Half of rural hospitals lose money; firm says 418 could close; Ky. not a standout except in Medicare Advantage, which is a threat

Map by Chartis Center for Rural Health, labeled by Kentucky Health News

Kentucky Health News

Rural hospitals are in more trouble than ever, and 418 of them are “vulnerable to closure,” according to a study of their finances by Chartis, a Chicago-based health-care consultancy that specializes in tracking the business of rural health.

The Chartis Center for Rural Health says rural hospitals are entering "a startling new phase of this crisis as rural hospitals fall deeper into the red, 'care deserts' widen throughout rural communities, and the increasing penetration of Medicare Advantage could further disrupt rural hospital revenue."

The top warning signal cited in the study is that half of rural hospitals are losing money, up from 43 percent a year ago. That news is especially bad for independent rural hospitals, 55% of which are in the red, while only 42% of rural hospitals affiliated with groups are operating at a loss. "Nearly 60% of rural hospitals are now affiliated with a health system," Chartis reports.

Most people on Medicare now have Medicare Advantage, private insurance plans that get lump sums from Medicare to cover members and look for ways to attract customers while limiting claims. "Medicare Advantage now accounts for 35% of all Medicare-eligible patients in rural communities," Chartis reports, saying Advantage plans' share of rural residents has risen 48% since 2019. 

Chartis map, labeled by Ky. Health News; click on it to enlarge

That's a problem for rural hospitals designated as "critical access" because Medicare Advantage plans' net reimbursement to such hospitals "is often lower for similar services than that of traditional Medicare because Medicare Advantage does not follow cost-based reimbursement" as traditional Medicare does for such hospitals, Chartis reports. Insurance companies negotiate those rates with hospitals, and in many rural areas, hospitals are at a negotiating disadvantage because few insurers operate in their service areas.

Also, "Medicare Advantage may not cover all the services traditional Medicare does, including swing beds, which provide skilled nursing care for patients and are often a strong source of revenue stability for rural hospitals," Chartis notes. "Rural providers may not be equipped to efficiently navigate administrative requirements for payment introduced by Medicare Advantage, such as prior authorizations, which can lead to increased denials."

Since 2010, "167 rural hospitals have either closed or converted to a model that excludes inpatient care," Chartis says. The firm says its estimate that 418 are “vulnerable to closure” is based on "a new, expanded statistical analysis" of their finances, gleaned from cost reports they file with Medicare.

The report does not give details for each state, but places each one in certain ranges. It deems fewer than 10% of Kentucky rural hospitals "vulnerable to closure" but places the state in the highest range of rural Medicare Advantage growth. As for being in the red or the black, it puts Kentucky among the states where 41% to 60% of the rural hospitals are losing money.

Ky. Hospital Assn. hands out annual quality awards to hospitals

The Kentucky Hospital Association recently gave Kentucky hospitals its annual Quality Awards, honoring them for their leadership, innovation in quality, safety and commitment to patient care. The recipients were: 

• Bluegrass Community Hospital in Versailles and Deaconess Union County Hospital in Morganfield - critical access hospitals 
• Rockcastle Regional Hospital in Mount Vernon - hospitals with fewer than 100 beds
• Ephraim McDowell Regional Medical Center in Danville and St. Claire Regional Medical Center in Morehead - hospitals with 100 to -250 beds
• St. Joseph Hospital, Lexington, and Owensboro Health Regional Hospital - hospitals with more than 250 beds
• The Brook Hospital-KMI, Louisville - psychiatric hospitals
• Continuing Care Hospital, Lexington - physical rehabilitation or long-term acute care hospital 
• St. Elizabeth Healthcare of Northern Kentucky - system project
• U of L Health, Louisville - KHA Quality-Centered Health System Award, a new one for the association

"These hospitals and systems demonstrated not only a dedication to patient safety, but their persistence in going above and beyond what is expected for providing quality care," a KHA news release said.

Critical access hospitals, which turned 25 in 2022, are vital to providing health care in rural areas; Kentucky has 28 of them

Update 1/3/2023: This story has been updated to correct the number of Critical Access Hospitals in Kentucky to 28. 

By Melissa Patrick
Kentucky Health News

Critical access hospitals celebrated their 25th anniversary in 2022. The designation was created to ensure the financial viability of the nation's small, rural hospitals. Kentucky has 25 28 of them, and at least one health official says they may be more important now than ever. 

"I could even make the argument, they're more important today than they were 25 years ago just simply because the stress and strain that's been put on the healthcare system in general gets tougher every year," said Hal Clark, vice-president of the Kentucky Hospital Association's solutions and member-services group. 

Barbourville ARH Hospital serves mainly Knox County.

Barbourville ARH Hospital CEO Charles Lovell also pointed to the value of CAHs, noting that during the pandemic they had to turn offices into patient rooms because there were so many patients and larger hospitals couldn't accepts transfers. More recently, he said, they have been near capacity because of respiratory illness.

"We are the lifeline for many of those patients," he said. "I just want people to realize that even though critical-access hospitals are smaller hospitals inside, we're not smaller in the care and the quality of care that we provide." 

The CAH designation came about after the closure of more than 400 hospitals during the 1980s and 1990s. The legislation that created the designation, spearheaded by Montana Sen. Max Baucus, was aimed at reducing the financial vulnerability of rural hospitals and improving quality, while also improving access to health care by protecting essential services for rural communities. 

Two key requirements for a CAH is that it have no more than 25 acute-care inpatient beds and be more than 35 miles from another hospital, with some exceptions. In return, CAHs are reimbursed at 101% of the costs reported to Medicare for inpatient, outpatient, laboratory and therapy services, as well as post-acute care in the hospital's swing beds, which are beds that allow for the care of acute patients as well as those who need skilled, longer-term care.

Lovell also spoke about how important expansion of the Medicaid program has been to the viability of rural hospitals. More than 400,000 Kentuckians gained health insurance coverage through Medicaid after the state expanded the program in 2014 to people who earn up to 138% of the federal poverty level, under the Patient Protection and Affordable Care Act.

"We, as hospitals, are fortunate that Kentucky adopted Medicaid expansion," Lovell said, calling it a "financial windfall" because it led to more of their patients having health insurance. He said 80% of the Barbourville hospital's revenue comes from Medicare and Medicaid. 

Clark, of the hospital association, called CAHs "an absolutely critical piece of the puzzle" when it comes to taking care of rural Kentuckians and said the state would be in a tough position without them. 

"If those hospitals were to close, in an under-served, very rural part of our state, then patients that needed to access health care are going to have to drive very long distances to receive care," he said. "That could mean the difference between life and death for some people. And so it's very important that those services remain viable and remain available to people in rural parts of our state." 

Further, he said, transportation remains a huge barrier to getting care for many Kentuckians in rural areas and CAHs provide much needed services close to home. 

These small hospitals are also important economic engines in their communities, Clark said. Hospitals are often one of the largest employers in rural communities, with some of the best-paying jobs. 

Rural hospitals continue to experience financial, operational and staffing challenges, and whether they have one patient or 25, they must remain fully operational, said Lovell. 

But Lovell said his hospital is not considering converting to the new "rural emergency hospital" program that allows hospitals with 50 or fewer inpatient beds to convert to outpatient-only service.

