Rural hospitals contend with an expensive shift to digital amid shrinking margins

The Covid-19 pandemic hastened the transition to virtual care delivery and technology-based operations for hospitals around the country. While this has been heralded as a long-overdue move, for rural hospitals the move is an especially expensive one. They have seen their operating margins narrow like their big-city counterparts but have less of a financial cushion than the latter enjoy.

As a result, many have decided that their 2021 IT spending must focus on areas that will give them the most bang for their buck. These include equipment upgrades, buying new revenue cycle management technologies, and of course, enhancing telehealth.

This emphasis on telehealth is based on the hope that the regulatory changes related to IT that helped them survive the past year will be made permanent.

A snapshot of the financial landscape for hospitals
Though U.S. providers received federal funding via the Coronavirus Aid, Relief, and Economic Security Act, reports on hospital finances paint a grim picture. Even with federal aid, U.S. hospital operating margins fell 42.4% from last January, according to a February report by Kaufman Hall.

Despite these bleak numbers, many large, urban health systems fared surprisingly well. Several of the most prominent organizations in the country posted billions in revenue last year, like Pittsburgh-based UPMC and Nashville, Tennessee-based HCA Healthcare.

But rural hospitals — many of which were in dire straits even before the pandemic — have not been so lucky.

Nearly half (46%) of rural hospitals have a negative operating margin, according to a report by The Chartis Center for Rural Health published last month.

Key IT priorities for rural providers
Against this economic backdrop, rural hospitals have to make IT decisions very strategically, said Brock Slabach, vice president of member services at the National Rural Health Association, in a phone interview.

A major challenge for these providers last year — which is expected to persist this year — is equipment upkeep and the upgrades required to maintain their EHR presence, he said.

“[Rural hospitals] got started with the tremendous subsidies that were afforded to allow them to implement EHRs, and now I’m afraid, many are buckling under the pressure of the investment they made 10 years ago — trying to keep up in terms of hardware and software,” Slabach said.

The subsidies were provided via the Health Information Technology for Economic and Clinical Health Act, passed in 2009. The act created a $27 billion incentive program to urge EHR adoption among hospitals and physician practices. Though the funds helped drive the initial adoption of the technology, now with the requisite upgrades, rural hospitals are on their own.

Though it is difficult to estimate the cost of these upgrades — as it depends on several factors including how much of the hardware has to be replaced or upgraded — Slabach has heard figures ranging from $100,000 to several million dollars.

But, despite this steep cost, a healthy IT infrastructure is key as the move to virtual care speeds up amid the pandemic. So Slabach expects to see continued investment in technology upgrades and updates.

Operational efficiency is also on the top of the list. For Memorial Regional Health in Craig, Colorado, IT investments will be focused on boosting revenue cycle management.

“The faster you process a claim and get it out the door, and the better that technology works, it gets to the payer faster,” said Andy Daniels, CEO of the 25-bed hospital, in a phone interview. “On the backend, once you receive the payment, the faster you are able to post that, your accounts receivable goes down and your cash flow remains stable.”

Steady cash flow is especially necessary for survival in an environment where patient volumes remain uneven.

Memorial Regional Health had outsourced its billing processes prior to the pandemic and had partnered with a bank to assist with collections. Both moves held them in good stead as the public health crisis worsened, Daniels said.

This year, the hospital is considering purchasing payer contract management technology for their commercial clients, he said. This technology will help Memorial Regional Health ensure they are getting reimbursed accurately and in accordance with their contracts.

It’s not just backend hospital operations that are a focus for IT investment. Rural hospitals are hopping on the telehealth train as well — a necessity in the age of Covid-19.

Soon after the pandemic hit, the Centers for Medicare and Medicaid Services implemented several waivers to support telehealth delivery in rural areas.

One of the biggest changes made by CMS is allowing rural health clinics and federally qualified health centers to be reimbursed as “distant sites” when providing telehealth services to Medicare patients during the pandemic.

Previously, these facilities could only be reimbursed as the “originating site” of service for telehealth, meaning they could only get paid for connecting their patients virtually with urban centers for second opinions or consultations with specialists, said the National Rural Health Association’s Slabach.

