The report originally appeared in the January 2009 issue of DOTmed Business News.

At first glance rural hospitals appear to be among the most at-risk health care providers in the country, suggesting little opportunity for medical technology upgrades. Rural and Critical Access Hospitals (CAHs) are isolated, often operating out of century-old facilities, and typically serving a poor and/or elderly patient base. Yet, these very disadvantages result in favorable Medicare reimbursement that not only keeps them afloat but has enabled many to make capital investments in new facilities and equipment, when supported by other funding sources.

A survey of Critical Access Hospitals recently compiled by Regents Health Resources shows that over 85% of respondents report imaging as a profit center within the hospital; most are planning to upgrade or augment at least one modality within the next three years. For example, of the 80% that provide CT services, more than one-third plan on upgrading while the many in the remaining 20% plan on adding CT services.
What exactly are CAHs? Hospitals that meet certain rigid federal guidelines can sign up for designation as a Critical Access Hospital and receive cost-based reimbursement for Medicare patients. The facility must have 25 or fewer inpatient beds and serve rural areas at least 35 miles from another hospital. Nearly one quarter of the U.S. population lives in rural areas so CAHs truly serve a vital role.

"It's the smaller, more rural areas of the U.S. that are served by these hospitals. The challenge with being smaller is that it's harder for them to attract talent and see a large number of patients, so raising revenue can be difficult. Based on that, the [Medicare] reimbursement structure is different from hospitals in a Metropolitan Statistical Area," said Brian Baker, Senior Vice President of Regents Health Resources, Inc., Brentwood, TN.

"Part of the point of applying for the Critical Access Hospital designation is that you are paid at 101% of actual [Medicare] costs," said Beth O'Connor, Executive Director, Virginia Rural Health Association, Blacksburg, VA. "It covers things that are billable but it doesn't cover staff and all the other things necessary to run a hospital. But at least it helps the facility stay above board."

Other benefits of the designation include exemption from certain restrictions that most providers face. For instance, qualified CAHs are exempt from prospective payment rules, and referring CAH physicians may own a stake in local radiology centers. These exemptions are needed because of the at-risk nature of the population and increased difficulty of providing health services in these areas. (See sidebar on page 23 of the January 2009 issue of DOTmed Business News.)

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