Dr. M. Ray Kenoyer talks with one of the nurses at the Hamilton County Hospital in Syracuse. Small, rural Kansas hospitals face a number of issues ranging from possible Medicare cuts, to workforce recruitment and needed upgrades for aging facilities. KHI News Service file photo from 2008. by KHI News Service

In small towns like this across Kansas, hospital administrators are paying close attention to federal deficit-reduction talks in Washington, D.C. that could lead to a 2 percent cut in Medicare spending, starting Jan. 1.

“Two percent may not sound like much,” said Vicki Hahn, who runs the Wichita County Health Center in Leoti. “But we’re a ‘critical access hospital,’ which means we’re reimbursed for 101 percent of our Medicare costs. If 2 percent gets taken away, it would put us in the red on our Medicare patients. That wouldn’t be good.”

Leoti is about 40 miles from Colorado and 110 miles from Oklahoma in a county where about 18 percent of the population is age 65 or older. Total county population is 2,276 people according to most recent U.S. Census estimates.

“We’re a frontier county,” Hahn said.

Medicare patients account for about 78 percent of the patients seen by the publicly owned hospital.

A cut in Medicare reimbursement, Hahn said, would force the hospital to ask the Wichita County Commission for help in offsetting the loss of federal support.

“That would be a big concern,” Hahn said. “If we end up losing revenue that doesn’t get replaced, we would have to come up with a much different business model than the one we have now.”

Many Medicare patients

Wichita County Health Center’s situation is not unique. Because of the disproportionate number of rural and small-town Kansans who are elderly, most of the state’s small hospitals treat a relatively high percentage of Medicare patients. Medicare is the federal health program for persons age 65 and older.

Roger Masse, chief executive officer at Ellsworth County Medical Center, said a 2 percent cut in Medicare reimbursement would result in a $200,000 loss for the public hospital he manages.

“In Ellsworth County, that’s a lot of money,” he said, noting that a three-mill property tax currently generates about $225,000 for the hospital.

“So far, operationally, we’ve been able to just about break even,” Masse said. “We haven’t had to ask the county for more than the three mills. But if we end up taking a $200,000 hit, how long can that be sustained? I don’t know.”

About 55 percent of the hospital’s patients, he said, are on Medicare.

Blaine Miller has a similar story. He runs the Republic County Hospital in Belleville. He said a 2 percent reduction in Medicare reimbursement would lower hospital revenues by about $110,000.

“That would be big for us,” Miller said. “At the same time, our charity care had gone up substantially. Last year, we had about $200,000 in charity care; this year we’re looking at about $300,000.”

Miller attributed the increase to the hospital’s non-Medicare patients either losing or not being able to afford their health insurance.

101 percent

Kansas has 83 federally designated “critical access” hospitals, the most of any state in the nation.

Among other things, the designation allows the hospitals to bill Medicare for 101 percent of their outpatient, inpatient, laboratory, physical therapy, and post-acute care costs. The hospitals, in turn, agree to have no more than 25 beds, limit their inpatient stays to no more than 96 hours per patient annually, and provide 24-hour emergency room care.

The critical access program was started in 1997 with the goal of ensuring access to emergency, primary and acute care in the nation’s rural areas.

In Kansas, nine counties — Linn, Woodson, Osage, Wabaunsee, Elk, Wallace, Gray, Chase and Doniphan — do not have a hospital.

But 10 counties — Barber, Harper, McPherson, Marion, Dickinson, Washington, Pottawatomie, Nemaha, Brown, Wilson — have two hospitals with 25 beds or less.

A future with fewer hospitals?

“There is so much required of hospitals nowadays, I don’t know that all of them can survive,” said Dennis Franks, chief executive office at Neosho Memorial Regional Medical Center in Chanute. “The requirements are the same for all of us, but our resources for meeting those requirements are different.”

Many of the state’s rural communities, he said, also are having a hard time recruiting medical staff, a situation that’s likely to worsen with implementation of the Affordable Care Act on Jan. 1, 2014, which could mean thousands of additional Kansans gaining access to health insurance either through the new subsidies provided for them to purchase private coverage or perhaps through Medicaid should state policymakers choose to expand the program.

“There simply aren’t enough primary docs to go around,” Franks said.

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