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Rural Hospital Flexibility Program Tracking Project Chapter 3B
Although the operating guidelines for each of these precursor models differ from those for CAHs, some small hospital administrators and their boards have delayed or forgone conversion because of fears about restricting their scope of services, becoming "less than a hospital," or, as some have said, a "band-aid station." This concern over the possible need to "downsize," to reduce services as well as reduce the number of licensed beds, led us to investigate some general questions about the scope of services in CAHs. Aside from limitations on length of inpatient stays and total number of beds, there is nothing in the federal conditions of participation that requires or even implies downsizing. In the first year of the Tracking Project, we suggested a more positive term to describe the process of seeking the most efficient, community-needs-oriented array of services: "right-sizing" (Tracking Project, Findings from the Field # 4). In this Year 02 report, we use new data from our survey of 217 CAH administrators to investigate several questions about scope of services:
In addition, based on site visits to 16 CAHs in Year 02, we present information on how CAH administrators and their boards are thinking about the relationships between specific services and their market position relative to other hospitals and to their communities. For example, are decisions about expanding some services made in response to a threat to market share, to improve the community's perception of the hospital, or for other reasons? Since this program is relatively new, we do not yet have claims data on which to base a quantitative analysis of market share and services provided. Such a project will be conducted as part of the scope of work in Year 03 of the Tracking Project. In thinking about which types of services to ask about as we constructed the survey, we made a decision to focus our survey questions on services that are labor-intensive as opposed to those that are capital-intensive. By capital-intensive, we mean services that require the purchase and maintenance of specialized equipment that might require a high volume of services to cover a fixed cost, e.g., CT or MRI imaging equipment. There are three reasons for our focus on labor-intensive services. First, we assumed that small hospitals, most of which have had negative operating margins in recent years, would not be in a position to purchase and maintain the kinds of equipment needed for services that require expensive equipment. Second, many capital-intensive services require the services of medical specialties that are not commonly available at small rural hospitals, or are only available by means of specialty clinics offered once a week or less. Third, we judged that the flexible staffing allowed by the CAH license would favor services that could be staffed more intensively when the demand is up, but could shift staff to other departments when demand is down. Such services include home health, inpatient and outpatient rehabilitation services, skilled nursing, swing beds, hospice and assisted living. In addition to the survey of 217 CAH administrators, all site visit teams made observations regarding the current scope of services, new services planned and/or services that might be discontinued. In addition, some site visit teams were able to pursue evidence of cross-training of staff such as might be expected if staff were routinely being shifted from one service to another. Is there a Typical Scope of Services? The Flex Program requires all CAHs to make available 24 hour emergency services and 24 hour nursing services, although they are not required to staff inpatient beds unless an inpatient is present. The Year 02 survey of CAH administrators included a set of questions covering scope of services before and after conversion to a CAH:
Services included in our analysis were:
While each CAH offers a unique set of services, one might begin to characterize a typical CAH by considering which services are offered by at least 75 percent of those surveyed. The following services are common to three-fourths of CAHs (See Table 1):
Additional services offered by at least half of those surveyed include:
While the inclusion of swing beds and inpatient and outpatient rehabilitation services on these lists supports our hypothesis that CAHs would offer labor-intensive services with flexible staffing, radiology does not confirm it, and surgery may or may not confirm this hypothesis, depending on the type of surgery, and its accompanying specialized surgical equipment. Table 1. Scope of Services of Critical Access Hospitals
Note: The category "limited since CAH conversion" is not shown due to the very small number of responses in this category. The column "have service now" was not specifically asked on the survey. It summarizes the net effect of the other columns. The number of hospitals as a percentage of 217 is shown in parentheses. What Services Were Dropped? What Services Were Added? If it was expected that CAH conversion would lead to a reduction in levels of service, Table 1 suggests otherwise. Table 1 indicates that, by and large, CAH conversion has been associated with an expansion of services rather than a reduction of level of services. Figure 1 at the end of this chapter illustrates which services expanded. Specialty Clinics The most commonly expanded service was specialty clinics. This may be one of the success stories of the Flex Program. As our site visits confirmed (see below), one of the benefits of network relationships has been an increase in the number of medical specialties available in CAH communities. These networks were encouraged by state office of rural health CAH eligibility requirements, and agreements often include transfer arrangements, quality assurance, physician review, credentialing, and specialty clinic