearings on hunger). His tour was not a unique event: his brother John had planned to come in December of 1963, Johnson , Nixon, Ted Kennedy, Bill Clinton, Paul Wellstone all conducted "poverty tours" that included eastern Kentucky.

39. Rural lifestyles – Portrait of Kentucky “Obesity, a major risk factor for disease and disability, is most prevalent for men in Owsley, Kentucky and women in Issaquena, Mississippi; obesity rates for men are lowest in San Francisco and for women in wealthy Falls Church, Virginia.”

40. 2. Rural Economy Health care is the fastest growing segment of the rural economy. On average, 14% of total employment in rural areas is attributed to the health sector. Natl. Center for Rural Health Works. (RHW) The average CAH creates 107 jobs and generates $4.8 million in payroll annually. (RHW) Health care often represent up to 20 percent of a rural community's employment and income. (RHW) If a rural provider if forced to close their door…

41. 3. The Taxpayer Rural hospitals are cost-effective Rural vs. Urban Spending Total savings if all beneficiarieswere treated at the rural equivalent? * Less spending per beneficiary Apply the rural rate of spend to urban beneficiaries In Potential Medicare Savings Medicare spends less on rural beneficiaries than on urban beneficiaries * Approximate Totals Source: Rural Relevance Under Healthcare Reform 2014, Study Area B.

42. Delivering Value Study Area C – Hospital Performance Who has the edge? Rural Urban • Quality • Patient Safety • Patient Outcomes • Patient Satisfaction • Price • Time in the ED Rural hospitals match Urban hospitals on performance at a lower price Data sources include CMS Process of Care, AHRQ PSI Indicators, CMS Outcomes, HCAHPS Inpatient/Patient Experience, MedPAR, HCRIS Source: Rural Relevance Under Healthcare Reform 2014, Study Area C.

43. Medicare Reimbursement (Parts A and B) (2008) Source: The Dartmouth Atlas (Age, Sex, Race and Price-Adjusted Medicare Reimbursements per Beneficiary), weighted averages by HSA

45. The Challenges Ahead - - it’s all about education Over 150 new members of House of Representatives in last two years. Many champions are no longer in Congress. Fiscal conservatives view rural payments as “special” or “bonus”

46. Rural Hospital Closures: 1980-90

47. The History of Rural • 1986 46% of ALL community hospitals were located in rural, non-MSA, counties • During the 80’s nearly 10% of all U.S. rural hospitals closed [Hart et. al, 1991] • 1992-1999 -- 122 Rural Hospitals Closed • Nearly 60% of rural hospitals gross revenue come from Medicare and Medicaid Approximately 439 Rural Hospitals in 20 years! Moscovice, I.: Rural hospitals: a literature synthesis and health services research agenda. Dec. 13-15, 1987 (a) p. 4 OIG Report “Trends in Rural Hospital Closure 1987-1991,” July 1993

48. Finally, Congress intervened… Created Sole Community Hospital, Medicare Dependent Hospital, Low-volume Hospital Adjustment, Hold Harmless Payment, Critical Access Hospital (Balanced Budget Act of 1997). Over the past 11 years, 7 more pieces of legislation have resulted in the modification of the CAH program.

49. They aren’t called “Critical” for nothing… Each year, Critical Access Hospitals provide care for: 7 million emergency room visits 38 million outpatient visits 900,000 admissions 86,000 babies delivered

50. Key CAH Legislation