"As health care evolves, we may have to look at things differently," he said. "But we all want to be around 25 years from now." 

Clark said none of the qualifying rural hospitals in Kentucky are actively pursuing then new option, but  KHA has encouraged them to be aware of the program and to know it is an option going forward.

Emily Baumgaertner of The Washington Post wrote recently about the program, "The government’s reasoning is simple: Many rural hospitals can no longer afford to offer inpatient care. A rural closure is often preceded by a decline in volume, according to a congressional report, and empty beds can drain the hospital’s ability to provide outpatient services that the community needs. But the new opportunity is presenting many institutions with an excruciating choice."

State rural-health office will get $299,999 a year for the next three years to help veterans get care; one of three such grants in U.S.

The Kentucky Office of Rural Health is one of three organizations in the U.S. to receive a three-year, nearly $900,000 grant from the federal Office of Rural Health Policy to improve access to health care for veterans living in rural Kentucky and to improve the coordination of care for veteran patients. The University of Kentucky Center of Excellence in Rural Health in Hazard serves as the federally designated Kentucky Office of Rural Health.

The $899,997 grant, provided through the Rural Veterans Health Access Program, will fund a range of efforts: conducting a needs assessment focused on the resources, programs, best practices and organizations currently available to assist the state's rural veterans; establishing and regularly calling together a stakeholder advisory group to guide projects; and hosting training sessions and community health days events for veterans, their families, health-care organizations and other community members.

The Office of Rural Health will also partner with community stakeholders to support projects at the local level that address veterans' access to care. Much of the work will be focused in the 27 counties where Kentucky’s 28 critical-access hospitals — rural facilities with 25 or fewer acute care inpatient beds — operate: Allen, Breckinridge, Caldwell, Carroll, Casey, Cumberland, Estill, Fleming, Floyd, Grant, Green, Hart, Knox, Leslie, Lincoln, Livingston, Madison, Marshall, Mercer, Morgan, Ohio, Russell, Simpson, Trigg, Union, Wayne and Woodford.

“This is a project and a population that we’ve been interested in working with for some time. We’re nothing short of excited,” said KORH Director Ernie Scott. “We have a veteran on our staff, a number of veterans working at the UK Center of Excellence in Rural Health and most of us here have a direct connection to at least one veteran in our own families. Our veterans are near and dear to our heart. It’s a population with a significant presence in rural Kentucky — more than 40% of Kentucky’s veterans live in rural communities — and it’s our honor to work with them, to support them and to seek out ways we can have a positive impact on their health and their ability to navigate the health-care system.”

Scott said the project also provides an opportunity to develop a closer relationship with the Veterans Health Administration, the country’s largest integrated health system, and to encourage innovative community partnerships between the VHA’s clinics and medical centers and Kentucky health-care professionals.

“There are plenty of efforts taking place here in the commonwealth to meet the needs of our rural veterans, and we’re not here to duplicate those efforts,” Scott said. “Instead, what we hope to do is call attention to any gaps that might exist in the care being provided to veterans and work with partners to develop solutions. We also want to showcase the good that’s being done and that can be replicated in other communities. This project is a win-win for everyone involved.”

The Office of Rural Health, established in 1991, is a federal-state partnership authorized by federal legislation. It works directly with clinicians, clinic and hospital administrators, policymakers and other stakeholders to improve the accessibility of health care services for the state’s rural and under-served residents. The office connects communities and health-care organizations to local, state and federal resources while working toward long-term solutions to financial, quality improvement and workforce challenges.

Hospitals agree to follow higher quality standards to get more money from Medicaid, which covers 1/3 of state's population

By Melissa Patrick
Kentucky Health News

With up to 28 rural Kentucky hospitals vulnerable to closure if their finance don't improve, Tuesday's announcement of a new payment model to increase the amount Kentucky's hospitals are paid for Medicaid patients is cause for their celebration.

"Improved reimbursement for Kentucky's hospitals is vital for their survival. Medicaid . . . does not cover the full cost of caring for the patients we serve," Nancy Galvagni, president of the Kentucky Hospital Association, said at Gov. Andy Beshear's news briefing Tuesday. "Every year our state's hospitals see a shortfall from treating Medicaid patients. And with more than a third of the state's population covered by Medicaid, this is an unsustainable model."

Galvagni told Kentucky Health News that the risk of closure is real for many Kentucky hospitals, noting that Our Lady of Bellefonte Hospital in Ashland closed last year, and Jewish Hospital in Louisville likely would have closed if it had not been taken over by the University of Louisville. 

"When you are operating with a majority of your patients who are being paid below cost, they can't reinvest in the facility or the capital requirements," she said.

In order to receive these funds, hospitals will have to abide by higher quality standards that are still being decided by KHA and the Cabinet for Health and Family Services. Quality standards include things like hospital-acquired infections, medication errors and readmission rates.

Friedlander and interpreter Virginia Moore
announced the new hospital payment program.

Health Secretary Eric Friedlander told Kentucky Health News that the new model will allow the state's hospitals to get paid an "average commercial rate," which is what private insurers would pay for health care in hospitals, instead of the current Medicaid rate, which he said is "way below that amount." 

Gov. Andy Beshear said at the briefing that this new Medicaid payment model will send an extra $800 million to $1 billion a year to hospitals. 

Friedlander called the payment model a "creative response" to what is allowed by the Centers for Medicare and Medicaid Services. He said the University of Kentucky and University of Louisville hospitals already have a similar mode of payment.

The next step is for the General Assembly to approve the program by passing House Bill 183, sponsored by Rep. Brandon Reed, R-Hodgenville. It would give the cabinet the authority to spend the money, which will be provided by the hospital association. It also allows for increased flexibility by allowing the state to exempt hospitals that would not benefit from the program.  

Friedlander explained that this new program does not incur any additional cost to the state because Kentucky's hospitals have agreed to cover it.

Further, he said a move to this new payment model will result in more money for the state. Beshear's news release says the Department for Medicaid Services will have access to an additional $50 million to $80 million in funding. 

Calling it a "fantastic win" for everyone, Galvagni said, "This could mean the difference between keeping the lights on and closing the doors to many of our hospitals across the state."

Friedlander added that this increased funding is important for a myriad of reasons. "This is designed to improve quality," he said. "It is designed to improve reimbursement to hospitals so that they're not taking the losses on their Medicaid patients. This will be designed to support financially, keeping all the hospitals in Kentucky open so we won't see more closures. This will go to improve infrastructure. And this ends up not being a cost to the state." 

Further, he said it will decrease uncompensated care at hospitals and will serve as an incentive to get everyone who is eligible signed up for Medicaid, "because the difference between a Medicaid patient now and somebody who is not insured is immense."

Carl Herde, vice-president of financial policy at the KHA, in a phone interview spoke to the importance of keeping hospitals open, not only because of the jobs they bring to a community, but also because studies show that communities without hospitals have higher mortality rates.

"When we get House Bill 183 passed and we move this forward, I think this really does create a path for financial stability, for specifically the small rural hospitals," he said, adding that most of the most financially vulnerable hospitals in the state are the small, rural ones. "And so we do think this creates a sustainable path for financial viability into the future for those communities."

The state plan amendment for these changes was filed Sept. 30, which means the federal government will allow the state to back-pay hospitals at the new rate starting July 1. 

