181: Rural health challenges and opportunities, Part 4: What does it take to prevent rural hospital closures?
Over the past two decades, nearly 200 rural hospitals have closed, resulting in millions of Americans losing access to an emergency room, inpatient care, and other hospital services. And today, more than 700 rural hospitals in the U.S. – or approximately 1 in 3 – are at risk of closing due to financial problems, according to a report from the nonprofit Center for Healthcare Quality and Payment Reform.
All this comes at a time when rural health disparities are rampant. In the final episode of our rural health series, we consider solutions: What does it take to prevent rural hospital closures? What evidence-based solutions can policymakers consider to ensure all Americans have access to critical health services, regardless of where they live?
Health Disparities podcast host Bill Finerfrock speaks with Harold Miller, president and CEO of the Center for Healthcare, Quality and Payment Reform and adjunct professor of public policy and management at Carnegie Mellon University.
Miller says many people assume that when a rural community loses a hospital, it’s one of several options, when in reality, “in many small rural communities, the hospital is the only place to get any kind of health care. It is the only place, not only where there is an emergency department, but because there's no urgent care facility in the community, there's no other place to get a lab test, there may not even be primary care physicians in the community.”
When it comes to policy considerations to prevent rural hospital closures, Miller says there need to be a greater emphasis on the role private health insurance plans play in putting hospitals at risk.
“The myth, unfortunately, is that the problem of rural hospital payment is all about Medicare and Medicaid, and that has led people to focus, I believe, inappropriately and excessively, on Medicare and Medicaid,” he says, “when what we have found is that the biggest problem for most rural hospitals is private insurance plans who don't pay the rural hospital even as much, in many cases, as Medicare or Medicaid does. … We need to start thinking about how to solve the real problems and to solve them now, rather than waiting until the hospital is faced with closure.”
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The transcript from today’s episode has been lightly edited for clarity.
Harold Miller: When a rural hospital closes, many people think that's just like one of many hospitals in an urban area, and that there are plenty of other places to get health care. In many small rural communities, the hospital is the only place to get any kind of health care. It is the only place where, not only where there is an emergency department, but because there's no urgent care facility in the community, there's no other place to get a lab test, there may not even be primary care physicians in the community, except for the fact that the rural hospital is employing them, so that, in fact, there can be hospitals in that community. There may not be any kind of skilled nursing facility or any kind of physical therapy available in the community other than through the hospital, and so when a rural hospital closes, the community literally can lose all of the health care that it has.
Bill Finerfrock: You're listening to the Health Disparities podcast from Movement Is Life. I'm Bill Finerfrock, a board member at Movement Is Life. I'm also the cofounder and former executive director of the National Association of Rural Health Clinics. Eight rural communities lost their hospitals in 2023, according to data from the nonprofit Center for Healthcare Quality and Payment Reform. But that doesn't tell the whole picture. In addition to these rural hospitals that have closed their doors for good, there are hundreds more that face continued risk of closure due to financial challenges.
And this comes at a time when healthcare disparities in rural areas are rampant. It's the focus of our latest podcast series, and today we're joined by an internationally recognized expert on health care, payment and policy, someone that I have known for a number of years, Harold Miller. Harold is the president and CEO of the Center for Healthcare, Quality and Payment Reform, and he also serves as an adjunct professor of public policy and management at Carnegie Mellon University. Harold, welcome to the podcast.
Miller: Thanks, Bill. It's nice to be here.
Finerfrock: The Center for Healthcare Quality and Payment Reform is an organization that a lot of people may not be familiar with. I've known you for several years. We first met working together on some initiatives on how to come up with some changes in payment policy. Could you tell our audience a little bit about the center and your work and kind of how that came about?
Miller: The Center for Healthcare Quality and Payment Reform was first started because many projects that were going on around the country that were designed to improve the quality of care for patients were struggling because the healthcare payment system didn't support them. There was not money to actually pay for them. And what was even worse was whenever the projects were successful, the providers of care could actually lose money. So for example, one early project was designed to reduce hospital-acquired infections, and the project was quite successful in doing that. But the problem was that reducing hospital-acquired infections meant that the hospital actually lost money, and that led us to say, we really, if we're going to improve healthcare quality, we need to reform the payment system so it actually supports that. The worst part of the healthcare payment system, in some ways, is that if patients stay healthy, nobody gets paid at all, which is not exactly a strong, strong reward for people to provide that kind of care.
