[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
HEARING TO REVIEW THE STATE OF HEALTH CARE IN RURAL AREAS AND THE ROLE
OF FEDERAL PROGRAMS IN ADDRESSING RURAL HEALTH CARE NEEDS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON SPECIALTY CROPS, RURAL DEVELOPMENT AND FOREIGN
AGRICULTURE
OF THE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
JULY 23, 2008
__________
Serial No. 110-42
Printed for the use of the Committee on Agriculture
agriculture.house.gov
----------
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COMMITTEE ON AGRICULTURE
COLLIN C. PETERSON, Minnesota, Chairman
TIM HOLDEN, Pennsylvania, BOB GOODLATTE, Virginia, Ranking
Vice Chairman Minority Member
MIKE McINTYRE, North Carolina TERRY EVERETT, Alabama
BOB ETHERIDGE, North Carolina FRANK D. LUCAS, Oklahoma
LEONARD L. BOSWELL, Iowa JERRY MORAN, Kansas
JOE BACA, California ROBIN HAYES, North Carolina
DENNIS A. CARDOZA, California TIMOTHY V. JOHNSON, Illinois
DAVID SCOTT, Georgia SAM GRAVES, Missouri
JIM MARSHALL, Georgia MIKE ROGERS, Alabama
STEPHANIE HERSETH SANDLIN, South STEVE KING, Iowa
Dakota MARILYN N. MUSGRAVE, Colorado
HENRY CUELLAR, Texas RANDY NEUGEBAUER, Texas
JIM COSTA, California CHARLES W. BOUSTANY, Jr.,
JOHN T. SALAZAR, Colorado Louisiana
BRAD ELLSWORTH, Indiana JOHN R. ``RANDY'' KUHL, Jr., New
NANCY E. BOYDA, Kansas York
ZACHARY T. SPACE, Ohio VIRGINIA FOXX, North Carolina
TIMOTHY J. WALZ, Minnesota K. MICHAEL CONAWAY, Texas
KIRSTEN E. GILLIBRAND, New York JEFF FORTENBERRY, Nebraska
STEVE KAGEN, Wisconsin JEAN SCHMIDT, Ohio
EARL POMEROY, North Dakota ADRIAN SMITH, Nebraska
LINCOLN DAVIS, Tennessee TIM WALBERG, Michigan
JOHN BARROW, Georgia BOB LATTA, Ohio
NICK LAMPSON, Texas
JOE DONNELLY, Indiana
TIM MAHONEY, Florida
TRAVIS W. CHILDERS, Mississippi
______
Professional Staff
Robert L. Larew, Chief of Staff
Andrew W. Baker, Chief Counsel
April Slayton, Communications Director
William E. O'Conner, Jr., Minority Staff Director
Subcommittee on Specialty Crops, Rural Development and Foreign
Agriculture
MIKE McINTYRE, North Carolina, Chairman
JIM MARSHALL, Georgia MARILYN N. MUSGRAVE, Colorado,
HENRY CUELLAR, Texas Ranking Minority Member
JOHN T. SALAZAR, Colorado TERRY EVERETT, Alabama
JOHN BARROW, Georgia ADRIAN SMITH, Nebraska
EARL POMEROY, North Dakota JEFF FORTENBERRY, Nebraska
ROBIN HAYES, North Carolina
Aleta Botts, Subcommittee Staff Director
(ii)
C O N T E N T S
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Page
Goodlatte, Hon. Bob, a Representative in Congress from Virginia,
opening statement.............................................. 30
Hayes, Hon. Robin, a Representative in Congress from North
Carolina, opening statement.................................... 3
McIntyre, Hon. Mike, a Representative in Congress from North
Carolina, opening statement.................................... 1
Peterson, Hon. Collin C., a Representative in Congress from
Minnesota, prepared statement.................................. 4
Pomeroy, Hon. Earl, a Representative in Congress from North
Dakota, prepared statement..................................... 5
Witnesses
Dorr, Hon. Thomas C., Under Secretary for Rural Development, U.S.
Department of Agriculture, Washington, D.C..................... 9
Prepared statement........................................... 10
Morris, Tom, Acting Associate Administrator, Office of Rural
Health Policy, Health Resources and Services Administration,
U.S. Department of Health and Human Services, Washington, D.C.. 12
Prepared statement........................................... 13
Spade, Jeff, Executive Director, North Carolina Rural Health
Center; Vice President, North Carolina Hospital Association,
Cary, NC....................................................... 30
Prepared statement........................................... 32
Fluharty, Charles W., Founder, President Emeritus, and Director
of Policy Programs and Research Professor, Rural Policy
Research Institute, Harry S Truman School of Public Affairs,
University of Missouri-Columbia, Columbia, MO.................. 38
Prepared statement........................................... 39
Myers, M.D., Wayne, Trustee, Maine Health Access Foundation; Past
President, National Rural Health Association, Washington, D.C.. 93
Prepared statement........................................... 94
Rheuban, Dr. Karen, Pediatric Cardiologist, Senior Associate Dean
for Continuing Medical Education and Medical Director, Office
of Telemedicine, University of Virginia Health System;
President-elect, American Telemedicine Association; Member of
the Board of Directors, Center for Telemedicine and E-health
Law; President, Virginia Telehealth Network, Charlottesville,
VA............................................................. 98
Prepared statement........................................... 100
Submitted Material
Submitted questions.............................................. 113
HEARING TO REVIEW THE STATE OF HEALTH CARE IN RURAL AREAS AND THE ROLE
OF
FEDERAL PROGRAMS IN ADDRESSING RURAL HEALTH CARE NEEDS
----------
WEDNESDAY, JULY 23, 2008
House of Representatives,
Subcommittee on Specialty Crops, Rural Development
and Foreign Agriculture,
Committee on Agriculture,
Washington, D.C.
The Subcommittee met, pursuant to call, at 2:30 p.m., in
Room 1300, Longworth House Office Building, Hon. Mike McIntyre
[Chairman of the Subcommittee] presiding.
Members present: Representatives McIntyre, Cuellar,
Salazar, Barrow, Pomeroy, Costa, Smith, Hayes, and Goodlatte
(ex officio).
Staff present: Aleta Botts, Claiborn Crain, Alejandra
Gonzalez-Arias, Tony Jackson, Tyler Jameson, Scott Kuschmider,
John Riley, Patricia Barr, Josh Maxwell, and Jamie Weyer.
OPENING STATEMENT OF HON. MIKE McINTYRE, A REPRESENTATIVE IN
CONGRESS FROM NORTH CAROLINA
The Chairman. I will now call this meeting of the
Subcommittee on Specialty Crops, Rural Development and Foreign
Agriculture of the House Agriculture Committee to order.
Good afternoon, and welcome to the Subcommittee's hearing
to review the state of health care in rural areas and the role
of Federal programs in addressing rural health care needs. I am
pleased to welcome Mr. Thomas Dorr, the Under Secretary for
Rural Development; and Mr. Tom Morris, Acting Associate
Administrator of the Office of Rural Health Policy for the U.S.
Department of Health and Human Services.
Gentlemen, welcome. I look forward to your testimony in
just a moment.
As the former Co-Chairman of the Rural Health Care
Coalition, a coalition of approximately 178 Members of
Congress, both Republican and Democratic, I have long been
concerned about whether folks in rural areas have adequate
access to quality health care. I continue to serve on the
steering committee of the Rural Health Care Coalition, and its
organization, I believe, has been one of the most active
caucuses, especially on a bipartisan basis, in the United
States Congress.
If rural areas are not able to provide health care to their
residents, then we have two possible scenarios. First, those
rural residents suffer from inadequate care, or second, those
rural residents no longer are rural, they leave and go
elsewhere. For those of us who care deeply about the vitality
of rural America, neither of these scenarios is acceptable.
Several programs operate at the Federal level to provide
assistance to rural health care facilities and their provision
of services to rural residents. I know that my home State of
North Carolina has directly benefited from the operations of
these programs, receiving over $20 million in the past 7 years
for rural health care facilities through grants and loans from
the USDA Community Facilities Program alone. So we are very
grateful for that and the cooperative efforts.
And, again, I commend our State Director, John Cooper, who
has done such a wonderful job, a fine Christian gentleman that
always knows how to reach out and care for people. I commend
him as an example nationwide, Mr. Dorr.
Despite the numerous programs designed to help, we know
that gaps remain. The transportation, geographic, and staffing
challenges are all too well known by Members of this Committee,
and those who live in rural areas. The rural population as a
whole tends to be older, tends to be folks of lower incomes,
and tends often to have greater health problems than their
counterparts in urban and suburban areas.
In fact, nearly \1/4\ of the U.S. population lives in rural
areas, but only about ten percent of physicians live in these
areas. That disparity alone says volumes: 25 percent of our
population in rural areas, but only ten percent of our
physicians.
Another glaring statistic: One-third of all motor vehicle
accidents occur in rural areas, but \2/3\ of deaths from motor
accidents occur on rural roads. While the National Center for
Health Statistics recently reported that, nationwide, life
expectancy reached a record high of 78.1 years in 2006, an
April 2008 study in the Public Library of Science journal noted
that life expectancy actually is falling for a significant
number of American women, mostly living in rural counties in
the Deep South, along the Mississippi River, and in the
Appalachian Mountain region.
We clearly have more to do on the issue of rural health
care. With the limited dollars available for rural health care
programs, we have to ensure they are used in ways that do
address the challenges. After all, rural citizens are just as
much American taxpaying citizens as citizens who live in the
big city; and we have to make sure that they are not
discriminated against.
We have to make sure there is sufficient coordination to
reach America's citizens who may happen to live in the more
rural areas. We want to make sure that we are maximizing those
efforts, that we are making sure that we are getting the full
bang for the buck; and make sure that as we look at these areas
that tend to have older populations and tend to have those with
greater disparities in terms of types of deaths and other
illnesses, that we are not overlooking American citizens,
American taxpayers, who also need the attention of the United
States Government.
I want to thank all of you for being here today. I
encourage the witnesses to use the stated 5 minutes for their
testimony. If you can read your testimony in 5 minutes that is
fine, but otherwise, please do not read your testimony if you
can't finish it in 5 minutes. Just read the highlights; or
better yet, tell us the highlights.
Pursuant to Committee rules, testimony by witnesses, along
with questions and answers by any Members of our Subcommittee,
will be stopped at 5 minutes. We will, however, gladly accept
your written testimony, no matter how long it is, for the
record. And that will be a public record, so please do not
hesitate to give us all the information you would like in that
fashion.
At this time, I would like to recognize the man who is
serving in lieu of our regular Ranking Member, Mrs. Musgrave,
but couldn't be here, our next in order Ranking Member, my fine
friend, a great Christian gentleman himself, a great colleague
and, in fact, my neighbor who is from the neighboring
Congressional district to mine in North Carolina, Mr. Robin
Hayes.
Robin?
OPENING STATEMENT OF HON. ROBIN HAYES, A REPRESENTATIVE IN
CONGRESS FROM NORTH CAROLINA
Mr. Hayes. Thank you, Mr. Chairman. And you are a great
friend. And interestingly, our districts really mirror each
other; you could kind of overlay them. We have urban areas on
the east and west, but tremendous rural areas in between.
So this is a very relevant hearing. And I may even have to
pay your alma mater, who are those folks in Chapel Hill,
Carolina Area Health Education Program?
I have to be careful giving him too many compliments on
his------
The Chairman. This is a Duke man.
All right. Go ahead. Thank you.
Mr. Hayes. West Virginia now. All right.
Thank you, Mr. Chairman, for holding today's hearing so we
can gain a better understanding of the health care needs of
rural America.
Rural Americans face unique challenges in getting quality
health care services, most notably the physical and financial
strain, particularly given the energy crisis, of traveling long
distances. Often the lack of timely access to these services
leads to delay, misdiagnosis, preventable diseases, and other
issues, some of which you mentioned, like the accident issue in
rural areas.
The USDA's many rural development grant and loan programs
help to sustain the quality of life in rural communities. These
programs build and maintain various health and human services
facilities, such as water and wastewater systems; modern
telecommunications systems for towns and rural areas, including
making certain that emergency and health care services have the
latest broadband capability; and in financing essential
facilities such as community rooms, libraries, hospitals.
Representing the Eighth District of North Carolina, which
is a very rural district, USDA Rural Development and John
Cooper have been a tremendous and innovative part of our
efforts to improve life in the communities. John Cooper, the
State Director and Director of USDA Rural Development in North
Carolina, and his staff have served to greatly help increase
the quality of health care, and increasing economic development
in the Eighth and Seventh Districts, but also across the state
as well. The recently enacted farm bill made several
improvements to these current programs.
Changes in the definition of rural will help to ensure
dollars build hospitals and health care services will go to
rural areas with the greatest need. Reauthorization of
successful programs, such as distance learning and
telemedicine, will continue to provide vital telecommunication
infrastructure to health care and emergency services. Reforms
to rural broadband programs will create incentives to increase
access to affordable, high-speed Internet in rural and
underserved areas.
Because of these programs, the knowledge and expertise
found in our finest medical facilities are now accessible to
physicians, health care professionals, and patients all over
the world, but most notably in some of the rural areas of my
district. Because of telemedicine services, many of our rural
constituents now benefit from the latest in medical knowledge,
technology and treatment, while remaining under the care of
their hometown health care provider.
Folks living in rural areas should have access to quality
health care. And I look forward to today's hearing and the
testimony so that we will learn more about the health care
needs of rural America; and give my welcome and thanks to our
witnesses for being here.
Mr. Chairman, I yield back.
The Chairman. Thank you, Mr. Hayes.
The chair will allow other Members to submit opening
statements.
[The prepared statements of Mr. Peterson and Mr. Pomeroy
follow:]
Prepared Statement of Hon. Collin C. Peterson, a Representative in
Congress from Minnesota
Thank you, Chairman McIntyre, for calling this hearing and for the
leadership you and Ranking Member Musgrave have shown on highlighting
the importance of health care delivery in rural areas.
Access to quality, affordable health care is of great concern to
all Americans, no matter where they live. The obstacles that Americans
can face in obtaining this care, however, are magnified in rural
areas--areas that everyone on this Committee represents.