Friedlander added that this new model, which must be approved annually, will help most of the state's hospitals and that the state and KHA has committed to making sure it does not harm any of them.

Friedlander and KHA said they were unsure, but thinks Kentucky is the first state to implement this particular payment model statewide. KHA added that other states have Medicaid payment programs that are funded at this level, but are done differently. 

Rural hospitals will get millions in settlement being negotiated with state, but range of possible amounts is wide; will feds help pay?

Most of Kentucky's rural hospitals are in line for millions of dollars of taxpayer money to settle an old lawsuit with the state, but just how many millions is uncertain. So is whether the federal government will foot part of the bill, reports John Cheves of the Lexington Herald-Leader.

The 58 hospitals "won a series of court rulings finding their Medicaid reimbursement rates unfairly low from 2007 to 2015," Cheves writes. "Last year, a unanimous three-judge panel of the Kentucky Court of Appeals sided with the hospitals. The Cabinet for Health and Family Services erred during the administration of then-Gov. Steve Beshear, the current governor’s father, the appeals court found."

The cabinet has appealed to the state Supreme Court, which hasn't decided whether to take the case and has given the two sides extra time to negotiate a settlement.

State Budget Director John Hicks

After losing to now-Gov. Andy Beshear in November, then-Gov. Matt Bevin sent the legislature a budget memorandum that estimated the cost of the settlement at $426 million. But the budget the Democratic governor proposed to the Republican-controlled legislature estimates it at $61.9 million.

“The 420 was a number that never should have been revealed,” Budget Director John Hicks told the Senate budget committee Feb. 4. “It was some forecast of the prospect of the loss to the Commonwealth, and current events are proving that’s not likely to take place to any extent to 420 million.”

Cheves reports, "An attorney for the majority of the hospitals suing the state said the $420 million estimate depends on whether the federal government, through the U.S. Centers for Medicare and Medicaid Services, agrees to share in the damages alongside the state of Kentucky." Medicaid paid 71 percent of Kentucky Medicaid costs from 2007 to 2015.

Politics could play a role. After Donald Trump was elected president, Bevin and CMS worked to make unrelated changes in the program, but their effort to require work from able-bodied Medicaid beneficiaries was blocked by the courts, and Beshear rescinded it.

Kentucky's rural hospitals began objecting in 2007 to changes in their Medicaid reimbursements. In 2010, the cabinet began holding individual dispute-resolution meetings with them. “Rather than issuing dispute-resolution decisions, the cabinet waited until May 31, 2013, to write the hospitals letters (saying) that they did not have appeal rights and dismissing the same without administrative evidentiary hearings or further due process,” the Court of Appeals said in its decision. “The hospitals requested administrative hearings from the cabinet’s dismissal letters within 30 days pursuant to [state administrative regulations]. The cabinet responded to those requests with letters stating no administrative hearings would be conducted.”

The same day it dismissed the hospitals' complaints, the cabinet sued them, seeking a ruling to uphold its Medicaid reimbursement formula. The hospitals counter-sued, leading to a Franklin Circuit Court ruling and the Court of Appeals decision. "In October 2015," Cheves notes, "the cabinet replaced the Medicaid reimbursement rate methodology that led to the litigation with a new one."

Celebrate National Rural Health Day on Thursday, Nov. 21, with a week of events starting Monday

The Federal Office of Rural Health Policy is planning a week of events to observe National Rural Health Day on Thursday, Nov. 21.

Monday, Nov. 18: From 9:30 a.m. to 12:30 p.m. ET, the National Institutes of Health will hold a seminar on the state of rural health in the U.S. at the main NIH campus in Bethesda, Maryland. For those who can't attend, the event will be videocast online here.

Nov. 19: From noon to 1 p.m. ET, The Health Resources and Services Administration will hold a webinar on addressing the opioid crisis in rural areas as it relates to women who are pregnant or have infants born addicted to opioids. Register here.

From 2 to 3 p.m. ET, the HRSA will host a Twitter chat on mental-health issues of agriculture workers. Find the chat using the hashtag #AgMentalHealth.

From 3:30 to 4:45 p.m. ET, the HRSA will host a webinar on suicide prevention in farm and ranch communities. Join the webinar here.

Nov. 20: From noon to 1 p.m. ET, the Rural Health Information Hub and the Norc Walsh Center for Rural Health Analysis will hold a webinar to discuss the new Rural Chronic Obstructive Pulmonary Disease Toolkit. Register here.

From 1 to 2 p.m. ET, the Centers for Disease Control and Prevention and the HRSA will hold a webinar aimed at rural health providers on improving antibiotic prescribing practices in critical-access hospitals. Register here.

From 2 to 3 p.m. ET, the HRSA will host a Twitter chat on rural substance-use-disorder issues. Find the chat by searching for the hashtag #RuralSUD.

From 6 to 10:15 p.m. ET, HRSA will host a virtual job fair aiming to bring more health-care providers to rural areas. Learn more here.

Nov. 21: From 9:45 a.m. to 3 p.m. ET, HRSA will celebrate National Rural Health Day in its D.C.-area office, including roundtables, lectures, and interactive sessions. The event will be livecast online.

At 1 p.m. ET, the Rural Health Information Hub will host a Twitter chat on how rural health organizations can access funding. Find the chat with the hashtags #RuralHealthChat and #PowerofRural.

From 2 to 3 p.m. ET, the National Organization of State Offices of Rural Health will air The Providers, a documentary about rural health-care providers, and lead a live discussion about it. Find out more here.

Study concludes 16 rural hospitals in Ky. at high risk of closing; another found 35 in poor financial health; remedies proposed

By Melissa Patrick
Kentucky Health News

Many rural hospitals across Kentucky are struggling to keep their doors open. And though the numbers vary on just how many are in dire financial straits, the conclusion is the same: in much of rural Kentucky, health care as we know it is in trouble.

Table from Navigant Consulting report

"We can't keep doing health care the way that we've done in the past, and that's the bottom line," Dr. Dan DeBehnke, managing director of healthcare at Navigant Consulting Inc., told Kentucky Health News. "But the other key component to that is that there's not a single magic bullet."

DeBehnke is a former health system CEO and co-author of a Navigant study released in February, which concluded that 16 of Kentucky's rural hospitals, or almost one-fourth of the total, are at high risk of closing unless their finances improve. The study considered 65 of Kentucky's 129 hospitals to be rural.

Another report, released in April, concluded that eight rural Kentucky hospitals are at high risk of financial distress; and 12 are considered to have mid-high risk of such distress. The report was done by the Cecil G. Sheps Center for Health Services Research at the University of North Carolina, using a distress-index model it has developed in tracking rural hospitals for a decade.

And a recent Kentucky Hospital Association analysis, using 2017-18 data, concluded that 35 of the 70 Kentucky hospitals it considers rural are in poor financial health. 

KHA told Kentucky Health News in an e-mail that the "good news" is that 21 of the 35 are owned by larger hospital systems, "so it is more likely that they will continue to have support. However, that leaves 14 hospitals very vulnerable [and] 10 of these 14 are critical-access hospitals."

Critical-access hospitals get slightly higher Medicare and Medicaid reimbursements in return for limiting their size and services. Kentucky has 27 of them. 