Finerfrock: It's interesting, because that was always one of my observations. I'd be in these meetings, and people would say, Well, you know, we want to reduce hospitalization, and we wanted to reduce ER visits. And if I was a CEO of a hospital, and I'm sitting there going, okay, that may be great public policy, but you just put me out of business, because those are the two ways in which it generate revenue. So I think it was, it always struck me as odd that that kind of didn't hit people more squarely, and understanding that, okay, these are great from a public policy community perspective. But concurrent with that, we have to look at how we're paying these facilities, because that's going to dramatically change their bottom line, right?
Miller: Exactly, right.
Finerfrock: When we first met, I don't know that you were really into the rural hospital space as much as you have, you've really done a lot in that space over the last couple of years. What kind of got you to start focusing on rural hospitals and some of the issues and challenges facing rural hospitals?
Miller: Well, it actually started about 10 years ago. We were asked to help with a project in Washington state, because there were over a dozen small rural hospitals that were losing money and were potentially at risk of closing. And so the state was looking to try to determine what to do about that. And so I got involved to try to figure out what are the causes and what were the solutions? And what we learned from that was that what people thought were the causes were not actually the causes, which meant that the solutions that they had been thinking about were not really going to be solutions.
And that led me to then ask the question whether or not there were similar problems, whether that was unique to that particular state in those particular hospitals, and what I found was that, in fact, it was a pretty common experience across the country, and it has been getting worse since then. So we have been trying to focus on making people aware of the problem, aware of what is causing the problem, and also the kinds of solutions that will actually make a difference.
Finerfrock: I think some of your more recent work, I've really enjoyed, you know, as you know, there's a lot of talk and a lot of movement towards value-based payments and this whole concept, and I think it's reminiscent to me of what we just spoke about, where, again, this is a great sounding term, value-based payments. Who could be against value-based payments? But how we structure those and how we design those are going to be really critical to ensuring that, you know, we have a healthcare delivery system, particularly in these rural communities. Can you talk a little bit about some of that, and how some of these payment models that sound great and again, from a public policy perspective may sound like a good idea, but could, in the end, be actually harmful to communities?
Miller: Well, you shouldn't support value-based payment if it doesn't really support value-based care. I think there's a lot of things, as you're saying, that are named value-based payment, but really don't do that. The most common approach to value-based payment has simply been to make, provide very small bonuses or penalties on top of the standard existing payment system based on quality measures, which may actually not even be the aspects of quality that patients care about. And the problem is that all they're doing is trying to layer on small incentives onto a payment system that doesn't fundamentally pay for the right things in the right way to begin with, and that only complicates and confuses things rather than actually fixes them.
So you really have to try to understand, start with understanding, what is the kind of care you want to deliver? What does it cost to deliver that care, and what is the right way to pay to enable the care to be delivered in a way that someone doesn't lose money? They don't necessarily need to make high profits, but they shouldn't lose money being able to do that. And that, the better the care, the more, the more the provider can deliver that care appropriately.
Finerfrock: Yeah, and I think, one of the things you touched on, you know, this concept of paying for quality and things. I mean, again, it sounds good, but as you noted, we also penalize people for outcomes. But one of the issues, and we see this a lot with the audience for Movement Is Life, is we're also holding providers institutions accountable for things that they really don't have the ability to control, in other words, the demographics of the community in which they're located, the status of insured versus uninsured, using the ER as a primary care substitute, because they don't have it. Those aren't necessarily things that that institution can control, but yet the payment models seem to want to hold them financially accountable for that. Can you talk a little bit more about that?
