Rural Communities at Risk: The Consequences of Medicare Cuts on Local Hospitals

Proposed Medicare cuts pose a significant risk to patients and communities nationwide. Challenges such as workforce shortages, rising costs, and supply chain disruptions have already strained America’s hospitals and health systems. These institutions play a vital role in providing quality and accessible care 24/7, meeting the needs of communities in times of illness and crisis. There is a better time to expand flawed policies that undermine their unique services and critical roles. Congress is currently considering legislation that could impose billions of dollars in additional Medicare payment cuts, particularly targeting hospital outpatient departments (HOPDs). These misguided “site-neutral” policies would further reduce patient access to essential healthcare services, especially in rural and medically underserved areas.

Flawed Proposals Based on Erroneous Assumptions

Site-neutral payment policies rest on the false belief that hospitals are overpaid for outpatient services provided to Medicare patients. However, the reality is quite the opposite. According to the American Hospital Association (AHA) survey data, hospitals received a mere 84 cents for every dollar spent caring for Medicare patients in 2020. Even without the proposed cuts, Medicare outpatient margins are already an alarming negative 17.5 percent. This shows that hospitals are significantly underpaid for their services. Moreover, while hospitals’ expenses increased by 17.5 percent between 2019 and 2022, Medicare rates for outpatient care only rose 7.5 percent during the same period. These facts highlight hospitals’ already strained financial situation, making further cuts detrimental to their ability to provide adequate care.

Threats to Access in Rural and Underserved Communities

The impact of these proposed cuts would be felt most acutely in rural and medically underserved communities. Medicare comprises nearly half of the revenue for most rural hospitals, and chronic underpayments have already contributed to the closure or conversion of at least 149 rural hospitals since 2010. Unlike other care settings, hospitals have the necessary resources and expertise to handle complex and emergency cases effectively. Patients in rural areas rely heavily on local hospital care, and reducing access would result in devastating financial hardship, reduced essential services, and even more hospital closures. These regions’ lack of alternative care options further exacerbates the consequences of site-neutral cuts, leaving vulnerable populations without crucial medical assistance.

Unique Role of Hospital Outpatient Departments (HOPDs)

Hospital outpatient departments (HOPDs) are critical in treating patients with sicker, lower-income backgrounds, complex conditions, and chronic illnesses. These departments possess the necessary resources, such as access to intensive care units (ICUs) and other critical hospital services, to handle complications and emergencies that may arise. Site-neutral proposals must consider these key differences between HOPDs and other care settings. The cost of care delivered by hospitals encompasses the unique benefits they provide to their communities, including standby capacity for unforeseen events, compliance with comprehensive licensing and regulatory requirements, and the provision of around-the-clock emergency care to everyone who seeks help, regardless of their ability to pay or insurance coverage.

Preserving Hospital’s Vital Services and Community Roles

Recognizing the broader scope of hospitals’ responsibilities and their vital services is essential. Hospital facilities maintain standby capacity to respond to natural and man-made disasters, public health emergencies, and unexpected traumatic events. Their comprehensive licensing, accreditation, and regulatory requirements ensure the highest standards of care. Hospitals are the bedrock of emergency medical services, open day and night, year-round, symbolizing healing, hope, and health. Their commitment to caring for all individuals in need, irrespective of their financial or insurance circumstances, is a testament to their indispensable role in communities nationwide.

Healthcare Landscape and Physician Acquisitions

Contrary to popular belief, health insurers and private equity firms, rather than hospitals, have been primarily responsible for physician acquisitions in recent years. The increasing costs and burdens associated with policies like commercial insurer prior authorizations have led many physicians to opt for employment rather than running their practices. Physicians consistently desire to focus on patient care and medical practice rather than creating their infrastructure or dealing with administrative tasks. Notably, health insurers have been the main acquirers of physician practices, with an average number of acquired physicians per deal being more than ten times higher for health insurers than for any other acquirer type, including hospitals and health systems.


How would the proposed Medicare cuts affect access to care in rural areas?

Rural areas heavily rely on local hospitals, with Medicare accounting for nearly half of their revenue. The chronic underpayment by Medicare has already led to numerous rural hospital closures since 2010. Further cuts would exacerbate financial hardship, reduce access to essential services, and potentially result in additional hospital closures.

What sets Hospital Outpatient Departments (HOPDs) apart from other care settings?

HOPDs are better equipped to handle complex and emergency cases due to their access to critical hospital resources, such as ICUs. They are vital in caring for sicker, lower-income patients with complex conditions. Site-neutral proposals must account for these key differences and the unique benefits hospitals offer their communities.

Who has been responsible for physician acquisitions in recent years?

Health insurers and private equity firms have taken the lead in acquiring physicians, while hospitals and health systems have had a relatively lower involvement. Physicians often prefer employment over running their practices due to rising costs and administrative burdens imposed by policies like commercial insurer prior authorizations.


Author: Staff Writer

Leave a comment

We'll never share your email with anyone else.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

ObamaCareFacts is a free informational site. It's privately owned, and is not owned, operated, or endorsed by the US federal government or state governments. Our contributors have over a decade of experience writing about health insurance. However, we do not offer professional official legal, tax, or medical advice. See: Legal Information and Cookie Policy. For more on our company, learn About or Contact us.