KHA recently replicated a narrower study that looked at the financial health of 44 rural hospitals in 2015, and found that their situation has worsened. The first study found that 15 of the 44, or 34 percent, were in poor financial health. The updated study added eight more to the list, bringing the number to 29 23, or 66 52 percent of the total.

While the numbers in these studies vary because they define financial risk differently, Navigant's DeBehnke told Kentucky Health News that the message to be taken from them is clear.

"The message is the same," he said. "Rural health care is facing a crisis."

The crisis becomes more real every time a rural hospital closes. Nationwide, 113 have closed since 2010, according to the North Carolina center. Five have closed in Kentucky since 2009, four of them since 2014. A hospital is considered closed if it has stopped providing inpatient care, even if it still offers other services, like emergency or primary care.

Why are rural hospitals struggling? 

A main reason rural hospitals are struggling, said DeBehnke, is that patient care has shifted from an inpatient model to an outpatient one, which has left them overstaffed and underused.

"The average rural hospital has about 50 beds and has an average daily census -- so, patients actually in beds every day -- of seven," he said. "They are utilizing well less than 50% of their capacity and they've got about 300 employees."

He also pointed to the loss of agricultural and manufacturing jobs in rural communities, leaving them with a shrinking population that tends to be older and poorer, meaning they are likely to be uninsured or on Medicaid or Medicare, which don't pay for the total cost of care.

The Navigant report adds that "budget-strapped" rural hospitals are also unable to invest in updated, innovative technology due to a lack of capital.

"It's a mixture of a lot of different things that have kind of come to a head at this point," DeBehnke said.

Federal reimbursement policies 

The Kentucky Hospital Association said several changes in federal reimbursement policies have hurt Kentucky hospitals, and several more being considered would do further damage.

KHA said last-minute changes to a rule that changes how Medicare reimburses the bottom 25% of hospitals for their "wage index" will cause a $2.6 million loss to Kentucky hospitals instead of the $4 million increase they would have gained under the original version. Some Kentucky hospitals in the bottom 25% will benefit from the extra money, but eight that would have been helped from this new rule will be worse off under the new formula, says KHA.

Cuts in the Medicare program that helps hospitals with a "disproportionate share" of Medicaid patients will leave Kentucky hospitals with $77 million less by 2021, KHA says. Medicare no longer allows such hospitals to mitigate what the industry calls the "Medicaid shortfall," the difference between what Medicaid pays and the actual cost of care.

Medicaid has its own disproportionate-share program. Its proposed cuts would reduce Kentucky's payments in 2021 to $60 million, 75% less than the 2018 total of $227 million, KHA says. Those cuts have been put on hold until Nov. 21, and hospitals are still hoping to prevent or mitigate them.

Also of concern is a "site-neutral" rule, finalized in November 2018 that allows Medicare to pay the same for an outpatient hospital clinic visit as it does to a traditional clinic for the same service. A federal judge blocked the rule last month, but the government could appeal. If the rule is reinstated, KHA says, it would cost Kentucky hospitals $563 million over the next 10 years.

The Hardinsburg hospital may have been saved
by a program federal officials are trying to cut.

Kentucky hospitals would also take a hit if the Centers for Medicare and Medicaid Services cuts a federal drug-discount program known as 340B. CMS has appealed a federal judge's ruling that its Medicare 340B rate cuts for drugs purchased through the program was unlawful. KHA says such cuts would cost Kentucky hospitals $16 million a year.

The impact of federal reimbursement policies can be told in the story of Breckinridge Memorial Hospital in Hardinsburg, which was on the brink of closing, largely because of ongoing federal reimbursement cuts to Medicare and Medicaid, but was finally able to break even because it started participating in the 340B program.

Hospital officials recognized that its break-even status obtained from the 340B program was a short-term solution, but city officials said it was enough to thwart their request for a tax hike to shore up the hospitals empty savings account.

Why does it matter?

Rural hospital closures cost communities their immediate access to emergency and acute care, causing longer drive times to the nearest hospital and in some cases poorer health outcomes, especially in a traumatic event. A University of Kentucky study found that ambulance-run length for rural patients increased 76%, from 14.2 minutes to 25.1 minutes, when their hospital closes. For seniors that transport time was 98% longer, going from 13.9 minutes to 27.6 minutes.

Hospital closures can also bring economic hardship to a community, since hospitals tend to be large employers and support other businesses, like pharmacies and clinics. When the sole hospital in a community closes, per capita income declines by 4% and the unemployment rate rises 1.6 percentage points, according to a study in the journal Health Services Research.

On top of that, not having a hospital can make it more difficult for a community to attract new employers or new health-care providers; hospital closures often results in the out-migration of existing providers and specialists.

Navigant determined that 10 of the 16 rural hospitals in Kentucky at high financial risk were essential to their communities, based on an analysis of trauma status, service to vulnerable populations, geographic isolation, and economic impact.

About 41% of Kentuckians live in rural areas, according to the Rural Health Information Hub.

What can be done? 

One of the main suggestions to shore up rural hospitals is to expand Medicaid under the Patient Protection and Affordable Care Act, but Kentucky has already done that. The liberal Center on Budget and Policy Priorities says that from 2013 to 2015, rural hospitals in Medicaid-expansion states improved their operating margins by 4 percentage points more than rural hospitals in non-expansion states, and their total margins by 2.3 percentage points more.

Another suggestion is to stop requiring small rural hospitals to have inpatient beds in order to get Medicare reimbursement. DeBehnke said that would allow them to become "rural emergency hospitals," with a well-functioning emergency department and an attached ambulatory clinic designed to meet local needs. This new designation would allow them to receive special help from Medicare.

One such proposal is the bipartisan Rural Emergency Acute Care Hospital (REACH) Act which has not gained much traction in Congress though it has been sponsored by Sen. Chuck Grassley of Iowa, the Republican who chairs the Senate Finance Committee. Navigant is proposing that states be able to do this on their own, through a waiver from CMS, DeBehnke said

Another suggestion is for rural hospitals to regionalize their care, which means they would divvy up functions among hospitals or agree to let certain hospitals specialize in certain types of care. Many already do this for perinatal care, the care given before and after the birth of a child.

DeBehnke said one model could have four hospitals in a region each be responsible for one area of care. One would do inpatient care, another would be a free-standing emergency room with a robust clinic, another would provide long-term care, and another would provide behavioral-health and addiction-recovery care. He said that may sound really good to some, but is a hard sell because communities and their hospitals are reluctant to give up services.

"There's a balance between keeping some resource in that community that are health-care related or losing the facility altogether because of the financial stresses," DeBehnke said. "So we think that regionalization is a really good opportunity to stabilize rural healthcare."

It's also important for these facilities to be "really, really laser-focused on cost and cost structure," he said.

DeBehnke said there needs to be a shift away from only thinking about how to save rural hospitals to one that looks at the bigger picture, which considers the real health-care needs of rural communities and what kind of facilities and services they require.

"It's a multi-factorial problem that actually is nuanced, related to the local community and the region in which health care is provided, and the solutions will have to be tailored accordingly. There's not going to be a single fix," DeBehnke said. "It's a heavy lift, mostly from a cultural standpoint and from an emotional standpoint related to those communities."