Miller: People criticize the fee-for-service system, because it pays more for more services. But in fact, patients who need more services, that's a good thing for them, because if you don't pay if they need more services, and you don't pay for more services, and they don't receive them, they're going to receive worse outcomes. And so many of the so-called value-based payment systems try to simply give a fixed amount of money to health care providers, physicians or hospitals, and expect them to deliver all the care that patients need for that fixed amount of money. The challenge is that if they get patients who have higher needs, there may not be enough money to deliver services to them, and the patients who have the highest needs can actually then be harmed the most by that whereas they would actually be able to do better under a fee-for-service system.
So the challenge is trying to find the right blend between those paying enough for patients who need more services, but paying in a way that ensures that those patients actually do well, and not trying to hold a physician or a hospital responsible or put them in financial risk for something, as you said, that they cannot actually control, because there's only a certain portion of outcomes that can actually be controlled by people in healthcare. There are many other factors that affect those outcomes.
Finerfrock: And one of the things, too, that I think correlates to that is, and you referenced it is, you know, what is it that we're measuring in terms of these quality measures or outcomes? And one of the questions I raised early on with regard to value-based payment is, well, first of all, who's defining value, right? Who has defined what that term means? And I think it's relevant, particularly in rural communities, because in rural communities, access would be a value term, right? They want to have access to a provider who's in their community or in close geographic proximity. But our value measures don't, in any way, factor that into the calculation. It's all based on, how did you do on certain reporting measures? Did you do this test? That test? Did you do this? And can you talk about this concept of who's defining value and how different communities might define value, and what the impact of that may be?
Miller: Well, I think you raised a good point about access, because if I get I need a service, and I can receive the service, but the service is 50 miles away, it's over a mountain pass in the winter, in the snow, then the fact that I have an insurance plan that says that it's going to pay for that or that, somehow, some quality measure says that that's a high quality service, doesn't do me much good, because I may not actually be able to get there. And it's particularly a challenge for people who have lower incomes, who are working and can't take time off of work. Because it's easy to say, well, there's a really good hospital or a really good physician an hour away, but you're going to have to take off work today, lose income, try to find someone to watch the kids in order to be able to get there, and we don't really provide any kind of support in terms of defining value, is to say that high quality care that is accessible is as important as simply high quality care somewhere.
And that's really been the issue in rural communities, is that when a rural hospital closes, many people think that that's just like one of many hospitals in an urban area, and that there are plenty of places, other places to get health care. In many small rural communities, the hospital is the only place to get any kind of health care. It is the only place where, not only where there is an emergency department, but because there's no urgent care facility in the community, there's no other place to get a lab test. There may not even be primary care physicians in the community, except for the fact that the rural hospital is employing them, so that, in fact, there can be hospitals in that community. There may not be any kind of skilled nursing facility or any kind of physical therapy available in the community other than through the hospital. And so when a rural hospital closes, the community literally can lose all of the health care that it has.
And so it's not just that you may have to travel an emergency or you may have to travel for an elective procedure, you literally have to travel for anything that you needed, even a simple blood test, an X-ray or a physician visit. And that then is going, in a community that loses that kind of access, it means that people are simply not going to be less healthy, and the outcomes are going to be worse. And the odd part of that is we're probably going to end up spending more money to take care of them down the road than we would have by trying to keep the services available and accessible to them in their own community.
Finerfrock: Yeah, as you were talking about that, I was reminded, Movement Is Life has done some work in a community called Hazard, Kentucky, and on one of our visits there, we got talking to some of the folks in the community and one of the individuals relayed a situation. She unfortunately, had been diagnosed with cancer and needed to get outpatient treatment. But the nearest place she could go to get it was Lexington, Kentucky. She didn't have the capacity to be able to drive there, but there was a van that would go from Hazard to Lexington to take patients, but that van left at like eight in the morning, would be an hour and a half, two hour drive. They'd get there, she would have her treatment, which typically lasted an hour, hour and a half, but then the van didn't come back to Hazard till five o'clock in the afternoon, because everybody who needed to go to Lexington, regardless of whatever time their appointment was, had to be on that van. So in essence, a service that took, took an hour, an hour and a half to occur for her, was an all day adventure. And then, you know, so I think sometimes people...
Miller: And she, and she's getting chemotherapy and she's not feeling well.
