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Q-and-A: Rural hospitals and the Affordable Care Act

By Cristina Janney
Posted on 12/11/2013, 2:16 PM

How will the Affordable Care Act affect rural hospitals?

Rural hospitals will see significant reductions in the traditional Medicare payments under the new health law. This is especially important for smaller rural hospitals because they rely heavily on Medicare payments -- about 45 percent of their annual income comes from Medicare.

Why will Medicare payments go down under the new health law?

The changes in payments reflect the federal government's goal of improving health care and reducing costs. The new law rewards quality of care, which in turn should reduce expensive trips to the emergency room by those who are uninsured.

How will that affect hospitals, specifically rural hospitals?

Hospital administrators say they will have to become more efficient and spend more on primary care to reduce unnecessary hospital admissions. Since rural hospitals are much smaller than those found in and around cities, economies of scale are harder to realize.

How will rural hospitals change?

Some hospitals are teaming up with other rural hospitals to create groups called Hospital Engagement Networks, which bring health educators in to work with hospital staffs on best practices. Remember, the new health law rewards quality of care. Other rural areas are forming Affordable Care Organizations, which include doctors' groups and other medical services. In theory, hospitals and Medicare save money because patients are receiving improved care and are healthier. These organizations can capitalize on those savings, but the also assume risk if costs increase.

How will people in rural areas be affected by changes at their nearby hospitals?

Some hospitals are eliminating expensive services that patients have come to expect. For example, obstetrics units, mental health units or long-term care units may be cut, forcing customers to travel farther for care. Experts think some small hospitals will not be able to make adjustments and will close. But the emphasis on primary care may result in fewer trips to hospitals.

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