Logistics, distance, and under-investment are significant
challenges rural areas face when it comes to health care. On average,
rural residents are older and have fewer financial resources than urban
and suburban residents. Health care delivery costs are higher in rural
areas, and a low supply of medical professionals in the countryside has
been a persistent problem.
Distance plays a big role, as well. The distance between home and
the nearest health care provider can mean less preventative care, and
it can put more strain on emergency personnel and medical facilities
when time is critical.
This Committee is limited in what it can do to address rural health
care delivery.
USDA operates several rural development programs, in the form of
loans and grants, designed to assist less-populated areas in meeting
these challenges. The Department of Health and Human Services also
operates rural health programs, but unfortunately, the Administration
has proposed severe cuts in funding for the kinds of programs that
would invest in quality health care for rural America.
And an investment in these kinds of technologies can make a
difference in closing the literal gap between a consumer and health
care provider. High speed telecommunications and telemedicine, for
example, are beginning to play a larger role in rural health care.
The Distance Learning and Telemedicine Program, first authorized in
the 1995 Farm Bill, is a popular program that utilizes modern
technology to provide additional access to specialists who are not
available in many rural communities.
Under Secretary Dorr with USDA's Rural Development Mission is here
before the Committee once again and I look forward to hearing not just
on the operation within USDA, but the coordination with other agencies
with rural health care programs in order to maximize the use of Federal
resources in today's budget climate.
I also welcome our panel of witnesses that will provide a ground-
level perspective to the problems facing rural medical services and
rural health care delivery today.
Thank you again, Mr. McIntyre, for calling this hearing today. I
yield back my time.
______
Prepared Statement of Hon. Earl Pomeroy, a Representative in Congress
From North Dakota
I want to thank Chairman Mike McIntyre and the Subcommittee on
Specialty Crops, Rural Development and Foreign Agriculture for holding
this important hearing today to review the state of health care in
rural areas and the role of Federal programs in addressing rural health
care needs. As Co-Chair of the Rural Health Care Coalition, I am deeply
concerned about access to affordable, quality health care in rural
America and this hearing is a good opportunity to get on record the
unique rural challenges that folks in my district and across the face.
Rural health care providers and patients living in rural areas face
obstacles vastly different that their urban counterparts. Rural health
care delivery and access is challenged by numerous impediments
including shortages of health care providers, geographic remoteness,
low patient volume with disproportionately high Medicare populations,
limited access to integrated health systems, and lack of electronic
networks to efficiently manage health care delivery.
In fact, only about ten percent of physicians practice in rural
America despite the fact that nearly \1/4\ of the population lives in
these areas. Although only \1/3\ of all motor vehicle accidents occur
in rural areas, \2/3\ of the deaths attributed to these accidents occur
on rural roads. Rural residents tend to be poorer with average per
capita income $7,417 lower than in urban areas. They also tend to have
high death rates and poorer health than their urban counterparts.
In addition to these unique socioeconomic characteristics, patients
living in rural areas face obstacles to access health care providers
who struggle to stay afloat. Approximately 83 percent of North Dakota's
counties are federally designated as entire or partial health
professional shortage areas. We have two counties without either
physicians or medical facilities and 15 counties are served by
satellite clinics that are not open every day. Over the last 4 years,
four rural ambulance units have stopped operations and since 2000,
twenty-six rural pharmacies have closed. In December 2007, a study
found that 55 facilities throughout the state were recruiting 185
vacancies including physicians, nurses, physician assistants, nurse
practitioners, physical therapy and mental health.
As Co-Chair of the Rural Health Care Coalition, I have fought hard
to ensure that our rural providers receive equitable reimbursements
under Medicare to help them keep their doors open. As you know,
Congress just enacted into law a $3 billion rural health package that
maintains and expands our commitment to rural health in the Medicare
Modernization Act (MMA). However, these funds are provided for Medicare
services only. And as we all know, the majority of the folks living in
rural America are not seniors and they need access to rural health care
services as well.
That is why the Rural Health Care Coalition has fought hard to
maintain the rural health care safety net via Federal funding including
grant programs we are discussing today. I would like to submit for the
record a letter submitted to the House Labor-Health and Human Services-
Education Appropriations Subcommittee by the Rural Health Care
Coalition in strong support of robust funding for these important
programs in Fiscal Year 2009. Programs supported in this letter include
the Rural Hospital Flexibility Program, Small Hospital Improvement
Program, Rural Outreach Grants, State Offices of Rural Health and
Telemedicine to name a few.
I was disappointed that the Administration's Fiscal Year 2009
budget recommended over $160 million in cuts to these rural safety net
programs, which would cost North Dakota $3 million alone. These cuts in
my opinion are penny wise--pound foolish. Despite assertions to the
contrary, these funds are not duplicative of Medicare rural health care
enhancements under the Medicare Modernization Act. MMA was never meant
to replace the Health and Human Services rural health grant programs.
MMA was about preserving access and helping providers keep their doors
open to seniors, the HHS grant programs are meant to improve health
care quality and develop innovative systems of care for all rural
Americans, young and old. It is my hope that this Congress will avert
the President's recommended cuts and I look forward to working with the
new Administration in placing a greater priority on preserving the
rural health care safety net.
I look forward to hearing the testimony of my colleagues and
distinguished experts to learn more about the roots of these rural
health challenges and how the Federal Government can craft common sense
policies that can help bring relief to these important populations. I
am committed to doing my part to helping reduce disparities in health
care and I look forward to working with the Agriculture Committee to
advance this important cause.
Attachment
March 19, 2008
Hon. David Obey, Hon. James Walsh,
Chairman, Ranking Minority Member,
Subcommittee on Labor, Health and Subcommittee on Labor, Health and
Human Services, Education, and Human Services, Education, and
Related Agencies, Related Agencies,
Committee on Appropriations, Committee on Appropriations,
U.S. House of Representatives, U.S. House of Representatives,
Washington, D.C.; Dear Mr. Chairman Obey and Ranking
Member Walsh: As Members of the House Rural
Health Care Coalition (RHCC) and on
behalf of our constituents in rural
America, we urge you to support
rural health care programs by
including funding for them in the
FY09 Labor, Health and Human
Services, and Education and Related
Agencies Appropriations bill.
Funding approved by the Committee
is critical to the effective
delivery of many health programs in
rural and underserved communities
across the country. We are greatly
appreciative of your
recommendations last year to
restore the rural health care
safety net to its 2005 levels,
adjusted for inflation. Building on
your efforts from last year, we
once again ask you to support
modest inflationary updates for
important rural health care
services and giving strong and
favorable consideration to the
following programs, which are of
the highest priority to the RHCC:
FY 2009 RHCC Request $39.2 million
FY 2008 Enacted Appropriation $37.87 million
This funding line supports both the Medicare Rural Hospital
Flexibility Grant program and the Small Hospital Improvement Grant
program and we urge that the Subcommittee support a modest increase in
funding for inflation. The Medicare Rural Hospital Flexibility (FLEX)
Grant program is instrumental in guaranteeing access to basic inpatient
and outpatient services to residents of rural communities. FLEX program
funding can be used to determine if a facility would benefit from
conversion to Critical Access Hospital (CAH) status under Medicare.
While this funding has helped more than 1,200 facilities convert to CAH
status, many of these facilities still have negative operating margins.
That is why the FLEX program also supports quality improvement projects
and the development of networks of hospitals and other providers such
as tertiary care sites or emergency medical service providers to meet
the full range of services for Medicare beneficiaries in rural areas.
Under the Small Hospital Improvement program, approximately 1,600
hospitals grants of approximately $9,000 are awarded to purchase
computer hardware and software and train staff on computer information
systems that are necessary to comply with Federal regulations. Unlike
FLEX grants, this program is not solely tied to Critical Access
Hospitals but rather to any rural hospital with 50 beds or less. These
small grants greatly aid rural facilities in integrating quality
improvement strategies and the ongoing implementation of the
Prospective Payment System and HIPAA rules that further the need to
obtain new technology. According to past reports to Congress, these
funds meet critical needs for these small hospitals that would go unmet
given their precarious financial situation and lack of operating funds
needed to keep pace with constant software and hardware upgrades needed
to operate in a complex environment.
Rural Health Outreach and Network Development Grant Program
FY 2009 RHCC Request $53.9 million
FY 2008 Enacted Appropriation $48 million
The Rural Health Outreach funding line supports innovative health
care delivery systems as well as vertically integrated health care
networks in rural areas. Projects funded under this funding line have
brought care that would not otherwise have been available to at least
two million rural citizens across the country. The grants fund
demonstration programs and usually last no more than 3 years. The
intent is to provide initial support for innovative ideas in rural
communities and then to transition off Federal funding as the projects
become self sufficient. Grant programs in this line include: Rural
Health Outreach Services Grants, Rural Network Development Grants,
Rural Network Planning Grants, and Delta Network Development Grants.
Our appropriation request provides for a modest inflationary
adjustment.
Office for the Advancement of Telehealth
FY 2009 RHCC Request $7.1 million
FY 2008 Enacted Appropriation $6.7 million
This grant program helps increase access to quality care services
in underserved and rural communities through the use of advanced
telecommunications and information technology. These grants support
distance-provided clinical services, and are designed to reduce the
isolation of rural providers, foster integrated delivery systems
through network development, and test a range of telehealth
applications. Given the many challenges facing health care providers
and their patients in rural communities, improving the availability of
telehealth services is a critical step forward for our rural
constituents. We respectfully request that the Subcommittee provide
$7.1 million in the FY09 Labor, HHS, and Education appropriations
legislation for this important program.
State Offices of Rural Health Grant Program
FY 2009 RHCC Request $9.2 million
FY 2008 Enacted Appropriation $7.99 million
This program is a small matching grant program to states to promote
the operation of state offices of rural health. Since the initiation of
the program in 1991, the number of state offices has increased from 14
to 50. The concept behind the program is to create a state focus for
rural health interests, bring technical assistance to rural
communities, and help them tap state and national resources available
for rural health and economic development. The RHCC requests that the
Subcommittee provide adequate funding, including a modest inflationary
adjustment, to support the State Offices of Rural Health Grants and
enhance the effectiveness of the important programs they oversee.
Rural Health Research Grant Program
FY 2009 RHCC Request $9.7 million
FY 2008 Enacted Appropriation $8.5 million
This grant program supports eight academic-based rural health
research centers, which study rural health issues, including rural
hospitals, health professionals, delivery of mental health services,
and functioning of managed care, in rural healthcare delivery systems.
This research program is the only one in the Department of Health and
Human Services (HHS) that soles examines the rural dimensions of
traditional health services research. This research plays an essential
role informing the Office of Rural Health Policy staff about key
Medicare, Medicaid and workforce issues and their impact on the ability
of rural providers to provide essential health care services to rural
communities. As Congress continues to modify and reform Medicare, rural
communities will rely on the research provided through these centers to
adapt to Federal policy changes. The RHCC supports a modest
inflationary adjustment to support this important rural health policy
research.
National Health Service Corps (NHSC)
FY 2009 RHCC Request $133.9 million
FY 2008 Enacted Appropriation $123.5 million
The NHSC plays a critical role in maintaining the health care
safety net by placing primary health care providers in our nation's
most underserved rural communities. Currently, more than 4,000 NHSC
clinicians are providing primary care services to four million
Americans. Unfortunately, this represents only 8% of our nation's
underserved population. We request this increase in funding to hire
additional primary care practitioners, dental practitioners and mental
health practitioners are needed to serve the 46 million Americans
without adequate health care in their communities. Moreover, President
Bush's commitment to expand the number of individuals served by
community health centers will require additional health professionals
to staff these facilities. We request that the Subcommittee provide
$133.9 million for this program which plays a key role in providing
clinicians to community health centers.
Area Health Education Centers
FY 2009 RHCC Request $36.9 million
FY 2008 Enacted Appropriation $28.18 million
Area Health Education Center funding provides direct financial
support to schools for healthcare workforce development and education.
AHECs link the resources of university health science centers with
local planning, educational and clinical resources. This network of
health-related institutions provides multidisciplinary educational
services to students, faculty and local practitioners, ultimately
improving health care delivery in medically underserved areas. This is
an effective program as primary care graduates of this and other Title
VII health professions programs are up to ten times more likely to
serve minority and disadvantaged populations by practicing in medically
underserved communities. We respectfully request your support for a
modest inflationary adjustment for these important community resources.
Rural and Community Access to Emergency Devices
FY 2009 RHCC Request $2.04 million
FY 2008 Enacted Appropriation $1.46 million
Automated external defibrillators (AEDs) are small, easy-to-use
devices that shock a heart back to normal rhythm during cardiac arrest,
saving the life of the victim. Access to AEDs for police forces, fire
departments, first responders, and community organizations in rural
areas is critical to increasing the survival rates of cardiac arrest
victims in remote locations. The Rural and Community Access to
Emergency Devices program assists in purchasing emergency devices such
as AEDs and in training first responders in their use and we urge the
Subcommittee to support a modest inflationary adjustment.
The RHCC is grateful for your support in recognizing the need for
providing a sound future for the delivery of rural health care. We hope
you will continue to support the millions of Americans in rural and
underserved areas by acknowledging and considering these funding
priorities.
Sincerely,
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Hon. Earl Pomeroy, Co-Chair, Hon. Greg Walden, Co-Chair,
House Rural Health Care Coalition; House Rural Health Care Coalition.
The Chairman. We appreciate Mr. Salazar being here; and any
of the other Members who may come in will be allowed to submit
any opening statements for the record, so that we can proceed
immediately now and let the witnesses begin their testimony.
Hopefully, we can get through the hearing before we are
called to votes. We will ensure there is ample time for
questions for each of our Members.
So panel one, we will begin with Mr. Tom Dorr, the Under
Secretary, as I said earlier, for USDA Rural Development. And
followed immediately by Mr. Tom Morris, the Acting Associate
Administrator for the Office of Rural Health Policy.
Mr. Dorr, please begin.
STATEMENT OF HON. THOMAS C. DORR, UNDER
SECRETARY FOR RURAL DEVELOPMENT, U.S. DEPARTMENT OF
AGRICULTURE, WASHINGTON, D.C.
Mr. Dorr. Thank you, Mr. Chairman.
Mr. Chairman, Mr. Hayes, I too must outwardly admit in a
very grateful manner that John Cooper is one of our outstanding
State Directors; and we are delighted to have him in our camp.