Finerfrock: Exactly. Now you gotta go sit, sit in a van with a bunch of other people while you're dealing with the the effects of of cancer treatment. Absolutely. So I know you've done a lot of work on looking at what are some of the solutions or answers, and one of the reasons I was excited about having you on was to give you an opportunity to kind of discuss some of the ideas that you've put forward with regard to, how do we how do we address this? And you know, you and I haven't always agreed on every, every aspect of some of these things, which is good.
Miller: I can't believe that, Bill.
Finerfrock: I know it's shocking, but you know, I mean, I think that's what's good. That's what I've enjoyed about our relationship, is we have the ability to kind of talk back and forth. And I have some ideas, you have ideas, and you know, I've certainly learned a lot from you over the years, and really, you know, some of the things that I think about. One of the things that in one of your recent papers, and you've talked about this, and I had actually written some stuff about it several years ago, is this idea of standby capacity and and payments for for these essential services, I think this is, I don't know that there's anybody else who really has has talked about this kind of issue. We all kind of know or understand what that is, ithe term itself may not be, but then when you explain it, you go, okay, yeah, I get it. Can you talk about this idea of standby capacity and what that means and kind of what your ideas are in that area?
Miller: Sure, the simplest way I think, to understand it is to imagine a small rural hospital and its emergency department and a small community from the people's perspective who live in the community, it's really important to have that emergency department there so that if they have an emergency, there is someone placed to go immediately that they can be treated. The problem is that emergency departments are paid only whenever somebody comes for an emergency. So the good news would be if the community had no emergencies, because you would have people who are healthier and happier because they had no emergencies, but the hospital would be getting no revenue to be able to support that emergency department, because there is a minimum fixed cost that the hospital has to incur to operate an emergency department, you need to have a physician there, 24/7 to be able to take care of patients whenever they come in, and nurses and other staff and equipment, et cetera.
And so the hospital has to pay for that cost, regardless of how many patients come in. In a small rural community, there aren't necessarily patients coming in every hour. The ones who come in are happy that the emergency department is there. But if you pay the rural hospital the same amount for emergency department visit that you pay a larger hospital, the small rural hospital, will not generate enough revenue to be able to cover that cost. If you step back and think about it, though, from what I just said, the hospital is actually providing two different services, not one.
One service is when a patient has an emergency medical problem, injury, etc, and comes in, the hospital takes care of them, and they get paid for that. But the hospital is also providing a service by being there, and the hospital doesn't get paid for that service. So the notion of the standby capacity payment is to say we should pay the hospital for both of those services. The standby capacity payment is the minimum amount the hospital should get, regardless of how many patients come in to be able to keep the emergency department open, they would then still be paid an additional amount when patients come in, because there's additional costs incurred when somebody is getting treated for an emergency in the hospital. But the hospital would not have to, would not run out of money, or have to close because they weren't getting enough money to keep the emergency department open.
The analogy I often use with this is the fire department in the community, nobody funds their fire department by charging people for who have fires. In fact, you are happy in the community if you have no fires at all in the community. But that doesn't mean you don't need a fire department. You still need to have the fire department, and you need to have all the costs associated with that, and we don't. So we pay for fire departments to be there, whether there is a fire or not, and we need something of the same kind of an approach for hospitals, for these, what are really essential services in the community.
The emergency department is one example of that. Maternity care is another example of that. If you want to be able to deliver babies in the community, you need to have physicians who can do C-sections and OB-trained nurses and anesthesiologists or nurse anesthetists available on a 24/7 basis. Some days there may not be any baby delivered, but that doesn't mean that you don't still have to have those people available to be able to deliver the baby. If there is a baby, and it's a very positive thing for families in the community to know that the hospital is there ready to take care of them, if when the baby comes, rather than saying you're going to have to drive an hour. Or a way to be able to deliver the baby and hope it doesn't have to be delivered on the road. But that fixed cost has to be covered regardless of how many babies there are, and the hospital has to be on standby for babies when they come. So we should be paying a standby capacity payment for the hospital to maintain those essential services in the community.
