The Decision before the Cascade Medical Center (CMC): Spring 2024
Remain as a Critical Access Hospital (CAH) or convert to a Rural Emergency Hospital (REH)
Situation: The Federal Government has created a new hospital type called a “Rural Emergency Hospital” or REH. The intent of the legislation is to provide rural communities with an additional option to preserve access to the most critical medical services. For some hospitals, converting to an REH comes with financial benefits. Cascade Medical Center is eligible to apply to convert from its current license as a Critical Access Hospital (CAH) to an REH. A few hospitals converted immediately as their financial situations were dire. To date, 21 hospitals nationwide have converted.
Fortunately, CMC is financially stable at this time and leadership decided that rather than jump at the conversion option last year, we would take the time to thoroughly study the pros and cons before bringing it to the Board for decision. The 3 committees of the Board (Finance, Quality, and Strategic Planning) have provided their input and perspective on the question. Converting to an REH has financial advantages to CMC, but would require us to cease “inpatient” services. The Background and Assessment below provide more information to help us make the best decision for our community
Background: The last time CMS created a new provider type was in 1997 when it created the Critical
Access Hospital (CAH) designation. Congress created the CAH designation through the Balanced Budget Act of 1997 in response to over 400 rural hospital closures during the 1980s and early 1990s. Since its creation, Congress has amended the CAH designation and related program requirements several times. The CAH designation was designed to reduce the financial vulnerability of rural hospitals and improve access to healthcare by keeping essential services in rural communities. To accomplish this goal, CAHs receive certain benefits, such as cost-based reimbursement for Medicare services. In January of 1999, CMC applied to become a CAH. On June 1, 2000, Cascade Medical Center received permission from CMS to become a CAH. The CAH designation and its associated advantages helped support rural hospitals, including CMC, over the past two decades.
During that time, the standards of medical care have advanced, health care labor costs have risen dramatically, demographics in urban and rural areas have shifted, and the consolidation of hospitals into systems have transformed our industry. The result is that rural hospitals face unprecedented challenges to remain financially viable while meeting the ever-rising standards of care and patient expectations. One important dynamic is the centralization of specialty care and surgical services into urban centers where high volumes create economies of scale needed to support expensive equipment, costly critical care units, and highly compensated specialists.
Effective 1/1/2023, the Centers for Medicare and Medicaid Services (CMS) established REH as a new provider type via Section 125 of the Consolidated Appropriation Act of 2021, to address the growing concern over closures of rural hospitals.
Cascade Medical Center was featured in a New York Times article on this subject in December of 2022. In the 14 months since then, we have studied the pros and cons of REH conversion. We contracted with an independent 3rd party, the Rural Health Redesign Center (www.rhrco.org), to assist us with the financial analysis. Much of the information provided in the following Assessment section is a result of their technical assistance.
Assessment: This is not the first time CMC has faced this kind of decision. For decades, CMC provided maternity care and delivered babies. But that service was discontinued in the mid-1980s due to the small number of deliveries managed here, the constantly escalating medical training for OB and neonatal care, and staff specialization necessary to operate a state of the art Labor & Delivery program. Given how medical practice has evolved and the increased specialization of inpatient medicine – there comes a time when a small hospital must decide what it should focus on. CMC has a growing volume of ER patients and can best serve the community by focusing on ER as a core competency and center of excellence. The same applies to other key services of Family Medicine, Urgent Care, and Physical Therapy – our other strong service lines with many patients. However, our volume of inpatients is low and not rising, so we have an opportunity to better align our resources with services our community uses in such a way that will bring greater benefit to our patients and to the community as a whole.
There are qualitative and quantitative pros and cons to converting from Cascade’s current CAH license to an REH license. In summary:
Pros of Conversion:
• Net financial gain of $500,000 to $900,000 per year. This can be used to fund CMC facility modernization, facility expansion to support growing ER, PT, and other outpatient services, IT system upgrades, and staffing.
•Modest cost reduction related to inpatient services (at least $30,000 per year).
•Reduced liability caring for both long-term skilled nursing patients at the same time as ER patients with the same staff and resources.
Cons against conversion:
•Approximately 1 patient per month will be transferred to McCall or Boise for care that would previously have kept the patient at CMC in “inpatient status.”
•Ease of conversion back to CAH, if desired, is uncertain
Recommendation:
It is the opinion of CMC Leadership that the community would be better served if the hospital converted from a CAH to an REH. Conversion would make more financial resources available which CMC could use to better serve our community. Increased revenue could be used to improve current services through IT upgrades, facility maintenance and staffing; and new services could be developed and offered. Being classified as a Rural Emergency Hospital better reflects what CMC actually does, and gives CMC a pathway for operational improvements and service growth.
Additional resources:
https://www.npr.org/sections/health-shots/2024/01/10/1223828296/federal-fix-for-rural-hospitals-getsfew-takers-so-far (Public radio coverage of REH option)
https://www.usatoday.com/story/news/health/2024/02/06/rural-hospitals-upgradeinfrastructure/72343083007/ (USA Today coverage or REH option)
https://chqpr.org/downloads/Rural_Hospitals_at_Risk_of_Closing.pdf (Center for Healthcare Quality & Payment Reform assessment of issue)
https://www.rhrco.org/_files/ugd/861f85_1de507b3570e42b7a8ff5a772490c4c8.pdf?index=true (Rural Health Redesign Center education on REH option) https://www.rhrco.org/_files/ugd/861f85_15d17d7a07b245e9abf458e78b6fa6eb.pdf (REH Conversion FAQs) https://www.youtube.com/watch?v=NOS-Aq4oX0g (1-hour presentation of REH by Oregon Office of Rural Health)