I would like to thank the Members of the Subcommittee for
this opportunity to testify on rural health care. This is a
high priority for the Administration, for USDA Rural
Development and, obviously, for Members of this Subcommittee as
well. And I do appreciate, we all do appreciate, the support
that Congress continues to provide in this area.
Modern technology has created remarkable new opportunities
to improve access to health care in rural communities. We look
forward to working with each of you to ensure that these
opportunities are realized. We work closely, as well, with our
friends at the Department of Health and Human Services, the
Indian Health Service, and the Veterans Administration to
identify and meet the health care needs of rural communities.
For example, we have developed in conjunction with them a
prototype of a rural Critical Access Hospital. This was done
with the leadership of the Department of Housing and Urban
Development, Department of Health and Human Services and,
particularly, the leadership of the Health Resources Service
Agency. This model is now available to rural communities as an
efficient, cost-effective planning tool.
We are continuing to participate in a Rural Hospital
Working Group with HRSA and others in an effort to create a
how-to manual for rural communities undertaking the
construction of replacement hospitals.
In the private sector, we have developed a close
partnership with the National Rural Health Association and with
large lenders such as the Farm Credit System, which can handle
larger loans than many local banks are able, in many cases, to
make. For our own part, we are working to break down the
stovepipes and develop synergies across our own program areas.
Rural Development's health-related investments have
traditionally been made by our Community Facilities and
Distance Learning and Telemedicine Programs. Since 2001,
however, we have also invested more than $200 million through
the Business and Industry Guaranteed Loan Program, and smaller
amounts through the Rural Business Enterprise Grant Program,
the Rural Economic Development Loan and Grant Program, and the
Renewable Energy and Energy Efficiency Program.
The point here is simply that we are prepared to respond
flexibly and to apply all of our tools, as needed. We recognize
that projects can be structured differently, approaches may
vary, and we intend to work with communities to identify viable
solutions.
Finally, we recognize that limited budgets may create a
more competitive program environment in the future. The DLT, or
the Distance Learning Telemedicine Program, is already
competitively awarded. The Community Facilities Program has
traditionally had an open loan window in which qualifying
projects were funded first come, first served.
We are now examining our options as the market evolves and
as it grows. And we look forward to a continuing discussion
with the Subcommittee on these and a variety of other matters.
Thank you all very much for this opportunity to be with
you, and I look forward to any questions you may have.
[The prepared statement of Mr. Dorr follows:]
Prepared Statement of Hon. Thomas C. Dorr, Under Secretary for Rural
Development, U.S. Department of Agriculture, Washington, D.C.
Mr. Chairman, Members of the Subcommittee, thank you for this
opportunity to discuss the role of USDA Rural Development in improving
access to quality health care in rural America.
This is a high priority for the Administration and, I know, for the
Members of this Subcommittee as well. We are appreciative of the
support that the Congress continues to provide in this area.
At the Federal level, several agencies share responsibility for
this effort. We work closely with our colleagues at the Department of
Health and Human Services, The Department of Housing and Urban
Development, the Indian Health Service, and the Department of Veterans
Affairs to identify and meet the heath care needs of rural communities.
As an example of this inter-agency coordination, in cooperation
with the Department of Housing and Urban Development and the Department
of Health and Human Service's Health Resources and Services
Administration (HRSA), we have developed a prototype of a rural
Critical Access Hospital, which we have made available to rural
communities to aid in the development of efficient, cost-effective
hospitals.
We are continuing to participate in a Rural Hospital Working Group
with HRSA and others in an effort to create a how-to manual for rural
communities undertaking the construction of a replacement hospital.
In addition, in the private sector we have developed a close
partnership with the National Rural Health Association (NRHA) and with
larger lenders, such as the Farm Credit System, which can handle loans
that many local banks are unable to make. We are committed to forming
additional partnerships which will enable all parties to strengthen the
services we provide to rural America.
While several Federal agencies collaborate to provide rural health
care services, our perspectives may sometimes vary. The mission of USDA
Rural Development is to increase economic opportunity and improve the
quality of life in rural communities. From this perspective,
investments in rural health care are a triple play.
First and foremost, we of course recognize the inherent importance
of quality health care to rural residents.
In addition, major health care facilities--clinics, hospitals, and
a wide variety of specialized care facilities--are intrinsically high-
value assets to rural communities. They provide jobs, generate economic
activity, support a wide range of ancillary services, and bring to town
highly skilled professional people who are likely to make valuable
contributions across the entire spectrum of civic life.
Finally, access to quality health care is clearly an important
condition for many business and institutional site decisions. In this
respect, quality health care is essentially an infrastructure issue
like transportation, adequate electric capacity, water and wastewater
treatment capacity, and broadband access. Communities that lack these
attributes may be effectively redlined for many types of developmental
opportunities. It is therefore an important part of our mission to help
ensure that these gaps are filled.
In considering Rural Development's role in this area, it is
important to note that we are community-driven. We administer over 40
programs which we are prepared to use flexibly to solve problems
identified by rural communities themselves. Since 2001, we have worked
hard to build synergies among programs, break down stove-piping, and
encourage both our own staff and our partners in the communities we
serve to work across traditional program boundaries.
Traditionally the bulk of USDA Rural Development's investment in
rural health care has been provided through the Community Facilities
Program, and in dollar terms this continues to be the case.
Since 2001, we have supported investments of more than $1.75
billion in Community Facilities to help rural communities develop or
improve more than 1,000 health care facilities. Of this total, 144
facilities were hospitals while 262 were health clinics. Other health
care investments in this period included assisted living facilities,
nursing homes, vocational and medical rehabilitation centers, and
mental health centers.
The Community Facilities Program, however, does not stand alone. In
the health care sector, from FY 2001 through FY 2007, no fewer than six
separate Rural Development programs have invested or supported
investments in a total of over $2.2 billion in more than 1,800 health
care-related projects:
------------------------------------------------------------------------
Projects Funding
------------------------------------------------------------------------
Community Facilities
Loans......................... 795 $1,152,420,669
Guaranteed Loans.............. 284 648,953,654
Grants........................ 363 32,950,541
Distance Learning and
Telemedicine/Medical
100% Grants................... 245 80,789,842
Loans and loan combos......... 17 78,409,821
Business and Industry Guaranteed 82 202,897,348
Loans
Rural Business Enterprise Grants 28 3,553,287
Rural Economic Dev. Loans and 27 10,929,833
Grants
Renewable Energy Guaranteed 5 59,386
Loans And Grants
------------------------------------------------------------------------
During the same period, our Community Facilities Program also
supported investments of over $831 million in 5,201 fire, rescue, and
public safety projects. Many of these, including rescue and ambulance
services, communications facilities, storm warning systems, and fire
equipment, directly support the public health mission.
Looking forward, demand for these programs is growing and we expect
that this will continue. Anticipating this demand, the Administration
proposed in its 2007 Farm Bill submission $85 million in mandatory
funding to support an additional $1.6 billion in guaranteed loans and
$5 million in grants to support the reconstruction and rehabilitation
of Rural Critical Access Hospitals.
Although Congress did not choose to fund this initiative, we will
continue to invest in rural health care as funds are available. We also
anticipate that growing demand coupled with new technologies and a
stringent budget environment are likely to drive changes in program
delivery.
The Distance Learning and Telemedicine program is already in high
demand. It is administered as a nationally competitive program with
scoring based on (a) the rural nature of the service area; (b) economic
need; (c) leveraging, through matching funds; (d) project location in
USDA Enterprise Zones; (e) the need for services and benefits; (f)
innovativeness; and (g) cost effectiveness. In 2008, we anticipate
making approximately $24 million in grants and $28 million in loans and
combos.
Health care investments through the Community Facilities Program,
in contrast, have historically been community and demand driven. And we
continue to fund rural health care infrastructure through this program
as the current resources allow.
In closing, let me express again my thanks for the support of this
Subcommittee for rural health care. These investments are critical to
rural residents and to the long-term health of rural communities. We
look forward to working with you to ensure that these needs are met.
The Chairman. Thank you so much for that very prompt and
excellent summary. We look forward to our questioning time.
In the meantime, Administrator Morris, if you would
proceed.
STATEMENT OF TOM MORRIS, ACTING ASSOCIATE
ADMINISTRATOR, OFFICE OF RURAL HEALTH POLICY, HEALTH RESOURCES
AND SERVICES ADMINISTRATION, U.S. DEPARTMENT OF HEALTH AND
HUMAN SERVICES,
WASHINGTON, D.C.
Mr. Morris. Mr. Chairman, Members of the Subcommittee,
thank you for the opportunity to meet with you today to discuss
the health care needs of rural populations in this country. I
am here today representing the Health Resources and Services
Administration, known as HRSA.
HRSA focuses on the most vulnerable Americans and makes
sure they receive health care. HRSA works to expand the health
care of millions of Americans--the uninsured, mothers and their
children, those with HIV/AIDS, and residents of rural areas.
HRSA takes very seriously its obligation to implement
enacted legislation. We help train future nurses, doctors, and
other clinicians and place these clinicians in the areas of
greatest need. Our efforts stress cross-cutting alliances
within the agency to deliver quality services. We also work
with governments at the Federal, state, and local levels, and
with community-based organizations to seek solutions to rural
health care problems.
My testimony will describe HRSA's activities in rural
America and our collaboration with other partners, such as the
USDA.
HRSA's Office of Rural Health Policy is the leading Federal
proponent for better health care services for the 55 million
people that live in rural America. Housed in HRSA, ORHP has a
department-wide responsibility to analyze the impact of health
care policy on rural communities. ORHP informs and advises the
Secretary of HHS, and works to ensure that rural considerations
are taken into account in the policymaking process.
Some of our efforts at ORHP include the Medicare Rural
Hospital Flexibility Grant Program, Rural Health Care Services
Outreach grants, and the State Offices of Rural Health. We also
help support the Rural Recruitment and Retention Network, which
links providers to rural communities in need.
The Community Health Center Program is a major component of
America's health care safety net, and due to the efforts of the
health centers and the generous support of the Congress, we
recently completed a Presidential initiative that created over
1,200 new or expanded health centers in this country. They
served 16 million patients in 2007, and as part of a renewed
focus on high-poverty areas in the last year, we awarded 80 new
health center sites that serve 300,000 people in areas of
highest need. Today, more than half of the health centers, 53
percent, serve rural populations.
The National Service Corps is another program, and has
placed more than 28,000 health professionals committed to
providing improved access to primary care, oral health care,
and mental health services in underserved areas. This is a
service program, and the clinicians go wherever the area is of
greatest need. Approximately 60 percent of NHSC's placements
are in rural areas.
In an era of high gasoline prices, travel costs have become
an even greater barrier to residents of rural areas. In 2007,
HRSA provided funding for 140,000 telehealth visits in 46
different specialty areas to patients in rural communities. We
estimate that this has saved patients over 14 million miles in
travel, or almost $7 million in travel-related costs.
The geographic isolation of rural communities poses
significant challenges in ensuring that all mothers and
children have access to routine preventive care, acute care,
and specialty care. To meet this challenge, HRSA funds the
Healthy Start Program and the Maternal and Child Health
Services Block Grant Program to states.
HRSA works with sister agencies in HHS and other Federal
departments as we seek solutions to rural health care problems.
We collaborated with the U.S. Department of Agriculture on the
capital projects that Mr. Dorr already mentioned. We are also
seeking to work with them in the coming year with their
Economic Research Service to seek to create a definition of
frontier. We are also working to make sure that the health
centers provide WIC services, Women, Infant, and Children's
services, in the health care setting, and we will serve as an
ex officio member of the recently formed Rural Advisory
Committee for the Department of Veterans Affairs.
In conclusion, we take great pride in the work we do to
provide quality health care for rural Americans. I thank you
for the opportunity to testify, and I am happy to answer any
questions.
[The prepared statement of Mr. Morris follows:]
Prepared Statement of Tom Morris, Acting Associate Administrator,
Office of Rural Health Policy, Health Resources and Services
Administration, U.S. Department of Health and Human Services,
Washington, D.C.
Mr. Chairman, Members of the Subcommittee, thank you for the
opportunity to meet with you today on behalf of Dr. Elizabeth Duke,
Administrator of the Health Resources and Services Administration
(HRSA), to discuss rural access issues as they affect the nation and
what is being done to meet the health care needs of the rural and
highly rural populations in this country. We appreciate your interest
and support of rural health care and access to care for people residing
in rural areas.
Introduction
The Health Resources and Services Administration (HRSA) helps the
most vulnerable Americans receive quality medical care without regard
to their ability to pay. HRSA works to expand the health care of
millions of Americans: the uninsured, mothers and their children, those
with HIV/AIDS, and residents of rural areas. HRSA takes seriously its
obligation to zealously and skillfully implement enacted legislation
from the Congress. HRSA helps train future nurses, doctors and other
clinicians, and to place these clinicians in areas of the country where
health care is scarce. HRSA's efforts stress cross-cutting alliances
across its offices and bureaus to bring about quality integrated
services. The Agency works and collaborates both within government at
Federal, state and local levels, and with community-based organizations
to seek solutions to rural health care problems.
My testimony will briefly describe several HRSA activities that
touch millions of people in rural America. These include Office of
Rural Health Policy programs, the Health Center program, the National
Health Service Corps, Telehealth, and Maternal and Child Health
programs. I will also briefly describe our collaboration with our
partners in other agencies, including the U.S. Department of
Agriculture who is testifying alongside of me today.
RSA's Rural Activities
Office of Rural Health Policy
HRSA's Office of Rural Health Policy (ORHP) is the leading Federal
proponent for better health care services for the 55 million people
that live in rural America. Housed in HRSA, ORHP has a department-wide
responsibility to analyze the impact of health care policy on rural
communities. ORHP informs and advises the Secretary, and works to
ensure that rural considerations are taken into account throughout the
policy-making process.
I would like to highlight six of ORHP's efforts to improve the
health of rural Americans. The Medicare Rural Hospital Flexibility
Grant Program (FLEX) provides funding to states who in turn award the
dollars to rural hospitals. For example, the FLEX grants has helped
over 1,200 small rural hospitals secure higher payments from the
Medicare program under cost-based reimbursement.