Sen. Stephen Meredith

State Sen. Stephen Meredith, R-Leitchfield, has filed three bills for the upcoming legislative session to help rural health providers. They would remove all requirements for Medicaid co-payments; require more equitable payments between urban and rural providers from managed-care organizations, which care for most Kentucky Medicaid members; and reduce administrative burdens on providers by decreasing the number of MCOs to three from the current five.

Meredith said the bills would only help rural hospitals, not save them. "The only thing that is going to save rural hospitals is a fundamental change in the health-care delivery system," he said. "But reduced administrative costs associated with providing health care, every dollar we can put back into the care of patients versus the paperwork, that would be a benefit."

A former hospital administrator, Meredith said some rural hospitals have "a margin of 1/2 to 1 percent, that's nothing," and that could disappear if a doctor gets sick and is unable to practice "for an extended period of time."

The Kentucky Hospital Association says it also is "very concerned about the ongoing financial viability of rural hospitals," and is working to improve policies to help them. KHA said it changed the distribution methodology of the Medicaid disproportionate-share payments so that hospitals with a higher-than-average number of Medicaid patients, including critical-access hospitals, get twice the amount from the payment pool than they would have otherwise.

KHA said it is working with the state to implement a new Medicaid Hospital Rate Improvement Plan that would generate $100 million in additional reimbursement in the current state fiscal year. The money would make up the difference between what Medicaid actually pays and the actual cost of care. KHA says Medicaid pays 82% of the total cost of care. This would be accomplished through a provider tax, the revenue from which would be used to qualify for more federal funding.

Burkesville hospital open, similar one 24 miles away in Tenn. is closed; big differences: Medicaid expansion and diversification

OpenStreetMap contributors, via The Daily Yonder, adapted by Ky. Health News

Along the Cumberland River in Southern Kentucky and Middle Tennessee are two towns 24 miles apart by road. One has a hospital, and one does not, partly because Kentucky expanded Medicaid and Tennessee has not. But Cumberland County Hospital in Burkesville, Ky., hasn't just been lucky.

Cumberland River Hospital in Celina, Tenn., closed March 1, ending 146 jobs and undermining economic-development prospects in Clay County, which has a population of about 8,000. A physician assistant who has clinics in other rural Tennessee communities recently bought the hospital from Cookeville Regional Medical Center and says "he plans to reopen the hospital in phases, beginning with a clinic" Taylor Sisk reports for The Daily Yonder. "But the new owner will face the same challenges as did the former owners – as do most rural hospitals."

Neikirk and Capps (Daily Yonder photo)

Most recent rural-hospital closures have been in states that haven't expanded Medicaid under the 2010 Patient Protection and Affordable Care Act. Tennessee is one of those states. The expansion in Kentucky meant "survivability" for the Burkesville hospital, which is the main employer, with 340 jobs, in a county of 7,000, Chief Financial Officer Rick Capps told Sisk.

"He acknowledges, though, that expansion alone isn’t enough," Sisk reports. "A nonprofit owned by shareholders in the county, Cumberland County Hospital has diversified quite a bit over the past decade." It bought a local pharmacy and the county nursing home, runs the local 911 center and includes the practices of two physicians, Robert Flowers and Sam Rice, who have worked in the county for more than 30 years, Sisk reports: "That partnership, says CEO Rick Neikirk, has been key to the hospital’s success." So has its critical-access status, which gives it slightly higher government reimbursements in return for limits on its beds, services and patient stays.

Medicaid expansion also helps, in another way, Sisk notes: "With far fewer uninsured patients now entering their doors – a lighter burden of uncompensated care – the hospital has more flexibility to deviate from the standard model." In Celina, Medicaid expansion “would have helped, no question,” but probably wouldn't have kept the hospital open, Cookeville Regional CEO Paul Korth told Sisk.

Daily Yonder map, adapted by Kentucky Health News

Breckinridge County rejects tax for struggling hospital, which blames Medicare and Medicaid reimbursement cuts for its plight

The Breckinridge County Fiscal Court has unanimously rejected Breckinridge Memorial Hospital's request for a tax to shore up the financially struggling 25-bed hospital in Hardinsburg.

The magistrates and County Judge-Executive Maurice Lucas voted 7-0 at a special meeting on Dec. 20 to deny the request of the hospital, which operates as Breckinridge Health, a nonprofit with a home-health service, a nursing facility and primary-care clinics.

The vote followed several public hearings on the request for a tax of 10 cents per $100 worth of property, an especially controversial idea in one of the few Kentucky counties primarily dependent on agriculture.

The critical-access hospital has blamed its financial problems on reduced Medicare and Medicaid reimbursements, which account for 70 percent of its revenue. It was the lead plaintiff in an unsuccessful lawsuit challenging a decision by the Obama administration that reduced the payments to hospitals who serve a disproportionate number of low-income patients. The U.S. Supreme Court refused on Oct. 1 to hear an appeal of lower court rulings.

At first SOAR summit session only about health, speakers agree local cooperation is needed to address Appalachia's health issues

Jeffrey Howard speaks at the health session before
the SOAR Summit. (Photos by Melissa Patrick)

By Melissa Patrick
Kentucky Health News

PIKEVILLE, Ky. – From top to bottom of the health-care system, speakers agreed local cooperation is essential to improving health in Appalachian Kentucky. They spoke Thursday, at the first-ever preliminary sessions for the annual Shaping Our Appalachian Region Summit, held Friday in Pikeville.

Dr. Jeffrey Howard, the state health commissioner, talked briefly about some of the many health issues that plague Appalachia – including diabetes, lung disease, cancer, adverse childhood experiences – but spent most of his time talking about substance abuse.

Howard said some research indicates there is a 141 percent greater risk of  drug-related overdose and overdose death in Appalachia than the rate outside the region, and though there will be an "unprecedented" amount of money available in the next year to fight the problem, the real solutions will need to be found at the local level.

"There is no amount of money that is going to get us out of this crisis," Howard said. "This is a cultural crisis, especially in Appalachia. So we have to come together as a group, we have to embrace one another and really have a grass-roots effort to overcome the issue of substance abuse."

Howard suggested that one community solution that comes at no cost would be to identify at-risk children and families to invite to dinner once a month. He said a family had done this for him growing up, allowing him to "see what a functional family looked like."

The session opened with a video of Howard talking about how he had been raised in Eastern Kentucky by a mother and stepfather who were addicted to drugs, and in and out of recovery. He said it wasn't until he turned 14 and moved in with his father, became involved in sports, found his faith and met the woman who is now his wife, that he was able to overcome the many obstacles that substance abuse had put in his way.

Howard lives in Louisville. He described what it felt like to "come home" in a way that likely rings true to many from the region, and also speaks to the need for local solutions.

"Every time those low, round-top mountains peak up on the horizon, I just get a feeling of tranquility, peace, happiness," he said, adding later, "I know that every time I get that feeling, I know who I am, where I belong, that I'm home. And most importantly, I'm with the people I belong with."

Rural health: A boots-on-the-ground perspective

In the second part of the health session, a rural hospital CEO, a health department director and a federally qualified health center's behavioral-health coordinator and therapist talked about what rural health in Kentucky is really like.