Finerfrock: I love the analogy with the fire and also police. The difference, of course, is that in the case of fire and police, those are considered public services that are supported with tax dollars. Health care is more of a private arrangement, and we have multiple people who are paying for services. You've got commercial insurers, you've got Medicare, you have Medicaid, and then individuals. Is it feasible, or do you think it's practical that we could get all of those payers to recognize that the necessity for these standby capacity and would they, what is your sense of whether or not they'd be willing to support that? Have you had any conversations with policy makers who go, yeah, the light bulb went on and said, You're right, and how might we do that?
Miller: Well, first of all, I think a lot of people would be surprised to know that in many small rural communities around the country, the only reason why the hospital is still operating is because there are local tax dollars being used to keep the hospital open so it actually is being treated as a public service. The challenge is that in many cases, what those community taxpayers are doing is subsidizing private insurance plans who are not paying adequately for the services in the community. It would be one thing to say the community is taxing itself to create some additional service at the hospital that wouldn't otherwise be sustainable, but whenever you say that, the community has to tax itself to keep basic, essential health care services open because health insurance plans aren't paying adequately, I think that's just plain wrong.
So I think health insurance plans should be paying adequately to support the care in the community, because what good does it do to have health insurance if there's no place to use it? This is simply a different way of paying for that than exists today. And the conversations that I've had with many people about this are that it does make a lot of sense, it's feasible to do, but I think many people have not been pursuing it because they actually don't understand that this is the real cause of the problems in rural hospitals. And so we have to make sure that people understand this is what's causing the closures and the financial losses, and this is the kind of solution to it.
It's also the kind of thing that, it's not just up to health insurance plans to do this. It's up to the people who choose health insurance plans to say, I want to choose a health insurance plan that does pay this way. So when a Medicare beneficiary is deciding whether or not to buy a Medicare Advantage plan and which Medicare Advantage plan to buy, they should be saying which plan is actually paying adequately and appropriately to keep the hospital in my community open? When an employer is choosing an insurance plan to cover their employees, they should be thinking not just about which services are covered, but whether or not the payment is going in a way that will keep services available in the local community, because, again, if the health plan says, we cover it and we pay for it, but only at some place that you can't get to or that you have to leave work to be able to get the services that's not good for the community or for the employer. So I think people need to start thinking differently about what they should be asking about their health insurance plans than they have so far.
Finerfrock: Yeah, I think that's a great point. I wrote a book several years ago, almost 30 years ago, as I was thinking about it.
Miller: That's more than several, Bill.
Finerfrock: Yeah, it was called Understanding Managed Care and a guide for rural providers. And there was a section that talked about that, of understanding what it is that you're purchasing, and is that plan really supporting the local infrastructure that you need. So there was a section on it, particularly with regards to employers, because employers, as you know, make these decisions for their employees, and they're necessary, their concept of value is, you know, what's the financial bottom line? But for their employees, this concept of value may be, do I have services in my community? And to try and make employers think about that when they're choosing a plan, are you choosing a plan that actually makes services available? So it's not enough to say, here's an insurance card, but do I have some place that I can use that card to obtain the services that I need.
Miller: For larger employers, larger employers, most people don't realize this, but they are typically self-insured. They're not actually buying insurance. They're simply engaging a health insurance company to pay healthcare providers on their behalf. And although in small rural communities, in many cases, there aren't very large employers, there are, in some cases, and national employers who have operations in those communities are that way. And so they can decide if they want, actually the employer decides that they want to pay in this fashion, then they simply need to hire a health insurance plan that will administer the payments in that fashion.
Finerfrock: So what are some of the other ideas and suggestions that you have with regard to how to kind of fix this problem, from a payment perspective? Do you have other ideas that you'd kind of like to make our audience aware of?
Miller: Well, I've talked about a different method of payment, but it really starts fundamentally with saying we need to pay adequately for the services, and that has been the problem for a lot of rural hospitals. The myth, unfortunately, is that the problem of rural hospital payment is all about Medicare and Medicaid, and that has led people to focus, I believe, inappropriately and excessively, on Medicare and Medicaid, when what we have found is that the biggest problem for most rural hospitals is private insurance plans who don't pay the rural hospital even as much in many cases as Medicare or Medicaid does.