staffing. Laboratory and Radiology Nearly a quarter of CAHs expanded their laboratory and radiology services. Virtually all CAHs had these services prior to conversion. Although our survey did not collect details on these expansions, it is likely that many of these expansions involved capital expenditures for new equipment, as well as physical remodeling. Our site visits confirm that many CAHs made such investments. How were small hospitals that have had negative margins for several years able to make such investments? One likely explanation is the new opportunity to recover capital costs through cost-based reimbursement. Some of these capital needs are relatively small (especially some lab equipment), and may have been funded by loans. With the assurance that cost-based reimbursement would help recover the costs (for all Medicare and, in some states, Medicaid procedures), post-CAH loans may have been easier to secure, even for hospitals with chronic negative margins. In addition, hospitals may have used lease arrangements for equipment, again, building the cost into cost-based reimbursement. Home Health The service most commonly eliminated was home health. Although the divestiture of a home health service has occurred approximately concurrent with CAH conversion for 24 survey respondents, the only connection we would infer between the two strategic moves is that, in considering conversion, hospitals engage in scrutiny of their financial condition. They were likely to find that, under the interim home health payment system prompted by the 1997 Balanced Budget Act, and facing imminent prospective payment, home health was going to be a money loser. Nevertheless, thirteen hospitals expanded their home health services in the CAH conversion year. Considering the uncertain future for home health reimbursement, these thirteen home health expansions may be evidence that home health offers a staffing "buffer" that allows RNs, LPNs and certified nurse aides (CNAs) to be flexibly scheduled among services, achieving a kind of staffing efficiency that offsets the poor reimbursement projections. Or perhaps hospitals are meeting a community service need despite revenue problems. Obstetrics Relatively few CAHs (27%) offered obstetric services, despite evidence from rural health research centers that low-risk rural women have better outcomes if they deliver close to home.2-4 A variety of conditions have made providing obstetrical (OB) services a significant challenge for most small rural hospitals, including physician coverage, surgical backup, and sufficient volumes. Next to home health, this is the service most likely to have been dropped after CAH conversion: 17 hospitals (9%) dropped their OB service, and two more limited services. While 58 percent of CAHs overall are 30 or more miles from the next hospital offering OB, 63 percent of those hospitals that dropped or limited services were at least 30 miles away, and almost a third of those that dropped or limited services were 45 or more miles from the next facility. Of those who dropped or limited services, two-thirds were considered "isolated" by Rural Urban Commuting Area (RUCA) code designation.* Of the majority of CAHs not offering OB service, 28 percent (or 40 hospitals) were 45 or more miles from the next facility. Most of the rural hospitals we visited that are continuing to offer OB service in the face of the financial and logistical odds, serve a primarily low-income population. A couple of these hospitals are on Indian reservations. When Medicaid offers cost-based reimbursement to CAHs (such as in Montana and Oregon), the high cost of maintaining these services is recoverable. In other cases (such as Missouri and New Mexico), hospitals face the more serious financial consequences reflecting the fact that square feet dedicated to OB are not allowable on the Medicare cost report. At least one of the hospitals we visited was considering dropping OB for that reason. Changes in Surgical Volume While 12 percent of hospitals dropped or limited inpatient surgery (N=26), and 8 percent hospitals (N=18) dropped or limited outpatient surgery at the time of conversion, a large majority of hospitals expanded or maintained their surgical services, especially in the outpatient setting. We did not collect data on specific procedures that are offered. Of the 91 CEOs (48%) responding to our survey who said they "expected a change in surgical services" over the next few years, only two said there would likely be a decrease. Twenty-one of 93 CEOs (23%) said they were recruiting a surgeon. Of those who dropped or limited inpatient surgery following conversion, almost a third (8 hospitals) were 45 or more miles from the next facility offering inpatient surgery. Of the hospitals that dropped or limited outpatient surgery, only 11 percent (or 2 hospitals) were that far away from the next facility offering the service. Seven hospitals (41%) that dropped or limited outpatient surgery were considered isolated (RUCA code 10 or greater). A third of hospitals that perform no inpatient or outpatient surgical services (for a total of 14 hospitals) were 45 or more miles from the next facility offering any surgery. Of note, hospitals receiving local tax support were less likely to drop surgical services: for inpatient surgery, 38 percent of those that dropped or limited the service got tax support, while 62 percent of those that dropped the service did not (p=.12). On the outpatient side, 28 percent of the hospitals limiting or dropping surgery got tax support, versus 72 percent who did not (p=.025). We also asked about the number of inpatient and outpatient procedures performed per year, before and after conversion to CAH. Since a few CAHs had extremely high or extremely low surgical volume, we grouped hospitals into seven surgical volume categories to compare pre- and post-conversion outpatient surgical volume (Table 2). Table 2. Outpatient Surgical Procedures per Year.