Scott Lockard, public health director of the Kentucky River Health Department District, told the group that one entity can no longer be responsible for providing health care in a community.

"We have to partner. . . . We don't need to be competitors, we need to complement each other," he said. "And I think we are seeing that more and more throughout our communities, throughout our systems and we're all working together, we're playing well in the sandbox and we're sharing our pails and shovels better than we used to."

Sonji Adams, the behavioral health coordinator and therapist at Mountain Comprehensive Health Corp., said she is most proud of their many programs that integrate behavioral and physical health care. For example, Adams said it takes a collaborative, integrated effort to help people with substance-use disorders be successful.

"Let's get everybody together in the same room. Let's share ideas. Let's figure out a hub and spoke model so whenever they come to say I need help, we know exactly where to send them," she said to a room full of applause. "We have to be able to meet them with community resources to get them better so that we're making an entire community better."

From left: Susan Starling, Scott Lockard, and Sonji Adams

Asked for a wish list that would improve rural health, Lockard said to applause that he would wish for a "statewide smoke-free law." And among a long list of other wishes, he said that while everyone recognizes the issues around substance use disorders are "huge," he added that we "can't drop the ball" on other diseases that are killing citizens, such as heart disease, cancer, smoking, and obesity.

Adams said she would wish for a model of care that moves from "sick care" to "health care" for both physical health and mental health issues. She said she would also wish for more behavioral health care providers to work in Eastern Kentucky.

Susan Starling, CEO of Mercy Health-Marcum & Wallace Hospital in Irvine, wished for policy makers in Baltimore (where her hospital's new parent company, Bon Secours Health System, is headquartered) and Washington, D.C., to understand "what rural is" because she said they often don't understand the importance of a hospital that only has 25 beds or how harmful a 1 percent cut to a program can be. Starling's hospital is one of those critical-access hospitals, 27 in Kentucky, that get 1 percent more federal reimbursement in return for limiting their beds and services.

She also said she wished for a way to save rural emergency medical services, saying many of them "don't have the money to survive." She said her hospital often has patients in the emergency room who have to wait two days for transport because "they can't get an EMS truck to come to our hospital and take them back to their community."

Earlier, Starling said she wanted to make sure everyone understood how important hospitals are to rural communities. Listing her hospital's many awards and accreditations, she said "quality health care in a small rural hospital setting" is possible. She said her hospital, in 2016, provided $1.5 million of uncompensated health care, employed over 250 people, spent $12 million on wages, supplies and services, and had a total economic output estimated at $19 million: "That's not chump change for us in Estill County."

One-year project aims to help 10 Ky. critical-access hospitals deal with substance-abuse issues and treatment access

A one-year project aims to help 10 rural Kentucky hospitals address substance abuse, with one community outreach event educating health-care providers about the "disease of addiction" and another providing Naloxone training to community members at their local hospital.

Both events were part of KORH's Critical Access Substance Abuse Project, which is funded by the federal Office of Rural Health Policy, according to news releases from the Kentucky Office of Rural Health.

The July 18 CASAP event in West Liberty hosted Dr. John Sanders, the medical director for hospice and palliative medicine at St. Claire HealthCare in Morehead, who told a group of providers about the "disease of addiction," and explained how our understanding of addiction and the treatments for it have evolved, stressing that a purely punitive approach to end addiction simply won't work.

He also explained how some physicians have contributed to the problem and discussed the history of 12-step programs and how they work.

“Any time that we can get medical professionals together in the same room talking about one of the state’s most serious health issues, I think we’re doing some important work,” KORH Director Ernie Scott said. “We hope that the health-care professionals attending Dr. Sanders’ presentation walked away with an enhanced understanding of the complexities of addiction and the work that still needs to be done in our communities to deal with the everyday realities of substance abuse.”

This event was co-sponsored by the Northeast Kentucky Area Health Education Center.

The July 17 event in Hyden offered free Naloxone training to 60 community members at the Mary Breckinridge Appalachian Regional Hospital. Participants also received two doses of the life-saving drug that can reverse the effects of an opioid overdose, says the release.

Scott called the Naloxone training and distribution event a success, adding that the hope of the project was to have communities and hospitals working together and that this event had certainly met this goal.

"We're really excited to see community members come to one of our CASAP-sponsored events, be engaged with one of the most serious health issues impacting rural Kentucky today and learn about what they can do to help out," he said in the release.

The project is designed to provide support to ten critical access hospitals in Kentucky, chosen because they are in rural areas with high rates of poverty, unemployment and substance abuse.

"The overarching goal of the project is to address substance abuse issues and concerns at the hospital and community level through education and working to improve patient access to treatment options," says the CASAP website.

The release adds that the project will also work to better link the participating hospitals to their surrounding communities to meet the needs of their patients with substance-use disorders.

Besides Morgan County ARH and Mary Breckinridge, the other critical-access hospitals in the project are ARH Our Lady of the Way and McDowell ARH in Floyd County, Barbourville ARH, Ephraim McDowell Fort Logan Hospital in Harrodsburg, Ohio County Hospital in Hartford, Russell County Hospital and Wayne County Hospital.

Small, rural hospitals doing more orthopedic surgeries, but their 30-day death rate is one-third higher than that of larger hospitals

Critical-access hospitals, a linchpin of health care in rural areas, are performing many more orthopedic surgeries. But the Medicare patients who get the five most common orthopedic procedures at such hospitals are one-third more likely to die within 30 days than those who get them at larger, general hospitals.

That's what The Wall Street Journal found by reviewing Medicare billing data from 2008 to 2013, which showed a 43 percent increase in surgeries at critical-access hospitals, "far outpacing the growth of those services at general hospitals" and raising "troubling implications for patient safety," says the Christmas Day story by Christopher Weaver, Anna Wilde Mathews and Tom McGinty. From 2010 to 2013, the death rate at such hospitals was 34 percent higher than at the larger facilities.

“Patients are getting bad outcomes, probably because they are getting procedures at hospitals without the experience to do it well,” Ashish Jha, a Harvard University public-health professor who has studied critical-access hospitals, told the Journal. He and his colleagues reviewed the Journal's data and concluded that "the 30-day mortality rate for inpatient joint replacements was about 9 per 1,000 at critical-access hospitals in 2013, compared with around 5 in 1,000 at general hospitals," the newspaper reports.

"Many studies suggest that patients generally get better results when their procedures are done at hospitals that perform them frequently," the Journal reports. "The average critical-access hospital performing inpatient joint replacements in 2013 did about 26 that year, compared to about 132 at general hospitals. Hospitals doing more than 100 procedures a year have the lowest risks, said Nelson SooHoo, an orthopedic surgeon at UCLA’s David Geffen School of Medicine who has studied the issue."

Kentucky has 29 critical-access hospitals. In general, such hospitals must have no more than 25 beds and keep patients no more than 72 hours. In return, the federal government gives them a small bonus on their Medicare and Medicaid payments, part of a policy Congress enacted to maintain the viability of hospitals in rural areas.

"Financial incentives can make doing more surgeries appealing to critical-access hospitals, thanks to their special status with Medicare, especially as the rural hospitals merge with larger rivals," the newspaper notes. "The Journal’s analysis shows that the fastest-growing procedures at critical-access hospitals are often-elective orthopedic surgeries that could otherwise be scheduled at facilities with more experience. Experts say that as the hospitals’ experience grows, patients’ outcomes should improve. But so far, mortality rates have held fast, according to the analyses by the Journal and Harvard researchers."