Most people are familiar with the idea that big hospitals get paid a lot more by private insurance plans and they get paid by Medicare and Medicaid. What people don't realize is that at small rural hospitals, it's exactly the opposite. The big health insurance plans actually pay the hospital less than they get from Medicare and less than it actually costs them to deliver services. And there's a couple of reasons for that. One is that big insurance plans have all of the clout compared to small rural hospitals. And second, even if they say we're going to pay you the same amount as we pay a larger hospital, it may not be enough to cover the higher costs of delivering those services in rural areas.
So in effect, a lot of the policies and solutions that people have talked about have been letting private insurance plans off the hook by suggesting that they're not part of the problem, or even a major part of the problem, and instead focusing on other areas. And one of the most, I think, serious problems has been the shift to Medicare beneficiaries, to Medicare Advantage plans. In recent years, Medicare, original Medicare, is actually often the best payer for small rural hospitals, critical access hospitals, which is the majority of small rural hospitals in the country, get paid by Medicare, original Medicare based on the actual cost in delivering services. But Medicare Advantage plans are not required to pay the same way that original Medicare does. So when a Medicare beneficiary living in a small rural community switches to Medicare Advantage plan because they hear about zero premiums or designer eyeglasses or whatever the other marketing pitches are, they don't realize that they may actually be putting helping to put their rural hospital out of business, because the Medicare Advantage plan doesn't have to pay the same amount. And what is even more frightening is that the Medicare Advantage plan doesn't even have to pay at all. So under original Medicare, if your doctor says you need to be in the hospital, Medicare will pay for your hospital stay. The Medicare Advantage plan might say, we don't think you need to be in the hospital. We don't agree with that. We're not going to pay for that admission. Or you we're only going to pay if you go to a health to a hospital or a doctor or something somewhere else that's 50 miles away, which may be cheaper in terms of the cost for the Medicare Advantage plan, but isn't better, and may cause that patient to incur a lot of costs.
So you would much rather be able to get, if you get your hip replaced in another city, to be able to come back home to your own community and to be able to get rehab in the local hospital. But many Medicare Advantage Plans literally won't pay for that. They'll say you have to go to some other place, which is a challenge if you're trying to recover, recover from surgery, and you may not be able to walk at all in the first place to say, Oh, and you have to somehow get yourself, you know, 50 miles away. And there may not be even a van to ride in those particular cases. And this is happening increasingly, and it's been hidden. People are not aware of how extensive and how serious this is, and many rural hospitals have been reporting that this is literally the biggest problem that they're having is the amount of money that they're losing on Medicare Advantage plans.
Finerfrock: And we saw the same thing, are seeing the same thing with rural health clinics. I mean, it's, it's this idea that that they're they either are not putting them in their network, and patients don't realize it, as you pointed out, that they're attracted by the fact that, oh, this is a zero premium bill in, and I get all these extra bennies. I mean, I sometimes feel like, you know, the hospital administrators, the hospital needs to do a better job of educating their community, of, hey, you know, here are the plans, and if you choose that plan, here's what may happen. You may not be able to go here. You may be doing harm. Because I think most people, if they were aware of that, could make a better decision, but they don't have all the information.
Miller: I think that, I think the hospitals and the clinics do need to do a better job of education. The challenge is that they are small hospitals and small clinics, and they don't have lots of staff to be able to do that kind of work, and most of them are scrambling just to keep up. Big hospital systems typically have large departments whose job is nothing other than to fight prior authorization denials and resubmit claims that have been denied inappropriately by health plans. Small rural hospitals don't have that kind of staff, and so oftentimes they end up simply getting hurt by that, they don't have the staff to do the analyzes necessary to determine what the problems are.