Table 2 provides an illustration of the number of hospitals** that increased, decreased, or held constant their outpatient surgical volume. The shaded diagonal indicates those hospitals without a substantial change in volume (n = 83). All cells to the left and below the diagonal count hospitals that decreased their volume as they converted to CAH status (n= 15). Those cells to the right and above the diagonal count hospitals that increased their volume (n=37). While this analysis indicates more hospitals increased outpatient surgical volume than decreased it, the dominant category is those facilities whose volume stayed essentially the
same. The Influence of Network Affiliation Table 3. Scope of Services of Critical Access Hospitals where
Note: The category "limited since CAH conversion" is not shown due to the very small number of responses in this category. The column "have service now" was not specifically asked on the survey. It summarizes the net effect of the other columns. The number of hospitals as a percentage of 51 is shown in parentheses. Among this subset of 51 hospitals, the same kinds of services are being expanded as for the full sample of 217, but in significantly greater proportion. For example, in the full sample, 25 percent of hospitals with radiology and 20 percent of those with labs expanded their services. In the subset of those that were helped by their affiliated hospitals, 50 percent expanded their radiology services and 45 percent expanded lab. Similarly, in the full sample, 31 percent expanded outpatient surgery and 33 percent expanded specialty clinics, compared with 60 percent and 52 percent respectively in the subset with network assistance. Figure 2 illustrates that service expansions were more likely among hospitals that were helped by their affiliated hospital across nearly all services included in our survey. These numbers suggest that the networking emphasis that is part of CAH conversion in most states may be contributing to the expansion of these services. A more detailed discussion of the role of pre-CAH and post-CAH network and system relationships in explaining scope of services can be found in Chapters 3C and 3D.
Evidence from site visits to sixteen CAHs conducted during Year 02 suggests that there are two additional factors contributing to the expansion of scope of services at some CAHs. First, site visit teams heard many references to the importance of specialty clinics at a majority of the sites visited. However, we were not able to determine any direct financial gains to the hospital resulting from these clinics. In most cases, visiting specialists are given free access to examining rooms, and few admit patients to the hospital. Specialists bill patients directly from their home offices, and, in some cases, patients first seen in a specialty clinic in the CAH community were subsequently driving to the larger community where the specialist was based for follow-up visits. Perhaps the most immediate benefit to the hospital, though not quantified by any of our sites, is the value of ancillary services used by the specialist, such as lab and radiology procedures. In fact, the expansion of these services described above may have resulted from the needs and opportunities afforded by expansion of specialty clinics. In most cases, the administrators and board members of the CAHs we visited saw an indirect benefit from the expansion of specialty clinics. They believe that having a variety of specialists available through the CAH, whose names are listed as part of the hospital staff, elevates the image of the hospital in its community. They believe this is an effective way of addressing patient outmigration. For those sites that were able to estimate their current market share, the average estimate was 25 percent, ranging from a low of 10 percent to a high of just over 50 percent. Market share, of course, is improved with a broader scope of services. Small rural hospitals should probably enjoy market shares around 50 or 60 percent. Market share growth can be a much more important and effective way to build financial stability than reimbursement formulae changes.5 A survey of 33,455 households in 56 Northwest communities6 found small rural hospital market share ranged between 14 and 82 percent, with the median community market share at 36 percent. Physician market share was typically 14 points higher than hospital market share. In that survey, researchers found 58 percent of respondents in the median rural community said they would seek local care for a broken arm, whereas fully 42 percent would drive to the next hospital community for care of a simple emergency room procedure like that. These ratings depend largely on image, which may or may not be rooted in actual quality of care. The other factor contributing to expansion of services, especially radiology and laboratory, is the ability to recover capital costs through cost-based reimbursement. We found a surprising number of CAHs with major construction projects planned or in process, in addition to the acquisition of new automated lab analyzers, CT scanners, mammography and ultrasound and other equipment. Other Findings We had discussions about flexible staffing and cross-training at many of the sites we visited. Our findings varied. For example, many directors of nursing talked about having the flexibility to move a nurse from an outpatient setting to an inpatient setting, or vice versa, others have policies requiring all nurses to be trained in at least two areas to facilitate such flexibility. As for CAHs that own ambulance services or have an ambulance crew on site, they attempt to use emergency medical technicians (EMTs) in the hospital as Certified Nurse Aides (CNAs), emergency room (ER) techs, or in maintenance and dietary departments (with mixed success). We did not find any evidence that services are added, dropped or expanded on the basis of opportunities for flexible scheduling. On the other hand, we heard many comments about the difficulty of recruiting and retaining the workforce, especially RNs and CNAs, and the possible effect of workforce issues on the CAH's ability to staff its various services. Several sites we visited were operating their own CNA or LPN training programs, or offering them jointly with a nearby technical school. How CAHs are dealing with these workforce issues is a question proposed for Year 03 of this Tracking Project. Clearly, the aging population and shrinking workforce nationally has implications for the rural health workforce that must be dealt with by these small hospitals.