Free-standing emergency departments could be the solution to keeping hospital services in rural areas

The tribulations of rural hospitals in Georgia, and the response, could signal a new direction for saving such facilities. Four rural hospitals in Georgia "have closed in the past two years, and several more either have closed or significantly reduced services since 2001," Bob Herman reports for Modern Healthcare. "Nationwide, more than two dozen rural hospitals have shut down since 2013. For people in rural areas, a closed hospital means they have to travel farther, sometimes hours, for care. And that could mean life or death in situations such as cardiac arrest, car accidents, workplace injuries and other emergencies."

Republican-led Georgia, where officials have refused to expand Medicaid under federal health reform, "has proposed a regulatory change that some observers think could help rural hospitals across the country," Herman writes. Republican Gov. Nathan Deal said in March that "financially struggling rural hospitals can offer fewer inpatient services and still keep their hospital licenses. In essence, they can convert into free-standing emergency departments that stabilize and transfer patients to bigger hospitals. Under Deal's proposal, these rural facilities also could offer other basic services such as labor and delivery."

Some people are critical of the idea. Brock Slabach, a senior vice president at the National Rural Health Association, "said the financial sustainability of free-standing rural EDs in Georgia as outlined by Deal would be low," Herman writes. Salbach told him, “Emergency departments would be nice for access, but that doesn't provide (insurance) coverage. These rural communities are still going to be having problems of paying for these services. We need to try to find a way to expand coverage to these poor populations in a way that's not going to be called Obamacare.”

There are somewhere between 400 to 500 EDs in the U.S., Herman writes. Most "are affiliated with a hospital or health system, serving as a feeder for patients needing inpatient care. The EDs usually are within 20 miles of a full-service hospital. More recently, for-profit ED companies have been building in affluent suburbs, targeting privately insured patients who see the EDs as more convenient than making an appointment with a primary-care physician."

The problem is that few are located in rural areas, Herman writes. For urgent-care centers and free-standing EDs to survive in underserved rural areas the “operating model will need to adapt,” said Alan Ayers, a vice president for Concentra, the urgent-care subsidiary of giant Louisville-based insurer Humana Inc. "They will have to use mid-level clinicians including physician assistants and nurse practitioners, reduce operating hours, and offer other high-volume services such as primary care and occupational medicine. That could help rural facilities offset the typically high fixed costs, Ayers said."

"Perhaps the most feasible solution for rural areas is a hybrid model, mixing lower-level emergency care with primary-care services," Herman writes. "An example is Carolinas HealthCare System Anson in Wadesboro, N.C., a town of 5,800. In 2012, Carolinas HealthCare System—a large system based in Charlotte, N.C., with $4.7 billion in annual revenue—decided to overhaul Anson Community Hospital, a Hill-Burton facility with 125 staffed acute-care and nursing beds."

"The system spent $20 million and downsized the hospital's inpatient capacity from 30 beds to 15," he writes. "The new facility, which opened in July, offers 24/7 emergency care in addition to the limited number of acute beds. Carolinas officials said Anson's major innovation and attraction is that it uses a patient-centered medical home model, offering residents access to primary-care providers with the help of a patient navigator." (Read more)

Edelen says rural hospitals are top issue for rural U.S. and rural Kentucky; says some pols in state want to give up on rural Ky.

By Molly Burchett and Melissa Patrick
Kentucky Health News

BOWLING GREEN, Ky. – State Auditor Adam Edelen has finished his series of town-hall meetings across the state to get a better understanding of the struggles faced by rural hospitals, but this isn't the last you will hear from him about the brewing crisis among these hospitals – a crisis that he says is not just a Kentucky problem but "the most important issue facing rural America."

Hours before his last town hall, in Bowling Green on Sept. 19, Edelen told Kentucky Health News that the tour was not just about assessing the finances of these hospitals, because he has heard politicians in both parties say "We just have to give up on rural Kentucky. . . . I'm passionate about not giving up on rural Kentucky."

Challenges faced by rural hospitals are very different than those faced by suburban or urban hospitals, Edelen said, so a "one-size-fits-all" approach won't keep Kentucky's rural hospital network in vibrant or sustainable.

He noted that Medicare and Medicaid reimburse hospitals at below the cost of providing care, with the expectation that they will make it up from private payers, but such payers are in short supply at many rural hospitals because the economic recovery is "nonexistent in rural areas."

Changes in the health-care system

Some rural hospitals are expressing concerns about the expanding Medicaid rolls under the Patient Protection and Affordable Care Act, but Edelen said in the interview that most of the complaints he heard are about Kentucky’s move to put Medicaid under managed care in 2011.

He said in Bowling Green that Kentucky rolled out in six months what should have taken 18 months, creating a "extraordinarily complex" and costly Medicaid system that still has no-pay and slow-pay issues. Then came the PPACA, generally known as Obamacare, creating an unprecedented level of complexity.

The extra administrative overhead is particularly difficult for small hospitals and health-care providers, he said, and payment disputes with managed-care companies can be existential threats to community hospitals with small cash reserves. The Nicholas County Hospital in Carlisle closed in May.

"We've got a number of hospitals in Kentucky who have less than 15 days of cash reserves," Edelen said. "One hospital in particular told me that leaders meet weekly to figure out about who's getting paid and how much just to keep the doors open. . . . County officials are afraid they are going to lose their hospital, while the cabinet says all is well."

Cabinet for Health and Family Services Secretary Audrey Haynes said in an email, "There is little doubt that Kentucky's health-care industry has gone through tremendous transformation since November 2011." She said managed care within and "many other important changes . . . have created a health-care delivery system with more accountability; increased focus on prevention and early detection; decreased use and high costs of our emergency rooms for non-medical emergencies; and are actually treating and managing both mental and physical healthcare of our Medicaid consumers to achieve healthier outcomes."

Haynes added, "With the assistance of managed care, we saved Kentucky taxpayers $1.3 billion of state and federal funds in the last biennium budget ending June 2014," while providers "had a record revenue year, receiving over $3.4 billion." She concluded, "I realize the implementation of managed care has not always been easy for our hospitals and other health-care providers, but we continue to work closely with them and make adjustments and improvements."

Edelen said in the interview that hospitals "know their business models have to change," but health-access to care is still an issue, and if hospitals close, those issues will grow. He said he understands that not all rural hospitals can survive, but "You gotta try."

He also said rural hospitals are needed to deliver on the promise of Obamacare: "What's the good of having everybody insured if there's no one to provide care?" What's the government doing to soften the blow coming with these health-care changes?"

Kentucky is not alone

Kentucky has handled implementation of the reform law better than other states, Edelen said, but there are still big problems that no one is thinking about.

Like other rural hospitals across the country, community hospitals in Kentucky have long relied on federal subsidies of facilities with high numbers of Medicaid patients and uninsured people. Since the reform law was designed to cut the number of uninsured, it will also phase out Disproportionate Share Hospital (DSH) Medicaid payments to hospitals by 2020.