Another program, Rural Health Care Services Outreach, worked to
improve the health status of rural resident by providing a range of
services such as health screenings, health education, and provider
training. These community-driven projects provided flexibility for
addressing health needs specific to rural communities. A majority of
these projects fulfilled the needs in rural communities as 80 percent
of them have continued after Federal funding ended.
The State Office of Rural Health grant program, which funds the 50
states, ensures that there is a focal point for rural health issues. In
2006, the State Offices worked with close to 4,700 rural communities on
a variety of activities ranging from quality improvement to assistance
with grant writing. In Colorado, for example, funds support quality
reviews for over 30 clinical cases from small rural hospitals across
the state. Physicians review the cases for appropriate and timely care,
helping these hospitals to monitor and improve care if necessary.
ORHP efforts also include assisting in the enrollment of more than
180 rural hospitals in the 340B Discount Drug program. A change in the
law under the Medicare Modernization Act of 2003 allowed qualifying
rural hospitals which take care of a large percentage of poor and
elderly to qualify for this program. ORHP works extensively with the
states to identify eligible hospitals and assist them in the
application process for gaining access to low-cost pharmaceuticals.
HRSA's ORHP also supports the Rural Recruitment and Retention
Network (3RNet). The 3RNet works to increase the number of providers
practicing in rural America by linking rural communities in need of a
provider with providers seeking to practice in a rural setting. The
3Rnet consists of 43 states who work together to share information and
recruitment strategies. During FY 2007, 3RNet placed 404 physicians and
277 other health professionals such as nurse practitioners, physician
assistants and dentists. As a result, the 3Rnet saved rural communities
close to $9 million in recruitment costs last year. Over the past 4
years, 3RNet placed nearly 2,900 clinicians in rural communities.
Finally, the Rural Assistance Center (RAC), supported by ORHP,
offers rural residents one-stop shopping on health related rural
issues. Rural residents can e-mail or call the RAC staff and find out
about funding opportunities, successful rural health models or news and
statistics on rural communities. In one success story, a 23-county
consortia in Pennsylvania used information and assistance from the RAC
to help design and monitor a managed care plan for behavioral health.
Over its 5 year existence, RAC has worked with more than 5,000
individuals for customized assistance via its 1-800 line.
Consolidated Health Centers
The Health Center Program, a major component of America's safety
net for the nation's underserved populations for more than 40 years, is
at the forefront of the President's Health Center Expansion Initiative
to increase health care access in the nation's most needy communities.
Due to the incredible efforts of the clinicians and staffs of the
Health Centers, and the generous support of a bipartisan Congress, the
Initiative created over 1,200 new or expanded Health Center sites,
serving 16 million patients in 2007C compared with ten million patients
served in 2001. In 2007, as part of a renewed focus on high poverty
areas, 80 new Health Center sites serving 300,000 people without access
to Health Center services in areas of high need.
Health Centers are community-based and patient-directed
organizations serving populations with limited access to care. These
include low income populations, the uninsured, those with limited
English proficiency, migrant and seasonal farmworkers, homeless
families, and residents of public housing. Health Centers are open to
all regardless of ability to pay. Moreover, the Health Centers provide
comprehensive primary care service on a sliding fee based on the
patient's income.
Health Centers improve the health status of underserved populations
living in isolated rural communities, where residents often have no
where else to go. To meet this need, over half (53 percent) of Health
Centers serve rural populations. HRSA funds health center services in
rural areas within a 40 to 60 percent range as required by statute. For
example, in 2006, in rural areas, Health Centers served over 6.6
million people with 20.5 million patient visits. In the last fiscal
year, HRSA awarded approximately $836 million to Health Centers serving
rural areas. Additionally, the Agency recently awarded nearly $5
million in grants to Health Centers in rural areas to spur greater
health information technology investments. For example, one rural
grantee implemented an electronic health record in 22 Health Center
locations, reaching over 50,000 patients.
Peer reviewed literature and major reports document that Health
Centers successfully improve access to care, improve patient outcomes
for underserved patients, and are cost effective. Clearly, since their
inception in the 1960s, Health Centers remain on a quality quest for
their rural patients, grounded in the principles of community-oriented
primary care.
National Health Service Corps
The National Health Service Corps (NHSC) has the unique distinction
of having a book, The Dance of Legislation, a television series,
Northern Exposure, and a movie, Doc Hollywood, feature aspects of its
story. From its inception in 1970, the NHSC has placed in underserved
areas more than 28,000 health professionals committed to providing
improved access to primary care, oral, and mental health services.
The NHSC is a service program and its clinicians go wherever the
need is great, where others choose not to go. By statute, the Program
requires its recruited clinicians to serve targeted areas where they
are needed most by linking educational support with a clinical
placement (through a scholarship or loan repayment) to serve patients
most in need of primary care services.
From 1993 to 2006, the NHSC provided almost 18,000 total years of
dedicated service from its clinicians practicing in rural areas.
Approximately 60 percent of the NHSC's placements are in rural areas,
continuing a trend throughout its history. Moreover, the most current
retention rate of NHSC clinicians in rural areas is approximately 75
percent. To overcome shortages and scarcities in rural areas and to
expose students to hands-on primary care rotations, the Agency supports
state and community recruitment efforts including retention of their
grow-your-own health professionals. Additionally, according to one
study, in rural areas, NHSC clinicians are major contributors to local
economies, resulting in up to 14,367 jobs, and generating $1.5 billion
in economic impact.
For over 35 years, the NHSC has been and continues to be an
important contribution to the health care needs of underserved people
in rural America.
Telehealth
In an era of high gasoline prices, travel costs have become an even
greater barrier to rural patients receiving specialty services that are
not locally available. The Telehealth Network Grant Program (TNGP)
funds projects that demonstrate the use of telehealth systems in order
to improve health care services for medically underserved populations.
The TNGP focuses on providing innovative telehealth services to rural
areas. From March 2007 through February 2008, nearly 140 thousand
telehealth visits for 46 different specialty services were provided to
patients in rural communities under this Program. During the same
period, the TNGP is estimated to have saved patients over 14 million
miles in travel, or otherwise stated, an estimated savings of almost $7
million in travel costs.
In terms of health outcomes, the TNGP examines the impact of remote
disease management services on patient outcomes. From September 2006
through February 2008, 33 percent of diabetic patients enrolled in
Telehealth diabetes case management programs achieved control over
their disease as measured by their hemoglobin A1c levels. This is a
significant improvement over the baseline of ten percent of diabetic
patients who are estimated to have had control over the disease.
Under the Telehealth Resource Center grant program, HRSA supports
five regional and one national telehealth resource centers to provide
technical assistance to rural communities interested in providing or
receiving telehealth services. The five regional centers work together
to make available technical assistance from the nation's experts on
practical approaches to creating a successful telehealth program,
whereas the national center focuses on technical assistance to address
the legal and regulatory barriers to sustaining successful programs.
For example, the California Telemedicine and eHealth Center Mentor
Program created a network of mentors, individuals who have developed
successful telehealth programs in California, to serve as role models
and advisors to communities that wish to use telehealth technologies to
overcome barriers to service.
Maternal and Child Health
The geographic isolation of rural communities poses significant
challenges in assuring that all mothers and children have access to
routine preventive care, and acute medical and specialty care. To meet
this challenge, HRSA funds programs to improve maternal and child
health through the Healthy Start Program and the Maternal and Child
Health Services Title V Block Grant to states. Healthy Start works to
eliminate or reduce racial/ethnic disparities in birth outcomes in
high-risk communities. For example, North Carolina's Healthy Start
Program serves fourteen rural counties. The minority infant mortality
rate in these counties was 2\1/2\ times higher that the state's rate. A
recent evaluation indicates this year that there has been close to a 14
percent reduction in racial disparity for early entry into prenatal
care, 12.9 percent reduction in the racial disparity for neonatal
mortality, and a 10.8 percent reduction in overall infant mortality.
The Maternal and Child Health Services State Block Grant Program
helps improve the health care of many rural mothers and children.
States prioritize the use funds to address a multitude of maternal and
child health needs within the state. Among other things, states work to
reduce the rate of child deaths by motor vehicle accidents, decrease
the number of child suicide deaths, and lessen the rate of birth for
teenagers. Several rural states focus on reducing child injuries caused
by motor vehicle crashes. In South Dakota, for example, the state's
efforts have reduced the rate of deaths to children caused by motor
vehicle crashes from 11.1 in 2002 to 7.1 in 2006.
Collaboration With Partners
HRSA works with its sister agencies in HHS and other Federal
departments to seek solutions to rural health care problems. We
collaborate with the U.S. Department of Agriculture (USDA) and the
Department of Housing and Urban Development to assist small rural
hospitals in accessing capital for building projects through programs
funded by these two Departments. HRSA has also worked with USDA to
revise and define a frontier definition, and to increase the number of
health center grantees providing Women, Infant and Children (WIC)
services such as supplemental foods and nutrition education. Today 95
percent of health centers provide such services. In addition, we will
serve as an ex officio member of the Department of Veteran's Affairs
Rural Advisory Committee, which advises the Secretary on health issues
affecting veterans living in rural areas.
Conclusion
HRSA takes great pride in the work we do to provide quality health
care for rural Americans. Thank you for the opportunity to discuss the
agency's rural programs and I am happy to answer any questions you
have.
The Chairman. Thank you.
Thank you, gentlemen. And you two have been the first
witnesses we have ever had that have done a very succinct job
in less than the time offered. So thank you for showing it can
be done and done with great respect. That allows us even more
time for discussion and questions as we may need it, and we
thank you for that respect.
The chair would like to remind Members that they will be
recognized for questioning in order of seniority for Members
who were here at the start of the hearing, according to
Committee rules. After that, Members will be recognized in
order of arrival. And I appreciate the Members understanding
and following this procedure.
But I would also like to welcome Mr. Costa. Although not a
Member of this Subcommittee, is a Member of the larger
Agriculture Committee, and he has joined us today. And I have
consulted with the Ranking Member, and we are pleased to
welcome him and let him join us, as appropriate, during times
of questions as well.
And we are also pleased to be joined by Mr. Barrow of this
Subcommittee, who is joining us just in time for the questions.
So we are glad to have you, Mr. Barrow.
Secretary Dorr, can you discuss the role of financing from
local banks in the Farm Credit System in particular, that you
mentioned in your testimony, and the excellent job it has done
for the construction or renovation of health care facilities in
rural America?
Mr. Dorr. Well, certainly.
Traditionally, our programs have emphasized the direct loan
component. Over the years, however, we have recognized that
limited resources and, in fact, the ability to more effectively
engage local communities is likely to develop a stronger
relationship and a stronger commitment to the success of the
programs, long term. As a result, we have been for the last few
years going toward more effective guaranteed loan programs.
An example of this is a project in St. James, Minnesota,
which was initiated a couple of years ago. In that particular
case, they had a hospital that was built in 1957. It needed to
be rehabilitated and, in fact, replaced, which they did. It was
a $22 million project, I believe about $17 million of it was a
guaranteed loan, and $4 million or thereabouts was a direct
loan. That guaranteed loan component was one in which our Rural
Development Office was struggling to find someone to originate
that loan. Ultimately, Arborone, I believe a North Carolina-
based farm credit investment group, got involved in it and
provided the origination of the loan, and we were able to
provide the guarantee.
What this really demonstrates is that we are working with a
more and more diverse group of banks, investors, and other
financial entities to address this emerging rebuilding of the
infrastructure of rural America. Because of the history of the
way we have financed things in rural America over the last
several decades, this has been a bit of a new challenge.
We are delighted to find that there are organizations like
Farm Credit. There are some banks that are also now beginning
to get involved and they are actually able to utilize our loan
guarantee in a very low-cost way to step in and provide the
necessary build-out for this. In this particular case, we were
able to mitigate about 250 basis points or 2\1/2\ interest off
the prime rate. That probably would have been an added cost
that may have prohibited the local community from embarking on
this project. If you amortize that, say, on a $15 million loan,
just on an average basis, that amounts to $350,000, $360,000 a
year.
So we are looking for these kinds of partners, Farm Credit
through their investment groups. I understand this particular
project evolved out of the Investments in Rural America
Initiative that was started under Chairman Nancy Pellett at the
Farm Credit Administration. We found this as being a very
attractive project and program for us to work with. So we think
it has been very good.
The Chairman. Thank you, sir.
Administrator Morris, as part of the Administration's
assessment of rural health programs, we know your office sets
goals both to reduce health disparities and to strengthen
public health infrastructure and health care delivery systems.
Would you give us your honest assessment of the progress
that you have been able to achieve on those goals, both in the
short term and in the long term?
Mr. Morris. Yes, Mr. Chairman. In terms of health
disparities, certainly rural America has its share of them. And
there is a very regional tilt to it, with areas in the
Southeast facing some severe challenges.
Our Rural Health Care Outreach Services Grant Program, the
beauty of the program is, it is noncategorical, which means the
community can decide what the focus should be. And what we find
is that most of the applicants of this program tend to focus on
trying to improve health through health fairs, and adapt them
to what the local need is.
In order to track this, we have begun a performance
measurement system that will allow them to report on their
progress on disease indicators, access to primary care, and
things like that. We are hopeful that through the creation of
this we will be able to report quantifiable results that show
direct community health status improvement for where we make
those investments.
The Chairman. All right. Thank you, sir. Thank you very
much.
I will proceed and let Mr. Hayes be recognized to see if he
has any questions at this time.
Mr. Hayes. Thank you, Mr. Chairman.
Mr. Dorr, what analysis has USDA done to compare the
impacts of various projects that you funded in rural
communities, and the examples of successes. Hopefully, no
failures, but if so, what are some of those?
Mr. Dorr. We have begun to attempt this. I will try to
respect the time and abbreviate this.
As I have indicated to this Committee in the past, it was
very difficult when I first became the Under Secretary to
ascertain what the impact was of the variety of loans and
grants and loan guarantees we were making. In other words, what
kind of an impact in terms of new jobs, gross domestic product,
tax revenues, those sorts of things were being created with an
investment that we made, whether it was a grant or whether it
was a direct loan--which obviously has a higher credit score--
or whether it was a loan guarantee?