A few of the sites visited in Year 02 are relatively larger acute-care hospitals, with an average daily census of acute care in excess of ten patients. These larger hospitals converted to CAH status later than other hospitals in their states, since, in most cases, the advantages of CAH status were less clear than they have been for smaller hospitals. From our visits, we conclude these facilities are definitely not "limited service" hospitals. These larger hospitals offer extensive radiology, surgery, and in most cases, obstetrics. Some also have intensive care units and level 2 trauma classification. In addition to the size of the facilities, we investigated whether hospitals that have converted to CAH more recently are, in fact, significantly different from earlier converters. We addressed this question using data from the Year 02 hospital administrator survey, with a simple classification into "early converters," those that converted up through the end of 1999, and "later converters," those that converted since January, 2000. We found no significant differences between the two groups in most areas, particularly the "labor-intensive" services. On the other hand, we found significant differences in a few services that might be interpreted as more "capital intensive." (Table 4) Table 4. Major Differences In Scope Of Services
If the CAH program continues to expand, and if new CAHs tend to be larger, with a broader scope of services, scope of services may have significant implications for the Flex Program. These large CAHs, for example, appear to be offering more capital-intensive services, and may build more capital costs into their base, resulting in increased expenditures for cost-based payers. Thus, payer expenditures in the first few years of the program may not be an accurate predictor of future experience. On the other hand, the total number of participants in the Flex Program is limited by the criteria established in the legislation. Thus, such cost increases are also limited. Beyond the prediction of cost implications, there is a philosophical question raised by the conversion of larger, "full-service" hospitals to this program. When we visited one such hospital, we were told the state licensure survey team made several comments during the survey to the effect that this was "not really a CAH." In fact, we were told that the survey team had not appeared to be prepared to deal with some of the issues of a larger hospital. While they were accustomed to discussions about how far away the on-call physician lived, and whether s/he could respond within 30 minutes, the medical director in this case was trying to explain that the emergency room was staffed by three full-time ER physicians, and was hiring a fourth. This anecdote may illustrate a potential disagreement among those who framed this program, those who oversee it, and those who are implementing it. We make no conclusions here about the implications of this evolutionary process. However, hospitals increasingly serve their communities with services other than traditional medical-surgical beds. Thus, we would suggest that the concept of hospital "size" is no longer captured by inpatient measures. Conclusions
Figure
1: Changes in Services Pre-CAH Conversion to Post-CAH Conversion Chapter 3C: Critical Access Hospital Network Development Footnotes * The rural-urban commuting area code classifies U.S. census tracts using measures of urbanization, population density, and daily commuting from the 1990 decennial census. The classification contains two levels. Whole numbers (1-10) delineate metropolitan, large town, small town, and rural commuting areas based on the size and direction of the tracts' largest commuting flows. These 10 codes are further subdivided to permit stricter or looser delimitation of metropolitan and nonmetropolitan settlement, based on secondary commuting flows. ** It should be noted that approximately 80 hospitals responding to the survey had not completed a full year following CAH conversion, and their surgical volumes were annualized based on experience over a partial year. 1 Moscovice, I. Wellever, A. Sales, A Chen, M. and Christianson, J. (1993) Service Limitation Options for Limited Service Rural Hospitals, Working Paper #1, Rural Health Research Center, Institute for Health Services Research, University of Minnesota, Minneapolis, MN 2 Larson E, Hart LG, Rosenblatt RA. Is Rural Residence a Risk Factor for Poor Birth Outcome? Rural Health Working Paper Series #36, WWAMI Rural Health Research Center. 1995. 3 Nesbitt T, Connell F, Hart LG, Rosenblatt RA. Access to Obstetric Care in Rural Areas: Effect on Birth Outcomes. AJPH July 1990, 80:7, 814-818. 4 Larson E, Hart LG, Rosenblatt RA. Rural Residence and Poor Birth Outcome in Washington State. Journal of Rural Health. Summer 1992, 8:3, 162-170. 5 Amundson, B and Hughes R. Are Dollars Really the Issue for the Survival of Rural Health Services? Rural Health Working Paper Series #3, WWAMI Rural Health Research Center. 1989. 6 Hagopian A, House P, et al. The Use of Community Surveys for Health Planning: The Experience of 56 Northwest Rural Communities. Journal of Rural Health. Winter 2000, 16:1, 81-90. RHFP
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