With the waiver, rural health facilities can also be reimbursed for serving as the distant site of service. This means patients can use telehealth to connect with them from home for care the patient would have usually received in-person.

While this change is positive, rural hospitals had to quickly implement telehealth services to take advantage of the waiver.

“One of the biggest challenges [for rural facilities] was standing up provider-to-patient home telehealth visits after the CMS telehealth waivers were announced,” said Louis Wenzlow, director of health IT and strategic initiatives/CIO of the Rural Wisconsin Health Cooperative, in an email. “Only a subset of rural hospitals had the capacity to engage this, but for those that did, it was a major project.”

At first, hospitals like Memorial Regional Health relied on technologies easily available to them, such as Zoom, Daniels said. But it soon became clear that a formal telehealth strategy was needed, and the hospital decided to add virtual care capabilities via its Epic EHR system.

Memorial Regional will continue to focus on telehealth as a formal strategy in 2021, Daniels said.

“There is no amount of technology to make people come to the doctor,” he added. “They have to feel comfortable to come to the doctor. So, the best thing way [we] can do that is to offer televisits.”

A leader at Clara Barton Hospital, a 23-bed critical access facility in Hoisington, Kansas, echoed this sentiment.

The hospital was not using telehealth at all pre-pandemic, said Michael Thomas, Clara Barton’s IT director, in an email.

“In a rural setting, our patients had never requested a virtual visit because we are literally right down the street from the majority of our patient population base,” he said.

During the pandemic push to digital, the hospital rapidly set up and trained its workforce on a new telehealth solution. Continuing to invest in virtual care solutions for the hospital will be a key even after the pandemic ebbs.

“We quickly realized the technology can be used as a convenience factor for some of our patients, as well as offer a safe environment for our patients to be seen during the pandemic,” Thomas said.

As telehealth deepens its hold on the industry, EHR vendors have recognized that budget constraints may hamper rural facilities’ plans to add this now necessary service.

To help alleviate this burden, Cerner announced last year that it will offer a video visit platform to providers using its CommunityWorks EHR free of charge through the end of 2021. CommunityWorks is a cloud-based EHR tailored to community and critical access hospitals.

“At Cerner, we understand the complexities of health system budgets, especially for critical access hospitals,” said Mitchell Clark, president of CommunityWorks at Cerner, in an email. “Now more than ever hospitals need interoperable technology to help provide seamless care to patients.”

Rural hospitals’ regulatory wish list for IT
Though the end of the Covid-19 pandemic appears within reach, the devastating effects of the once-in-a-century crisis on rural hospitals will likely continue for years to come. Shifts in the regulatory environment will be necessary as these hospitals navigate the new normal.

Rural healthcare stakeholders say that the most beneficial change will be making telehealth waivers permanent.

The government should begin with solidifying telehealth payment parity, said Memorial Regional Health’s Daniels. This would make reimbursement for primary care offered to Medicare and Medicaid patients via telehealth the same as payment for those services in-person.

Though hospital volumes have recovered somewhat, they are unlikely to return to pre-pandemic levels, indicating that telehealth will reign supreme in 2021 and beyond. Telehealth payment parity would help providers recoup the loss from patient volume.

“It’s a volume-driven business for everybody, it just is,” Daniels said. “And [right now] the volume isn’t there.”

In addition, the aforementioned waiver that allows rural health centers to be reimbursed as originating sites of service for telehealth should be formalized, said Slabach of the National Rural Health Association.

And finally, the government needs to ensure that rural areas have adequate broadband access for services like telehealth and remote patient monitoring.

Though the Federal Communications Commission is providing broadband subsidies to eligible providers during the pandemic, this support could be hampered by high demand and limited funding, said Rural Wisconsin Health Cooperative’s Wenzlow. Action needs to be taken to make sure the funding doesn’t run out.

There is no doubt that the Covid-19 pandemic has changed healthcare delivery in this country. But the shift thrusts rural hospitals into an increasingly precarious position. Sound spending decisions, and support where possible, will be necessary to ensure these hospitals not only survive the current crisis but thrive.

Photo: marekuliasz, Getty Images