We embarked several years ago to try to ascertain how to do
that in our B&I Program, in our Business and Industry
portfolio. This evolved into something we called SEBAS, the
Socio-Economic Benefits Assessment System. And what that system
does in our B&I portfolio, using economically valid databases
and appropriate models, is to scrub and determine how many
gross new jobs we have created; it reduces them to net FTEs.
That is, if you invest money someplace, and it provides the
same service and eliminates a job over there, you can't
technically call a job here a net new job. This system scrubs a
lot of that out of the system. And, it ultimately generates a
number that identifies how much additional new gross domestic
product that investment creates. You then are able, for
example, to divide that by the number of jobs. You get a salary
per job or a quality of job indicator.
The interesting thing is that in addition to giving us that
data, it also is going to be a tool that ultimately will help
us analyze whether an application or an investment is really a
good one. So, in preparation for coming up here, I had our
folks pull the SEBAS numbers for B&I loans. We don't do SEBAS
yet in Community Facilities, but we are looking at how to
implement that technology there.
We have done a number of loan guarantees in the B&I
portfolio that are directly related to health care. For
example, in the area of continuing care retirement, in a period
from 2001 through to date, we have made 26 B&I loans. It
required a total of $3.45 million in budget. These investments
generated $7.5 million in GDP annually, and they created 272
net new jobs.
Now, here is the interesting thing: The total tax revenue
generated at the state and the local level annually will pay
off that budget requirement in 15 years and will have created
an additional job that is worth about $29,000.
What we also found out was that of those 26 loans, nine of
them actually created no new jobs. That is a significant
finding. This is a tool that allows us to determine whether or
not it is a good investment. We are able to find out, for
example, that our investments in hospitals create jobs with
about $45,000 annual salaries. You can repay the budget
authority off in about 2\1/2\ or 3 years. This varies by
category of investment.
This is a tool that, in the long term, will offer a lot of
potential. It will enable us to provide you with the kind of
information necessary for you to make better decisions as you
write statutes and decide what you are interested in funding.
And I think, as an Administration, we can likewise do the same.
I am sorry for the lengthy answer, but it was a bit
involved.
Mr. Hayes. Mr. Morris, quickly, how do you assess the
effectiveness of the programs operated by your office in
helping rural areas meet challenges associated with providing
health care?
Mr. Morris. Yes, Mr. Hayes, we have moved in HRSA towards
developing quality indicators for all of our programs, some of
which are common across programs, whether it is Maternal and
Child Health or Community health centers or even grant programs
in our office.
What we are trying to do with that is be able to measure
where our dollars have actually resulted in an improvement in
terms of various conditions, whether it is diabetes,
cardiovascular health, things such as that. And what we hope to
do is wrap that in an overall agency performance assessment
that will enable us to see what is working and what is not. And
that can factor into how we write our guidance for our grants
in the coming year, stressing continuous quality improvement as
we can.
Mr. Hayes. Thank you, sir.
Mr. Chairman, I yield back.
The Chairman. Thank you very much.
Mr. Salazar.
Mr. Salazar. Thank you, Mr. Chairman.
And thank you Under Secretary Dorr and Mr. Morris for being
here with us today.
As you know, I represent the western and southern part of
Colorado, one of the largest districts in the country, very
sparsely populated, and we have great disparities in how we are
able to afford health care to many of our constituents. The
biggest problem that we have is retaining doctors in rural
communities.
But let me just ask you a question about what some of the
health care administrators have told us. They say that
financing buildings through the Community Facilities Program
requires more red tape than it does through financing it
through other institutions. Have you looked at ways to cut down
and to make things--simplify the procedures, Mr. Dorr?
Mr. Dorr. I believe we have. We are doing so on a
continuing basis.
We are cognizant of the limitations in many of these rural
areas in terms of the expertise to deal with these programs. We
are attempting vigorously to cross-train our field staffs so
they are more capable of working with the customers at their
locations to figure out how to submit applications, and to
ascertainment whether or not these sorts of applications really
will work.
I just talked about SEBAS. If we are able to ultimately
implement that system it should begin to quantify the kinds of
services we provide in the context of what really makes sense
for those areas.
For example, we know from our colleagues' databases is that
no one should be more than 35 minutes--I believe is the
number--from an emergency trauma center in the event of an
accident. There are a number of those sorts of measures that we
are trying to incorporate into how we analyze applications, how
we provide guidance and assistance and, more importantly, how
we begin to leverage our loan guarantee programs with outside
lenders. And it is going to take time, but we are making
progress, and a number of these performance indicators will
make it less complicated to get where we need to get.
Mr. Salazar. Thank you.
And, Mr. Morris, like I said before, one of the biggest
problems that we have in our community is trying to retain
doctors in rural areas. Do you have any ideas as to how we
might enhance programs to solicit doctors to come and stay in
rural communities?
Mr. Morris. Yes, sir, Mr. Salazar.
Well, I think that over the years one of the most
successful programs we have had has been National Service Corps
both through its scholarships and its loans. And we find that
now we are leaning more towards the loan repayment as an
effective tool.
We place these folks based on where they score in terms of
a Health Professional Shortage Area score. And so, that way we
make sure they are going to the area of greatest need.
So, what we found is that more than 50 percent of them go
to rural areas. We are seeing a great need in rural areas, and
so the National Service Corps has committed a lot of resources
to that also.
Two other things we have done to try to help is we support
the Rural Recruitment and Retention Network. This is 45 states
working together, usually with a state point of contact who
does recruitment and retention for the state. And over the last
4 years the 3RNet, as we call it, has placed 2,900 clinicians
in rural areas; and that is mostly physicians, but some
dentists, physician assistants, and nurses. They do about
roughly 4,000 a year.
They do a lot of site development where they do a lot of
work ahead of time trying to make sure that the community is
the right fit for the clinician.
I think ``grow your own'' programs tend to be very popular,
where you identify somebody who enjoys the rural lifestyle, who
appreciates it, and is more likely to stay. And that is the
sort of retention issue that I think is important.
To help support this, we have also asked each of our State
Offices of Rural Health--there are 50, one in each of the 50
states--to identify a point of contact for rural recruitment
and retention issues so that there will be one person they can
call in each state to do this. And I will say that in your
State of Colorado we have one of our strongest State Offices of
Rural Health; they have really done a great job with the
resources they have over the years of recruitment and
retention, sir.
Mr. Salazar. Thank you.
And could you, Mr. Morris, give me a list of the different
programs, retention programs that you have? If you would
provide my staff with that, I would certainly appreciate that
very much.
Mr. Morris. I would be happy to do that for the record.
Mr. Salazar. Thank you, Mr. Chairman. I yield back.
The Chairman. Thank you very much.
Mr. Costa.
Mr. Costa. Thank you very much.
Mr. Morris, we are all obviously concerned about the new
rulemaking that is coming out and its definitions and impact on
our rural areas throughout the country. In my district, I have
some significant health challenges. It is a rural area, but we
have urban populations nearby, like Fresno--and Hanford is now
over 50,000--and Bakersfield. Yet we are three of the number
one ag counties in the nation, based on gross receipts, have
large populations of uninsured or underinsured; and health
clinics are obviously very important.
Critical access to hospitals through health care is also
overused, i.e., emergency rooms. And so I understand funding is
limited, but in your regulation process, I believe we are going
to exclude more and more of these rural health facilities.
Here is my question: Under your rules to address capacity,
does the capacity to handle the patient caseload which, in my
district, I have 14 facilities that may lose their rural
designation because of your rulemaking. If they close, clearly
the caseload is going to enlarge the responsibility of other
facilities for these rural patients.
Again, many of them are uninsured or underinsured. So the
primary care facilities sometimes do exist within 25 miles
under your rulemaking, but that doesn't mean they are easy to
access. These are working poor people that at $4+ for a gallon
of gasoline, it is very difficult.
So what does this mean? I mean, this does a disservice not
only to the clinics, but it further impacts the hospitals. Do
you have a response?
Mr. Morris. Yes, sir, Mr. Costa.
Are you referring to the recently published proposed rule
on Health Professional Shortage Area Designation?
Mr. Costa. Right. Right.
Mr. Morris. The comment period just closed on that, and we
are in the process of looking through all the comments to
decide what our next steps are.
I would be happy to get back to you for the record, or have
our legislative staff follow up about what we think our next
steps are going to be. I don't know myself.
Mr. Costa. The irony, of course, all politics is local in
part. But in Kings County I have a community with right around
50,000, another community that is 15 miles away, 10 miles away,
with 30,000 people. For the purpose of qualifying under Federal
formulae, they have combined their geographical formula
population, which now no longer makes them, by definition,
rural.
CMS is really complicating and making it more difficult to
provide access. How about the issue of areas where they are
principally served by farm workers? Do these Rural Health
Programs that provide the access, are there other programs
based on patients served that would be made available, not just
the location of the facility? And do you provide waivers for
these centers?
Mr. Morris. I think for migrant farm workers--the program
that has been the most effective over the years has been the
Migrant Health Center Program, because they built on a track
record and have served those folks. That is not determined by
either rural or urban status. It is defined mostly by where the
population is.
I think the set of Migrant Health Centers are best equipped
to do that.
And with the President's expansion, we put Community Health
Centers, 1,200 new sites, in places they hadn't been before. So
that safety net of Community Health Centers is much broader
than it used to be.
And can I ask one question about the definition of rural
that you raised?
Mr. Costa. Right.
Mr. Morris. For our programs in the Office of Rural Health
Policy, we try to use a broader definition of rural that we
developed in partnership with USDA. So we look at nonmetro
counties, but then we also look at the metro counties, which
are the areas you are referring to, and we identify the rural
Census tracts within those, so they are eligible for our
grants.
Mr. Costa. So if 51 percent of the patients come from a
nonurban area, would they qualify? Is a waiver possible? Can
the number be lowered to 25 percent?
Mr. Morris. I think that is referring to a regulation of
the Community Health Center Program. I will have to get back to
you for the record.
Mr. Costa. It is. And in terms of timeline, I have been
told it is different than what you just told us--my time is
almost up--that the new rule was proposed 2 weeks ago, but
August 26th is the deadline for the first comment period, and
CMS has 90 days to respond to the comments.
And if the clinic can't meet the requirements, they can't
get an exemption. And it can be decertified in 180 days.
Mr. Morris. Okay.
Mr. Costa. I mean, I am told that this could impact, in
California, 14 sites--or I mean eight areas in California by
this new rule.
Mr. Morris. There are several regulations pending right
now, and a lot of them focus on the same populations as the
Rural Health Clinic regulation that is out for comment right
now, which has a process in it in which clinics may be
decertified if they are no longer in a rural area, or if they
are not in an updated shortage area.
And then there was the Health Professional Shortage Area
redefinition that just closed.
I think we can follow up with you and get some
clarification on all those issues.
Mr. Costa. I would appreciate that. My time has expired.
Mr. Chairman, I want to thank you for holding this very
important and timely hearing for our rural areas throughout the
country.
And I would like to add whatever support to you and the
Subcommittee, if you want to put together a letter in terms of
questioning this whole rulemaking process, because, if the
impacts can happen in rural California, they happen all over
rural America, and this health care for the under- and
uninsured is critical.
The Chairman. Absolutely. Thank you. Thank you Mr. Costa,
for joining us today. And thank you for your kind words.
Mr. Barrow.
Mr. Barrow. Thank you, Mr. Chairman. I want to talk
Critical Access Hospital funding for a minute.
This is something I learned about in two different ways.
One is a result of my serving on both this Committee and the
Energy and Commerce Committee, which has jurisdiction over HHS
for some purposes. And also I learned about it on my last rural
hospital listening tour last year.
Critical Access Hospitals, as best I understand it, we
basically make a deal with rural hospitals. We say, ``Look, you
give up your dream, your ambition, your struggle to try and be
a full-service hospital, we will make you, in a feeder system,
sort of a primary clinic for a larger hospital to be designated
elsewhere, and we will reimburse you on a completely different
rate.
Since most of your patients are Medicare patients, we will
reimburse you on something different than your traditional
Medicare. We will do sort of a cost-plus type basis, kind of
keep you afloat. You lower your mission, you lower your sights
to be something different than what you have been in the past,
and we will reimburse you on a basis to make it possible for
you all to keep on doing it.'' That is the deal in a nutshell.
I found out last year that CMS is telling Medicare C--is
telling hospitals, Critical Access Hospitals that have accepted
this deal that their Medicare C patients aren't Medicare
patients for purposes of this reimbursement formula agreement
that has been in place from the very get-go. Of course we
hadn't had any Medicare C patients to speak of until Medicare D
came along.
And then, all of a sudden, when folks had to go to Medicare
D to get the drugs they couldn't get anyplace else, they were
bamboozled, hornswoggled, pushed, shoved, or tricked into
buying Medicare C coverage. So all of a sudden you have a whole
bunch of people showing up at hospitals, and they have Medicare
C coverage, when they have always had traditional, and they
didn't even know they were buying C.
Nobody in their right mind would buy a C policy in exchange
for Medicare A and B, but that is where we are finding
increasing percentages of our rural constituents who have
bought into it without realizing it.
Now they show up at the Critical Access Hospitals, and the
Critical Access Hospitals are saying, ``Wait a minute, this
person isn't a Medicare A, not a Medicare B, they are Medicare
C. So we don't reimburse you for these folks at cost-plus
basis; we treat them as if they aren't a part of the system at
all.''
I can't think of anything more stupid. Under Medicare A and
B, the government is paying an insurance company to administer
and manage the government's risk. Under Medicare C, we are
using tax dollars to pay an insurance company to assume the
government's risk. In both cases, the government is paying for
both of them out of Medicare funds; the taxpayer is footing the
bill either way. But the administrations at these hospitals are
being told, ``Wait a minute, you folks, an increasing
percentage of these folks simply aren't covered by the original
deal.''
Now my question to you all is in three parts. Are you aware
of this? If not, why not? If so, what are you doing about it to
try and persuade your counterparts at CMS that what they are
doing is, they are killing rural hospitals while Medicare C is
eating people alive with this bait-and-switch deal we have
going on, on a massive scale.
I will let either one or both of you gentlemen try your
hand at answering these questions. Are you aware of it? If not,
why not? And if so, what are you doing about it?