Kentucky's DSH money shrank by 4.2 percent in the fiscal year that ended June 30. The allocation is determined federally, but state officials have considerable discretion in how the cuts are applied to individual hospitals.

"I fear that the disappearance of DSH payments could be a death knell for Kentucky's rural hospitals," which would have serious economic repercussions for their communities, Edelen said. "We have an opportunity to be a thought leader here because this is going on all over the nation."

Nationwide, many rural hospitals are closing down just like the hospital in Nicholas County. Reuters reported that 24 rural hospitals have closed across the country since the start of 2013, double the pace of the previous 20 months, leaving whole communities without quick access to acute care.

"This needs to be an issue for rural America in the 2016 presidential campaign," Edelen said. "Now that the Farm Bill's passed, this is the most important issue facing rural America, and the competition's not even close."

Not just a health-care problem

Research shows rural hospitals contribute significantly to local economies. Health care accounts for 15 percent to 20 percent of all jobs in rural communities,  Dr. Mary Wakefield, now the administrator of the federal Health Resources and Services Administration, told a congressional hearing in 2000. Furthermore, health services and schools are important quality-of-life factors for attracting and retaining employers and retirees.

"When you lose your rural hospital you lose not only one of the primary employers in a county, but you tend to lose the leading corporate citizen," Edelen said in the interview. "You lose things like ambulance services and providers networks and then the burden on health departments becomes more pronounced; that is not sustainable long term."

For prosperity, a community needs an educated work force, a healthy economic environment and a network that provides health care, he said. "These are the things that are the non-negotiables in the 21st Century if you are going to bring prosperity to every part of Kentucky," he said in Bowling Green.

Edelen told the audience of about 120 that he wanted them to go home and talk about this issue in their communities to make Frankfort, with its "fifteen-minute attention span," pay attention. "Kentucky at its core is always going to be a state with a rural character," he said.

The auditor's office is compiling a report that will also include a financial "stress test" of 66 rural hospitals. Edelen said he aims to release it in November or December. "I want to clearly define the problem," he said, "and then facilitate a conversation to solve the problem."

He said in Bowling Green, "What this is really about in a nutshell is whether the political leadership in Kentucky is going to give up on rural Kentucky."

Most Kentucky hospitals will pay Medicare penalties under health reform, one the country's largest; look them up here

More Kentucky hospitals are receiving penalties than bonuses in the second year of Medicare’s quality incentive programs, one of the federal health reform law’s changes designed to create financial rewards for doctors and hospitals to provide better care. Pineville Community Hospital is being assessed the highest penalty in the country for its readmission rates.

Medicare has two quality-care incentive programs for hospitals. Value-based purchasing gives bonuses and penalties based on 24 quality measures, and the other program levies penalties for readmissions. Thirty-one Kentucky hospitals were assessed a penalty while 26 were given a bonus for improved performance, says an analysis by Kaiser Health News. Here's a screen shot of the beginning of the list:

The law allows the federal government to withhold a portion of a hospital's Medicare reimbursement money, up to a 1.25 percent penalty or bonus for every bill paid between October 2013 and September 2014, based on assessments of these quality standards.

"The incentives are among the law’s few cost-control provisions that have kicked in, but it is too early to tell how effective they will be in making hospitals operate more efficiently," reports Kaiser's Jordan Rau.

Large value-based bonuses are going to some major teaching hospitals and smaller institutions, such as Pikeville Medical Center. The state's average bonus is 0.25 percent, compared to the national average of 0.24 percent; Kentucky's penalties averaged minus 0.20 percent, for a total average of zero. It won't be known how much hospitals will receive or pay in dollar figures until next October since this depends on how much the hospital ends up billing Medicare, Kaiser reports.

However, as a result of the readmission program, Pineville Community Hospital is losing 2.57 percent of its reimbursements,the largest penalty in the country. Considering the impact of both the value-based program and readmissions program, Kaiser reports, two out of three hospitals are losing money starting last month.

Here's how the value-based score was figured: 45 percent on hospitals' use of clinical processes of care; 30 percent on patient experiences; and 25 percent on death rates. Hospitals were are also assessed by how they compared to other hospitals and how much they improved from two years ago, says Qualitynet.org.

Researchers are unsure whether the penalties are significant enough to trigger major improvements, writes Rau. And, some hospitals that have made improvements are still losing money because they haven't improved as much as other hospitals. On the other hand, some hospitals with subpar quality rankings are still getting more money because they showed improvement.

Nationwide, Medicare has raised payment rates to 1,231 hospitals and reduced payments to 1,451. Hospitals that are designated as critical access facilities and certain cancer hospitals were excluded from the program. But these facilities aren't immune to other portions of the health law, such as cuts in Disproportionate Share Hospital (DSH) program payments,for having a high percentage of Medicare and Medicaid patients.

New quality measures will be added to the value-based program for 2015, including comparisons of how much patients cost Medicare at different hospitals and rates of medical mishaps. In addition, the maximum readmission penalties grow to 3 percent next year, and a third incentive program will take an additional 1 percent of payments away from hospitals that have the most injuries or infections during patients' stays.

"Combined, these three quality programs have the potential to strip away as much as 5.5 percent of Medicare payments from the worst performing hospitals starting next October," reports Rau.

Dr. Patrick Conway, Medicare’s chief medical officer, says "We're moving away from volume and toward quality." Yet, to remain viable, some hospitals are being forced to make up for payment cuts by seeing more patients. Click here for the interactive chart.

Federal report says many hospitals wouldn't keep critical-access designation if distance rules were strictly enforced

More than two dozen Kentucky communities still have hospitals because of the critical-access hospital program, in which small, isolated hospitals get higher Medicare and Medicaid reimbursements in return for limiting their size and services. Now federal officials appear to be considering a move that could cost the hospitals money and perhaps put them at risk of closing.

Most of the hospitals would not meet current location requirements if required to re-enroll to get reimbursements from Medicare, and the Centers for Medicare and Medicaid Services could realize substantial savings by revoking certification to some of these hospitals and reimbursing them at lower rates set by prospective payment systems and fee schedules rather than at 101 percent of costs, according to a report by the Department of Health and Human Services.

The agency found that "the program costs the government and Medicare beneficiaries up to a billion dollars a year more than the original parameters of the law allowed," Jenny Gold reports for Kaiser Health News. If forced to re-enroll, 849 of the 1,329 hospitals in the program would not meet the requirements -- having 25 or fewer beds and being at least 35 miles away from another facility (15 miles in mountainous terrain) in communities that would otherwise have limited access to health services.

"Until 2006, states were allowed to waive the distance requirement and designate small hospitals considered 'necessary providers' as critical access hospitals as well, even if they were close to other facilities," Gold reports. "The program grew quickly and now nearly one in four acute care hospitals are getting the extra payments. Congress got rid of the loophole in 2006, but hospitals that already had the exemption were grandfathered." (Read more)

Critical-access hospitals are located in Barbourville, Berea, Burkesville, Cadiz, Carlisle, Carrollton, Franklin, Greensburg, Hardinsburg, Hartford, Harrodsburg, Horse Cave, Irvine, Liberty, Martin, McDowell, Monticello, Morganfield, Owenton, Princeton, Russell Springs, Salem, Scottsville, Stanford, Versailles and Williamstown. For a detailed list, click here.