When I mentioned early on that I started looking at this in Washington state, that was the challenge. In Washington State, the hospitals were losing money, but they actually hadn't, because they didn't have the staff to do it. They didn't weren't able to do the analysis to determine which service lines were losing money and which payers were losing money. And the assumption at the time was that they were losing money on inpatient services and that it was Medicare and Medicaid that was causing the problems. And in fact, what we found was that they were losing money on their emergency departments and their rural health clinics, and that the biggest source of losses was private insurance plans, not Medicare or Medicaid. That doesn't mean that there weren't issues there. And in fact, the Medicaid program in the state was underpaying for rural health clinics, and that was solved as a result of that analysis, but private health plans have continued to pay under the cost of treatment. And it's getting worse in recent years, because since the pandemic, costs have been going up in general for everyone, and it has become harder and harder and more expensive to be able to recruit healthcare staff everywhere, and it becomes even harder in rural areas. And so if health insurance plans aren't increasing their payments to be able to offset those higher costs, rural facilities are going to be even more disadvantaged than they have been in the past and potentially lose. So I think we need to start thinking about how to solve the real problems and to solve them now, rather than waiting until the hospital is faced with closure.
Finerfrock: I agree, and you touched on, and this was something I again and I wrote about in my book was kind of understanding your costs. You know, hospitals, notoriously, don't have a clue of what it costs them to provide services. Now, interestingly to me was, you know, this was before critical access hospitals, and was most, more on rural health clinics. But rural health clinics do know, those clinics do know their costs. Now critical access hospitals do, they know where their costs are. And so if somebody comes in and says, this is what we want to pay you for this service, they can turn around and go, Well, wait a minute, this is what it cost me. So either help me figure out how to lower my costs or you got to pay me more, you know? But that's part of the problem is really understanding what your costs are, so you can improve your negotiating position when somebody is offering to pay you X, Y or Z. Is that enough? Not enough, too much. You don't know.
Miller: Right, although it does, it does bring you back to the standby capacity problem, because let's suppose I, as a hospital, will know exactly what it's going to cost me to staff my emergency department. What I don't know is how many emergency department patients I'm going to get, right? So if I say I'm expecting to make up a number, 1,000 patients this year, and I divide the cost of the emergency department by 1000 and I say I need to get paid that much per patient to be able to keep the emergency department open, and I actually get that. I get that in the contract, everything looks great, and then I have 900 right come into the hospital, and all of a sudden I've lost money.
So it wasn't that I didn't know my costs. It was that the cost per patient, or the cost per service or cost per visit, number that I calculated was based on the wrong estimate and if a health insurance plan, for example, disagrees with that and says, we don't think you're estimating correctly and comes up with some different number, it's hard to say until it actually happens whether that's right or wrong. So that's one of the reasons why this notion of the standby capacity payment is important, is because it says you need to get that certain amount of money to cover those minimum fixed costs, regardless of how many patients come in. And you shouldn't be essentially at risk for the fact that patients were healthier and had fewer accidents in the community, because you didn't guess right about that whenever you designed your contract.
Finerfrock: Right. You know, you and I could probably talk for a couple days on this stuff. Unfortunately, we have only a limited amount of time. So as a wrap up, is there anything that you'd like our audience to know or to think about on this issue of rural hospitals and all the different things we've covered? As kind of a closing remark or observation for our audience.
Miller: Well, I would say two things. One is, don't assume that small rural hospitals are just miniature versions of large urban hospitals. They have different problems and the solutions that are needed are different and don't assume that simply because you have health insurance, that the health insurance plan is actually paying enough or in the right way to be able to preserve the services that you want to be able to access in your community. So I think people need to start asking their local healthcare providers, physicians, rural health clinics, rural hospitals, which health plans are paying them appropriately and which ones aren't, and then start to take that into consideration whenever they choose a health plan. So I think you should choose your health plan as though your local healthcare system depends on it.
Finerfrock: Well, this to me, like I said, I could go on for hours. I'm fascinated by this stuff, but we are limited time for our audience. If you'd like, you can learn more about the Center for Healthcare Quality and Payment Reform at the link and information in the show notes that are available. I'd like to thank Harold for joining us. I think this has been an important discussion. I want to thank you for taking your time to be with us. That brings us to the end of another episode of the Health Disparities podcast from Movement Is Life. This episode is part of a series we'll be doing on rural issues, and hopefully our audience enjoys it and finds it as interesting and fascinating as I do. Thank you.