Mr. Morris. Mr. Barrow, I am not aware of the full extent
of that, but I do know that Part C plans are paid differently
than Part A and B. But we meet quarterly with CMS and go over
there and talk to them about rural health issues.
And I will definitely take your concerns back.
Mr. Barrow. Will you commit to me that you will undertake
to advocate with these folks that as far as the hospitals are
concerned, their Medicare C patients should be treated exactly
the same for reimbursement purposes as Medicare A and B
patients should be? After all, the same taxpayers are footing
the same bill.
How about you, Mr. Dorr? Are you aware of this? Can you
shed some light on this?
Mr. Dorr. I can offer no insight.
Mr. Barrow. Will you undertake to advocate that so far as
the hospitals are concerned, Medicare C folks should be treated
exactly the same way as Medicare A and B folks?
The hospitals aren't selling the policies, the constituents
are exactly the same, and the person who is underwriting the
cost of this government financed benefit is precisely the same.
Do you see the sense of this?
Mr. Dorr. I will do what I can to look into the issue and
get information back to you. But I am not familiar with this
issue.
Mr. Barrow. Then I would ask you, please, to become
familiar with it, and let's see what we can do to fix it.
Thank you very much. I yield the balance of my time.
The Chairman. Thank you.
Along those lines, normal Committee rules would be to ask
for your response to come within 10 calendar days. Can you
gentlemen comply with that, as per Mr. Barrow's request? I
would like an answer.
Mr. Dorr. Certainly.
Mr. Morris. Yes, sir.
Mr. Dorr. We will certainly try.
The Chairman. Okay. All right. Thank you.
Thank you, Mr. Barrow. Mr. Smith has consented.
Mr. Pomeroy, you may proceed.
Mr. Pomeroy. Thank you, Mr. Chairman. I have a statement I
would like to add to the record.
The Chairman. Your statement will be allowed. We announced
earlier, any statements you would like to enter we will be glad
to receive.
Mr. Pomeroy. Thank you very much.
The Chairman. Yes, sir.
Mr. Pomeroy. I want to thank you for having this hearing,
Mr. Chairman. Like the hearing you had on hunger last week, I
think that you are showing the kind of leadership that is
fleshing out the real potential of this Subcommittee. As a
Member of the Subcommittee, I appreciate it.
The Chairman. Thank you.
Mr. Pomeroy. To attest to this statement, I have a letter
that we sent to the Appropriations Committee regarding the
funding of a number of programs that were discontinued in the
President's budget, specifically the funding of Rural Hospital
Flexibility Grants, Rural Health Outreach and Network
Development Grants, and the Office for the Advancement of
Telehealth. Basically, these and other programs mentioned in
the attached letter that I will add to the record reflect
investments in rural health infrastructure.
[The document referred to is located on p. 6.]
Mr. Pomeroy. Mr. Morris, you are pretty new on the job, as
I understand it; is that correct?
Mr. Morris. I am sorry?
Mr. Pomeroy. How long have you been in your position at
CMS?
Mr. Morris. I have been with the government for 12 years,
the Office of Rural Health Policy for 10 of those, and in this
job officially as of Monday.
Mr. Pomeroy. Well, in fact, some of your prior experience
at one point was as an intern with Senator Kent Conrad of North
Dakota; is that correct?
Mr. Morris. Yes, sir.
Mr. Pomeroy. Great. Anyone with an internship in one of the
North Dakota offices has a good grounding for a start. I will
not, therefore, hold you in any way responsible for the cuts
that we are trying to restore.
But it does seem to me important, especially in light of
some of the funding issues that you are talking about--grant
funding for a hospital improvement project here, grant funding
for something there--that this is part of some kind of plan,
there is some strategic evaluation of rural infrastructure that
is funded and advanced as part of these investments that we are
making. And I would like you to reflect on how that takes place
through CMS in a rural outreach area like North Dakota.
Mr. Morris. Thank you, Mr. Pomeroy.
I think that one of our primary focuses right now is on the
quality side, especially as it relates to rural hospitals,
because of the move towards public reporting, which is the
right thing to do for folks. But the challenge is that rural
hospitals sometimes have less staff, and therefore, developing
the capacity to actually publicly report to show how they are
doing it can be a bit of a challenge.
We have been working with CMS extensively to try to make
sure that the measures that are in place, are reflective of the
types of services that are delivered in rural hospitals. And
some of the data we have seen so far shows that, like for
pneumonia cases in Critical Access Hospitals, they do as well
or better than their urban and suburban counterparts. Other
cases, where they transfer out, is probably not as appropriate
a measure for them.
As we expand public reporting to the outpatient side and we
add things like transfer, we are going to have a much fuller
picture of how rural hospitals perform from a quality
standpoint. I think that dovetails nicely with what the
Institute of Medicine has been pushing folks since the release
of their report, To Err Is Human. That has been one of the
primary areas we have been focusing on as of late.
Mr. Pomeroy. I look forward to continuing to work with you,
now in your new position, on this whole HRSA grant rural health
infrastructure issue. I think it is critically important to
strategically advancing the system in a rational way. I
appreciate what you have told me about quality reporting.
Mr. Morris. Yes.
Mr. Pomeroy. Mr. Secretary, nice to see you again. I want
to ask you about, in my opinion, a very curious decision made
by the Administration in the funding of its human nutrition
labs under ARS. You have recommended the closure of the only
rural nutrition lab focused on obesity research, and that would
be the human nutrition lab in Grand Forks, North Dakota.
Now, I like the ARS folks. I have worked hard to support
their budget to the fullest extent that I can. I think they
made a really bad judgment call in trying to take down capacity
for what has become a national epidemic and, arguably, a
national epidemic particularly problematic in rural areas with
Native populations, like the areas served by the human
nutrition lab in Grand Forks.
Do you have any response to that?
Mr. Dorr. I really don't. It is not in my area. I was not
involved in that decision. And I will certainly share your
concerns with those who are. I suspect they have already heard
them, but I will reiterate that they have come up again.
And aside from that, I don't really think I can offer any
insight into that decision.
Mr. Pomeroy. I saw the Secretary at lunch today, and like
Mr. Morris, the Secretary had an early, very positive grounding
as a North Dakotan for his responsibilities.
Mr. Dorr. I am well aware of that on a daily basis.
Mr. Pomeroy. I know my time has elapsed.
Do you attempt to break down the stovepiping that occurs?
You know, we ask him to do some stuff on rural; and you, rural;
and other people, rural. How do you try and coordinate all
this?
Mr. Dorr. I would just simply say on behalf of our
organization that we have made a very definitive attempt to
break down stovepipes.
As I indicated in my early testimony, perhaps my oral
statement before you were here, we have worked together to
develop a prototype on Critical Access Care Hospitals in order
to minimize costs and duplication and increase efficiencies
and, yet, enhance the ability to have flexible space and
flexible use of these facilities.
There are a number of other areas as well. We are working
with the Indian Health Services and the Veterans
Administration.
I would be the last to suggest that we are doing everything
perfectly in that area, but it is an area that we need to
aggressively pursue. And I have encouraged our shop to do so in
any one of a number of areas, including this.
Mr. Pomeroy. Good.
Thank you, Mr. Chairman. I yield back.
The Chairman. Sure. Thank you, Mr. Pomeroy.
Mr. Smith?
Mr. Smith. Thank you, Mr. Chairman.
My question--well, first let me say, Mr. Dorr, that I
appreciate the communication with my district. And your
representative, Mr. Blehm, in Nebraska does a fabulous job.
Mr. Morris, I do have a question pertaining to policy. It
is interesting, the feedback that I hear from, say, a rural
physician versus an urban physician as it relates to midlevel
practitioners, advanced practice nursing, and otherwise. There
seems to be a little more open-mindedness in rural areas, and
that a physician sees a physician assistant as an enhancement
to the practice rather than a threat; and I find it quite
refreshing, actually.
But could you elaborate perhaps on any policies that you
think--Federal policies that could be enhanced or changed to
offer better health care, perhaps--meaning access through maybe
some expanded scopes of practice?
Mr. Morris. Thank you, Mr. Smith.
I think that one reason for that open-mindedness stems from
one of the longest-standing rural programs that has been on the
books, and that is the Rural Health Clinic Act, which was
established in 1977. And for 20 years it was the only way that
physician assistants and nurse practitioners could practice in
almost an autonomous way. It wasn't until 1997 that, under
Medicare, they were given the right to bill directly.
And so, as a result, there are 3,400 rural health clinics
around the country--that infrastructure has shown that these
folks can play a very important role in being a source of
primary care in rural communities. I think the RHC program is
really to be saluted for that.
I have no comment on the state scopes of practice. That is
an issue that is determined at the state level. But, what we
have seen in the literature and other things is that you can
get primary care from a nurse practitioner or a PA, as well as
a physician; and it can be good, high-quality care.
Mr. Smith. Okay. Thank you.
Thank you, Mr. Chairman.
The Chairman. Thank you.
Mr. Cuellar.
Mr. Cuellar. Thank you, Mr. Chairman.
First of all, I appreciate what you all are doing to
provide health care in the rural areas. One of the questions I
have is, I wish we could find a place where we could look at
all the different programs. Because I know, for example, Mr.
Secretary, you all have a list of programs; and I appreciate
that.
And same thing for HHS, Mr. Morris.
But is there a way that you could have them coordinated,
where we could look at the list? Is there a way that you have
all done that together already that we could, say, for this
type of category from both the agencies, we have this
available? Or even from the working group, if you have the
other agencies, could you put that together?
And I would like to get a copy so that way we are not going
to find everything under USDA, find everything under HHS and
the other members of your working group. How fast--or do you
have that already? How fast could you get that over to us?
Mr. Morris. I think we have a good start on it. And it is
through the Rural Assistance Center (RAC) which is in North
Dakota. And this was created just over 5 years ago with the
express intent of being one-stop shopping for all things rural.
And so, you can go to that. There is a reference librarian.
You can call up. They will do information searches for you.
They try to share information across the Federal Government
about funding opportunities for rural, not just within the
Federal Government, but at foundation level, things like that.
And so we found that the RAC is a good way do that.
But one thing we could do is make sure that USDA is aware
of it, and that we have all their programs, and that we are
reflective fully of their rural investment, too. We can commit
to doing that.
Mr. Cuellar. Okay.
So how fast could you--both of you all get that over to us?
Mr. Morris. I can send you information on the RAC within a
day or 2. And we will have some conversations about getting
them to take a look at the RAC website and make sure it is
representative of what their programs do.
Mr. Cuellar. Yes. Because I am a big believer, Mr.
Secretary, in a one-stop center. And if we have a hard time
looking for it, you can imagine the person in a rural area
trying to find that.
So if you all can put it into plain English and simplify it
for us, this would be a great tool to provide to the rural
areas. So, Mr. Secretary, if you all could get together on
that.
Mr. Dorr. You are speaking to the choir. And I can assure
you that I will have our staff work with these folks to make
sure that there are appropriate links made as quickly as we can
make them. And we will get that feedback to you.
Mr. Cuellar. Who would be one contact person we could have?
Linda or--I am sorry, could we have--because we have different
agencies, I want to make sure that if somebody contacts me,
both of you haven't talked already.
Mr. Dorr. Certainly. I just suggest you call my office, and
we will make sure we have somebody to contact, to deal with
this issue, when I get back. I am not sure who it exactly would
be today. I would want to talk to the Administrator, and I am
sure he will appoint someone within his staff to do it.
Mr. Cuellar. Okay. I appreciate it.
The other point I want to go into is, it was in your
testimony, about the distance learning and the telemedicine. I
am a big believer in that.
In my areas--I have rural areas in south Texas, I have
Colonials. As you know, they are basically Third World
conditions, and the long-distance learning and the telemedicine
is a good, effective way of using the dollars.
Could you again, when that individual comes in--Mr.
Secretary and Mr. Morris--if you could, get us everything that
is available on long-distance learning and telemedicine to us.
Again, not only to me, but for the Committee, because I think
this would be a great tool for our constituent work, which is
important to us.
I have no further questions, Mr. McIntyre. I just want to
say thank you very much.
I was with the Secretary Schafer in Colombia on the trade
agreement, and I really appreciate it. We had a good visit. And
I appreciate the work that you all have been doing.
Mr. Dorr. Well, thank you very much.
Mr. Cuellar. Thank you, Mr. Morris.
The Chairman. Thank you. And I agree with Mr. Cuellar, if
you could get us all that information on telemedicine and how
that relates to health care in rural areas that would be
helpful to us, given that that, in essence, is what we are here
for today, talking about the delivery of rural health care and
how we can tie that in, especially to our great medical
universities and research centers as they relate to our
particular states. Where the telemedicine would best be served
in each state in terms of what you all have seen according to
your surveys and information, that would be most helpful.
Let me say, as a native of Robeson County in North
Carolina, my home county, which is also the largest, but yet
the poorest of all 100 counties in North Carolina, we know how
important rural health care is. In fact, our county had the
first public health department in the entire United States.
So we invite you to come down sometime, and we would love
for you to come see the long history, in fact, the longest
history of any public rural health department in the nation
down in my native Robeson County. And we hope to have you come
join us sometime, each of you gentlemen, in the future.
And with that, I want to thank you for being with us today.
We will conclude this panel in the interests of time, but may
God bless you. Thank you for your good work, and please
continue it.
We will ask our next panel to proceed to the table as I
introduce you. Now the second panel will begin.
We would like to invite to the table Mr. Jeff Spade, Vice
President of the North Carolina Hospital Association, and also
Executive Director of the North Carolina Rural Health Center in
Cary, North Carolina, which is in the Research Triangle Park
area; Mr. Charles W. Fluharty, President Emeritus and Director
of Policy Programs of the Rural Policy Research Institute; Dr.
Wayne Myers, Trustee for the Maine Health Access Foundation, on
behalf of the National Rural Health Association; and Dr. Karen
Rheuban, Professor of Pediatrics and Medical Director for the
Office of Telemedicine with the University of Virginia Health
System.
If would you each take your seat, we will proceed
immediately with testimony.
While we are welcoming you to the table, I would also like
to recognize--we are thrilled to have the Ranking Member of the
entire Committee on Agriculture for the U.S. House, whose
portrait is right behind you, but look in front of you and the
man is really here, Bob Goodlatte, a great friend, former
Chairman of the full Committee.
