How Can Rural Hospitals Gear Up for APCs?

When the Health Care Financing Administration (HCFA) first proposed its ambulatory payment classification (APC) system, the future of small rural hospitals seemed in doubt. Now that HCFA has released the final rules, plenty of insecurity remains. Nobody knows whats going to happen at rural hospitals, comments Jack Turner, MD, PhD, of TeamHealth, a physician staffing company in Knoxville, Tenn.

Although HCFA has exempted rural hospitals with fewer than 100 beds from the financial impact of APCs until Jan. 1, 2004, these facilities cannot simply ignore the new outpatient prospective payment system (OPPS). A lot of people dont realize theyre still going to be paid under APCs, notes HCFA Technical Director Rick Gunling. They think they dont have to undergo system changes, but they have to get ready just like everyone else.

HCFA will bundle the exempted facilities charges under APCs and file them like those of any other hospital, but it will boost reimbursement to 100 percent of pre-APC payment levels. Small rural hospitals also are guaranteed to preserve their payment-to-charge ratio at 1996 levels.
Because of these measures, small rural facilities that do little outpatient work and refer many of their patients to larger urban or community hospitals will experience minimal financial changes under APCs, at least initially. According to several studies, however, APCs will place a heavier burden on rural hospitals than larger facilities. Gunling suspects that the differential stems from the smaller hospitals presumed inability to establish economies of scale. That is, they have difficulty buying in quantity or achieving optimal staff-to-patient ratios.

Rural Facilities Will Gain Less from APCs

For all facilities, Medicare predicts that reimbursement under APCsincluding transitional paymentswill exceed past levels by 4.6 percent. As a group, rural hospitals gain 4.4 percent. A further breakdown of the numbers, however, reveals that facilities with fewer than 50 beds will experience just a 3.3 percent increase in reimbursement, while those with 200 beds or more will enjoy a 6.1 percent increase. And when transitional payments dry up in three years, times could get even leaner for small rural hospitals.

Note: For more information on the HCFA study that produced these statistics, search the APC regulations under the heading Annual Impact of Hospital OPPS 2000-2001 at www.hcfa.gov.

To protect themselves from lean times, rural hospitals must assess what theyre already doing. They must learn how to make the most of their strengths and to minimize their weaknesses. If youve got a hospital with a high volume of procedures they lose money in, theyre in worse condition than one that only does two procedures but makes a buck on them, notes Turner. Look at past years experience for outpatient services. Make up a spreadsheet for costs, and break it down to specifics, [...]

- Published on 2000-08-01