And, Mr. Goodlatte, prior to starting this panel if you
have any statement for the record we would welcome it.
OPENING STATEMENT OF HON. BOB GOODLATTE, A REPRESENTATIVE IN
CONGRESS FROM VIRGINIA
Mr. Goodlatte. Thank you, Mr. Chairman. I really appreciate
your holding this hearing, and I am looking forward to hearing
what all of our panelists have to say.
But I particularly want to welcome Dr. Karen Rheuban, who
is a good friend and has been a great help to me and my
constituents by helping to spread telemedicine to some of the
most remote places and some of the most unlikely places, to
help people in all different walks of life receive excellent
health care and excellent advice from one of the finest
university hospitals in the country, the University of
Virginia.
So, Dr. Rheuban, welcome; and to all the panelists welcome.
I am always interested in opportunities to mix my two great
loves, technology and agriculture. So that is what we are doing
here today.
The Chairman. Amen. Thank you, sir. And thank you again for
being with us.
All right. I am pleased to introduce our first presenter
starting off with the panel, from Cary, North Carolina, which
is just outside of Raleigh. Jeff Spade is the Executive
Director of the North Carolina Rural Health Center, a resource
center supported by the North Carolina Hospital Association,
whose mission is to provide and assist rural health providers
in addressing local and regional health needs, and to foster
innovation and improvements in rural health care delivery.
Mr. Spade, please begin.
STATEMENT OF JEFF SPADE, EXECUTIVE DIRECTOR, NORTH CAROLINA
RURAL HEALTH CENTER; VICE PRESIDENT, NORTH CAROLINA HOSPITAL
ASSOCIATION, CARY, NC
Mr. Spade. Thank you, Chairman McIntyre and distinguished
Members of this panel, Subcommittee in the House of
Representatives. I am honored to be able to address you today.
I appreciate the opportunity.
And especially Chairman McIntyre and Representative Hayes,
who was here earlier, I am grateful for the work that you do on
behalf of rural hospitals and North Carolina hospitals. Both of
you have been very supportive.
And I really extend my gratitude to the Members of the
Subcommittee for their vigorous support of rural health
development.
I am the Executive Director of the Rural Health Center, as
the Chairman mentioned, which is a resource in technical
assistance there for rural hospitals, rural health
organizations, communities in North Carolina. I am based at the
Hospital Association in North Carolina, but I work at the front
line of rural communities every day to help rural hospitals,
rural health organizations and rural health leaders in
addressing the needs of their residents.
As a matter of fact, I also have done some work on the
Institute for Health Care Improvement campaign to improve care
for five million lives. And, in that capacity, I have worked
with hospitals in Colorado, Texas, Nebraska and Georgia as
well. So, other members of this panel, I have been in your
states and worked with the Critical Access Hospitals and rural
hospitals there.
I am most familiar with rural hospitals in health care in
North Carolina. And my opening statement today will briefly
describe key traits of rural North Carolina hospitals, explore
these critical aspects of rural hospitals in relation to the
communities they serve, and identify the issues and concepts
that are vital to the development of rural hospitals.
I have three priority improvements, requests of this
Subcommittee and of Congress. First, I would like you to
consider reconstituting the rural infrastructure grants and
loans that were considered and introduced in the earlier
versions of the farm bill. Second, we definitely need to
improve Medicare and Medicaid policies and payment structures
to support and accelerate the continuing development of
hospital and health care services in rural communities. And,
third, provide more incentives for Federal rural health
programs to emphasize and promote alignment and collaboration
amongst rural health care organization providers. Very similar
to the alignment you are talking about at the Federal level,
this needs to happen at the community level too.
In North Carolina, we have 61 rural counties served by 60
rural hospitals. We have 21 Critical Access Hospitals. I have
had the opportunity to bring all of those 21 Critical Access
Hospitals into existence. About \1/3\ of our rural hospitals
are Critical Access Hospitals, but in the country, more than
half, almost 60 percent, of rural hospitals are Critical Access
Hospitals. This is a very high number.
In North Carolina, rural hospitals cared for 243,000
inpatients, four million outpatients, 1.25 million emergency
patients, 137,000 patients that receive outpatient surgery. So
there is no doubt about the numbers for rural health care--
millions of visits for urgent and emergent care and health care
for hundreds of thousands of hospitalized and surgical
patients. And in North Carolina, of our 61 rural counties, that
is 2.8 million residents, a third of our total population.
There are over 400,000 Medicare beneficiaries and 600,000
Medicaid beneficiaries residing in North Carolina.
A crucial aspect of rural hospitals is the role as catalyst
for development of local access points for health care. Both
primary and specialty physicians are very dependent upon our
hospitals. And in North Carolina, 3,700 physicians practice in
rural North Carolina. Many of these physicians' practices would
not even be viable without the ability to diagnose, treat and
care for patients at their local hospital.
But I do really want to focus on fiscal integrity and
viability for our rural hospitals. They are highly dependent on
Medicare and Medicaid reimbursement for sources of revenue,
which counts for 63 percent of our hospital revenues in rural
areas. This dependence presents very serious difficulties
because government payers only reimburse hospitals at the
financial break-even point or less.
And our rural hospitals also have an uninsured burden. In
our case it is about nine percent. So you add that together,
and the average rural North Carolina hospital receives two
percent or more less in revenues than it costs to provide care
for its patients.
The North Carolina Hospital Association has extensively
studied the issue of financial viability and learned that the
most financially vulnerable hospitals are those with the
highest rates of Medicare, Medicaid and uninsured utilization.
And in our case, 55 percent of our rural hospitals fall into
this most vulnerable category simply because of serving
government patients and the uninsured, while only 12 percent of
our urban hospitals are similarly burdened.
But do not forget that we have this great economic catalyst
in our communities in rural hospitals: $4.2 billion in economic
output in North Carolina from rural hospitals, $1.8 billion in
salaries and benefits, and employment of 42,200 rural hospital
employees. In 75 percent of our rural counties, the hospital is
amongst the top five largest employers in the county.
In summary, the major challenges facing rural hospitals are
substantial: financial instability, ability to access critical
investment for capital, increasing burden of chronic disease,
and a rising number of uninsured. And we also need to
continually improve the quality, efficiency and performance of
our rural hospitals and health care organizations.
I can speak more to these issues as we move into our
discussion. I appreciate this opportunity to address this
Subcommittee. And I look forward to working with you further,
as you look at how to increase the viability of rural health
care across the United States.
Thank you very much, Chairman McIntyre, Members of the
House of Representatives.
[The prepared statement of Mr. Spade follows:]
Prepared Statement of Jeff Spade, Executive Director, North Carolina
Rural Health Center; Vice President, North Carolina Hospital
Association, Cary, NC
Chairman McIntrye and distinguished Members of the House of
Representatives, I am honored and privileged to be invited to address
you today. Representative McIntyre and Representative Hayes, I am
especially grateful and appreciative of your active support for rural
healthcare and rural hospitals in North Carolina. Your votes in support
of the recent legislation to correct and improve the Medicare
reimbursement for physicians, along with your continued and patient
guidance to establish a moratorium on CMS regulations regarding
certified public expenditures in the Medicaid program are immensely
valuable to the physicians, hospitals and residents of North Carolina.
I also extend my gratitude to the Members of this Subcommittee for your
vigorous support of rural health development. In my 25 years of
experience as a healthcare executive, the House of Representatives has
acted as a unified, bipartisan leader in establishing congressional
priorities for rural healthcare improvements, significant healthcare
legislation and Federal budget investments in healthcare. Please be
encouraged to continue the tradition of supporting accessibility,
affordability and excellence in healthcare for our rural residents and
communities.
I am Jeff Spade, the Executive Director of the North Carolina Rural
Health Center, a resource and technical assistance center for rural
hospitals, healthcare organizations and communities, based at the North
Carolina Hospital Association, located in Raleigh, North Carolina. In
addition to directing the NC Rural Health Center, I am a Vice President
with the North Carolina Hospital Association, Chairperson of the
Governor's Task Force for Healthy Carolinians for the State of North
Carolina and faculty with the Institute for Healthcare Improvement
based in Boston, MA. I work closely with the Institute for Healthcare
Improvement to engage more than 1500 rural hospitals across the nation
in the 5 Million Lives Campaign, an initiative to improve hospital
quality and patient safety.
Since I am most familiar with rural hospitals and healthcare in
North Carolina, my testimony today will briefly describe the key traits
of rural North Carolina hospitals, explore the most critical aspects of
rural hospitals in relation to the communities they serve, and identify
the issues and concepts that are vital to the development of rural
hospitals and healthcare in North Carolina.
I have three priority improvements to request of this Subcommittee
and Congress. First, restore the rural infrastructure grants that were
considered and submitted in the early versions of the FY 2008/09 Farm
Bill. Second, improve Medicare and Medicaid policies and payment
structures to support the continued development of hospital and
healthcare services in rural communities. And third, push for Federal
rural health programs to emphasize and drive greater alignment and
collaboration among rural health care organizations and providers.
North Carolina's rural healthcare system was initially organized
around the concept of a hospital serving its home county. Passage of
the Hospital Survey and Construction Act of 1946, better known as the
Hill-Burton Act, began a proliferation of hospital construction in the
poor, rural communities of America, places where no hospital or
healthcare would have been possible before. As a consequence many rural
communities throughout the country built their own local hospital. For
North Carolina, community hospitals were founded in 72 of the state's
100 counties, thus establishing the leadership role that rural
hospitals fulfill within their communities, even today.
North Carolina's 61 rural counties, as defined by the Office of
Management and Budget, are served by nearly sixty rural hospitals.
Rural hospitals are usually smaller than the average North Carolina
hospital, with rural hospitals caring for an average daily census of 51
acute care patients in 2007 versus an average of 119 acute patients for
all North Carolina hospitals. In 2007, North Carolina rural hospitals
cared for 243,383 inpatients, approximately 4.07 million outpatients,
an estimated 1.25 million emergency patients and 136,954 patients that
received outpatient surgery (see Table 1). The numbers speak for
themselves--millions of visits for urgent and emergent care and
hundreds of thousands of hospitalized patients. North Carolina's rural
residents depend heavily upon their local hospitals for valuable,
timely and necessary inpatient, outpatient, surgical and emergency care
services.
The demographics of rural North Carolina are similar to many rural
states. The population of North Carolina's 61 rural counties is
estimated at 2.8 million residents, nearly a third of North Carolina's
total population of 8.8 million. It is estimated that more than 412,000
Medicare beneficiaries and 627,000 Medicaid recipients reside in rural
North Carolina, respectively accounting for 15% and 23% of the rural
population. The challenges facing North Carolina's rural counties are
proportional, that is North Carolina's rural population has higher s
proportions or percentages, when compared to the state averages, of
elderly, low income residents and those in poverty, minority residents,
immigrants and uninsured residents, as well as higher rates of
unemployment, chronic disease, health-related mortality, avoidable
hospitalizations and the underlying determinants of health, such
obesity, poor nutritional status, lack of exercise and physical
activity and lower rates of educational attainment. In summary, the
difficulties of providing healthcare in rural North Carolina are
multiplied by the challenges of our rural demography.
North Carolina was blessed to be the home state of an innovator and
leader in rural healthcare, Jim Bernstein. I was fortunate to be a
colleague and protege of Jim's. In 1975, at a time when very few health
leaders understood the merits of rural health integration, Jim
Bernstein emphasized the importance of integrated rural health networks
in meeting the needs of rural residents. In 1986 Jim Bernstein brought
his concepts into practice in developing the prototype rural hospital
network in Scotland Neck, North Carolina. In 1990 Jim was able to share
his ideas regarding rural hospitals and health networks before a
Subcommittee of the House Ways and Means Committee of the U.S. House of
Representatives. As a result, the rural hospital network as envisioned
and created by Jim Bernstein became the national model for the Small
Rural Hospital Flexibility Program, which evolved into the Critical
Access Hospital (CAH) program. In the early 1990s, Our Community
Hospital in Scotland Neck became one of the first Critical Access
Hospitals in the country.
North Carolina's version of a network, as defined by Jim Bernstein,
is a patient-focused system of care consisting of private and public
organizations that provide an array of medical and social services to
the community. A successful rural network should include the local
rural hospital, along with its tertiary care referral center, in a
highly-integrated collaborative supported by community-based
organizations such as public health, primary care, dental care,
emergency medical services, social services, transportation, mental
healthcare and long term care. The composition of a rural health
network varies by community, but in communities across North Carolina
rural health networks consistently deliver efficient, effective and
coordinated quality health services to rural North Carolina residents.
Jim Bernstein's innovative design for successful rural hospital and
health networks can be summarized in four basic concepts:
To build community systems of care that assure access to
healthcare services focused on meeting the health needs of
rural residents.
To provide the planning, implementation and operational
support required by rural hospital networks to achieve higher
levels of integration while continuing to meet patient needs.
To integrate national and local initiatives that complement
state priorities and programs in order to improve the access,
quality and cost-effectiveness of patient care for Medicaid,
low-income and uninsured patients.
To focus on patients, not the provider, as the key integral
in rural health network development.
The vision that Jim Bernstein established and fostered for rural
hospitals and networks in the early 1970s is even more important
today--a model that has gained wide acceptance nationally.
What are the critical aspects of rural hospitals in relation to the
communities they serve? First, rural hospitals are central to the
healthcare and social service networks that under gird every rural
county and community. The healthcare ``quilt'' of a rural community is
comprised of a broad spectrum of healthcare organizations, community
agencies and services, government-sponsored health services and
providers, and a vast array of human service organizations that provide
invaluable health related benefits to the residents of rural
communities. In North Carolina, rural hospitals touch every component
of this community support system, from public health departments and
Medicaid, to Healthy Carolinians projects, community health centers and
free clinics. In addition to their healthcare mission, rural hospitals
offer to the community knowledgeable health professionals, leadership,
badly needed resources and space for community activities and
organizations, in-kind support and the basis for collaboration and
coordination. The rural hospital is an invaluable resource and lifeline
that ensures the viability of rural communities and their associated
healthcare networks.
Another crucial aspect of rural hospitals is their role as
catalysts for the development of local access points for healthcare.
Both primary care and specialty care physicians are dependent upon the
local hospital for a range of health services, from outpatient and
emergency care to complex inpatient care. Many rural communities would
lack access to even basic healthcare services without the support of
their local, rural hospital. Today, rural hospitals are highly involved
in the recruitment and retention of critical healthcare providers such
as physicians and nurses. More than half of North Carolina's rural
counties are designated by the Federal Government as whole or partial
healthcare professional shortage areas (HPSA). Since many rural North
Carolina counties are considered HPSAs, the contribution of rural
hospitals as the regional anchor for trained health professionals is
paramount. More than 3,727 physicians practice in rural North Carolina
counties. Many physician practices would not be viable without the
ability to diagnose, treat and care for patients at a local hospital.
Furthermore, over 19,800 registered nurses, 6,192 licensed practical
nurses and 1,931 pharmacists practice in rural North Carolina. The
healthcare services provided by these valuable, highly skilled health
professionals are directly tied to the services anchored by rural
hospitals.
A summary of rural hospital traits and characteristics would not be
complete without mentioning that fiscal integrity and vulnerability are
a constant concern for North Carolina's rural hospitals. As I
highlighted earlier, by virtue of their location, rural hospitals serve
proportionately more elderly, more poor, more uninsured and more
disadvantaged patients than their urban counterparts. As a consequence,
rural hospitals are highly dependent upon Medicare and Medicaid
reimbursement for sources of revenue (63% of rural hospital revenues);
some rural North Carolina hospitals depend upon government payers for
more than 70% of their revenues. This dependence presents serious
difficulties because government payers only reimburse hospitals at the
financial break-even point, or less. In addition, government payment
sources can be unpredictable due to Federal and state budget
constraints, leading to budget freezes, or even worse, budget cuts.
Rural hospitals also have a substantial uncompensated care burden (8.8%
of gross charges in 2007). As a result, in 2007 the average rural North
Carolina hospital received 2.2% less revenue than it actually cost to
provide patient care services--a situation that is untenable in the
long run. The precarious fiscal situation of rural hospitals led to two
North Carolina hospitals closing their doors and two other rural
hospitals to declare bankruptcy.
Rural hospital financing of Critical Access Hospitals is worthy of
special mention. A CAH is a small, rural hospital with 25 acute beds or
less. North Carolina has 21 CAHs, soon to be 22 CAHs, \1/3\ of North
Carolina's rural hospitals. Nationally more than 60% of rural hospitals
are officially designated as Critical Access Hospitals. The CAH program
is designed to help small, rural hospitals manage the detrimental
impact of fixed-payment government reimbursements upon their hospital
finances. In North Carolina, CAHs are reimbursed their inpatient and
outpatient costs for providing services to Medicare and Medicaid
beneficiaries. The CAH program has had a stabilizing effect on small,
rural hospital finances. However, CAH reimbursement does not address
the fiscal burdens of caring for uninsured patients, nor does it
provide an adequate level of reimbursement for investments in
renovations and upgrades to buildings, capital equipment and medical
technology, or to establish new health services. As a consequence, the
financial picture for North Carolina's CAHs has improved but many
small, rural hospitals, including CAHs, still face the perils of
substantial operational losses and fiscal vulnerability.
Looking beyond healthcare and into the realm of economic
development, rural hospitals are vital to the economic health of the
community. Rural economic development and the viability and
sustainability of rural hospitals are closely linked. Employers in
rural communities frequently cite the availability of local healthcare
services as a determining factor in business development. Less well
known, however, is the contribution of rural hospitals to the economic
vitality of rural communities. For the purpose of economic investment,
North Carolina categorizes all counties into three economic development
tiers. The economically challenged counties are in Tier 1 and Tier 2,
with the economically advantaged counties in Tier 3. Of the forty-one
counties in the most economically disadvantaged category (Tier 1),
thirty-three of the counties are rural. Furthermore, these thirty-three
economically disadvantaged rural counties are served by 28 rural
hospitals. The importance of rural hospitals as an economic engine is
best understood by examining some revealing statistics from 2003 (see
Table 2). North Carolina's rural hospitals accounted for an estimated
$4.21 billion in economic output and $1.79 billion in salaries and
benefits paid to an estimated 48,219 rural hospital-related employees
in 2003. Overall, rural health in North Carolina generated an estimated
$11.6 billion in economic output and $4.9 billion in salaries and
benefits paid to an estimated 165,029 rural workers in healthcare-
related businesses. In 75% of North Carolina's rural counties, the
hospital is among the top five leading employers in the county. The
evidence is simple and straightforward; rural hospitals contribute
billions of dollars in local and regional economic value and bring tens
of thousands of jobs to rural North Carolina economies and communities
year after year.
Rural North Carolina hospitals are a treasure to be valued,
nurtured, understood and embraced. Rural hospitals and health networks
are vital components of the rural communities they serve. Attention
must be given to the value of preserving, enhancing and investing in
rural hospitals and rural health networks in order to ensure that
effective, quality healthcare services remain consistently available
and accessible for North Carolina's rural residents and communities.
In summary, the major challenges facing our rural hospitals are
substantial: financial instability, mostly due to dependence on
government payers and a lack of commercially insured residents; the
inability to access critically needed investment capital for medical
technology, health information systems and electronic medical records,
for facility renovations and replacements and the development of
medical and clinical services; the increasing burden of chronic disease
and the rising numbers of uninsured; the withering effects and expense
of substantial and chronic workforce shortages (both physician and
allied health); and the absolutely vital need for consultation and
assistance to continually improve the quality, efficiency and
performance of our rural hospitals and healthcare organizations.
I congratulate the House Agriculture Committee and confirm that the
USDA rural health and development programs are meeting a definite need,
however more support and funding are required to stabilize and improve
our rural healthcare systems. The rural hospital loan programs
initially supported in this year's Farm bill were a step in the right
direction--to offer a package of grants and low-cost loans for advanced
medical technology, for quality and patient safety upgrades and for
investments in small rural hospital facilities and renovations. At a
minimum, please restore the health information technology and
infrastructure grants as initially introduced in the farm bill.
A second priority for North Carolina rural hospitals is directly
related to Medicare and Medicaid policy and payment, since these
payment programs are absolutely vital to the continued existence of
rural hospitals. These issues for Medicare and Medicaid include a fair
and equitable payment structure by CMS for rural hospitals; continued
maintenance and support of the certified public expenditure program to
fund state Medicaid services to low income rural residents; giving
rural hospitals and CAHs strong opportunities for success in the new
pay-for-performance system; and protecting and improving the Critical
Access Hospital program by increasing CAH reimbursement to 103% of
cost, expanding the bed size for eligible CAHs to 50 beds or less, and
allowing CAHs to participate in the Federal 340B drug program.
A third priority for rural North Carolina hospitals is the need for
Federal rural health programs to increase collaboration and alignment
among rural health providers and their communities. For instance,
Congress and CMS can act to improve the alignment between quality
incentive programs for rural physicians and hospitals. In addition,
Federal grant programs should emphasize and require greater community-
level collaboration among Federally Qualified Health Clinics, Community
Health Centers, migrant health centers, rural health clinics, rural
hospitals and other rural health programs funded by Federal grants and
loans. The substantial issues and challenges of providing quality
healthcare services in rural communities can only be solved by high
levels of cooperation and collaboration among the critical healthcare
providers in our rural communities. Congress can improve collaboration
by creating incentives for rural health providers to work together, and
with, their rural communities to design healthcare solutions that are
more integrated and more responsive to rural health needs.
In closing, I appreciate this opportunity to address this
Subcommittee and the Members of the House of Representatives. In light
of the renewed debate on comprehensive health reform and the likelihood
that Congress and the White House may, in the near future, take
important steps towards a health care marketplace that provides greater
access, higher quality and better value for rural residents and
patients, the NC Rural Health Center and NCHA look forward to working
with Congress and the Subcommittee as the Federal health reform agenda
develops and evolves.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you, Mr. Spade.
Mr. Fluharty?
STATEMENT OF CHARLES W. FLUHARTY, FOUNDER,
PRESIDENT EMERITUS, AND DIRECTOR OF POLICY
PROGRAMS AND RESEARCH PROFESSOR, RURAL POLICY
RESEARCH INSTITUTE, HARRY S TRUMAN SCHOOL OF
PUBLIC AFFAIRS, UNIVERSITY OF MISSOURI-COLUMBIA,
COLUMBIA, MO
Mr. Fluharty. Thank you, Mr. Chairman. It is an honor to be
with you again. And I would ask my full statement be placed in
the record.
The Chairman. Yes, sir.
Mr. Fluharty. I would just like to make a few comments. I
want to commend you for talking about rural development. As
everyone on the Committee knows, it is the first or second most
critical economic sector in every rural community. And I really
commend you for starting to think about that framework within
this Rural Development Committee. I thank you for that. It is
critical.
Just several observations, as the hour is late.
This USDA RD interaction with HHS is emergent, but it is a
really stellar example of what future rural policy for our
Federal system needs to look like.
When I was in front of this Committee last year in March,
when you were looking at the RD title, I laid out two or three
things that we in RUPRI feel are essential if we are going to
move to a globally competitive rural development policy. Two of
those were thinking about greater attention to diverse regional
actions and, second, thinking about how various Federal, state
and local departments work together.
We in the RUPRI rural health panel, which, as you know, has
worked with the caucus for 15 years, have been honored to think
about this with the Congress over time. And so I just would
like to offer some thoughts about how this Committee might move
forward on this agenda you are clearly leading.
A couple of things have to happen, it seems to us. The
first is the Committee needs to think more about viewing
Federal expenditures as an investment. And the quid pro quo for
that investment needs to be stronger attention to return on
investment and some sense of longer-term benefits. Second,
thinking about how we drive synergy in those investments so
that the whole is greater than the sum of the parts in the
Federal Government.
Now, this emergent USDA-HHS interaction is really exciting.
It is an example of what we think could move forward. I just
would encourage you to continue that, because it is
complementarity that we are seeking.
As you know, HHS has small grants programs, technical
assistance, balanced scorecard, the outreach grants. But USDA
RD has a huge capital investment opportunity, and linking those
two in a rational way is a truly unique opportunity to move
forward.
The question you have to ask, how can we do this better and
how can we do it more? And what can this Committee do to
support the other committees of jurisdiction?
I just offer one possibility from our perspective, and that
is a lot stronger evaluative framework that improves the scope
of the USDA rural health policy investments.
We are probably unique in this regard in RUPRI. Two
programs were mentioned here earlier: SEBAS, the evaluative
program at USDA, and the Rural Access Center at North Dakota.
We are honored to be strong partners in both of those. So we
have a unique orientation as to how these two Committees might
work better together. So just a couple of suggestions for the
Committee, if I could.
First of all, if you look at greater FLEX program
authority, which may come on the other side, and we think about
Critical Access Hospitals maybe being able to convert to
assisted living, skilled nursing--you combine that with the
fact that Medicare in 2011 is going to have a mandatory e-
prescribing. So when you think about the infrastructure grants
USDA is publicly able to make, including public reporting, we
should be thinking about RD investments in infrastructure as
much as bricks and mortar.
And there are really three issues in the continuum of care:
time, appropriateness of care, and where it occurs. And ORHP is
looking at all that. And I really think that if we think a bit
more about population health and appropriateness in terms of
investment, this Committee could really help a great deal in
building the linkage with ORHP.
Just in closing, I want to applaud you again for this. I do
believe if we think about a regional rural innovation system,
the health care sector, the sector that you are talking to, has
gone far further than any other sector in building that
integration. But USDA RD has an absolutely unique ability to
build the information infrastructure systems that are going to
be essential for wiser economic choices in the future. And I
commend you for starting to think about that, Mr. Chairman.
Thank you.
[The prepared statement of Mr. Fluharty follows:]
Prepared Statement of Charles W. Fluharty, Founder, President Emeritus,
and Director of Policy Programs and Research Professor, Rural Policy
Research Institute, Harry S Truman School of Public Affairs, University
of Missouri-Columbia, Columbia, MO
Chairman McIntyre, Ranking Member Musgrave, and Members of the
Subcommittee, it is an honor to appear before you again. I applaud your
leadership in assuring that the rural development concerns addressed
under the purview of this Subcommittee include attention to rural
health care. As you know, quality health care that is equitable,
affordable, and accessible is one of the most critical components in
the continuing viability of our nation's rural regions.
I am Charles W. Fluharty, Director of Policy Programs for the Rural
Policy Research Institute, and a Research Professor in the Harry S
Truman School of Public Affairs at the University of Missouri-Columbia.
RUPRI is a multi-state, interdisciplinary policy research consortium
jointly sponsored by Iowa State University, the University of Missouri,
and the University of Nebraska.
RUPRI conducts research and facilitates dialogue designed to assist
policy makers in understanding the rural impacts of public policies.
Continual service is currently provided to Congressional Members and
staff, Executive Branch agencies, state legislators and executive
agencies, county and municipal officials, community and farm groups,
and rural researchers. Collaborative research relationships also exist
with numerous institutions, organizations and individual scientists
worldwide. Since RUPRI's founding in 1990, over 250 scholars
representing 16 different disciplines in 100 universities, all U.S.
states and 25 other nations have participated in RUPRI projects, which
address the full range of policy and program dynamics affecting rural
people and places. Collaborations with the OECD, the EU, the German
Marshall Fund, the Inter-American Institute for Cooperation on
Agriculture, the International Rural Network and other international
organizations are framing RUPRI's comparative rural policy foci.
As this Committee begins consideration of the future design of USDA
organizational structure and program delivery, it is important to note
that we also anticipate a renewed discussion of more systemic change in
health policy in the next session of Congress. I would hope that this
Committee and USDA Rural Development will also engage those
discussions, as you represent a very critical building block in
sustaining a viable rural health system.
The Rural Policy Research Institute established the RUPRI Rural
Health Panel in 1993 to provide science-based, objective policy
analysis to Federal policy makers. While panel members are drawn from a
variety of academic disciplines and bring varied experiences to the
analytic enterprise, panel documents reflect the consensus judgment of
all panelists.
This panel, comprised of many of our nation's leading rural health
researchers, has advocated since its inception that Federal, state, and
local public sector decision makers create innovative investment
approaches which unite multiple funding streams to ensure local
sustainability. For this to be accomplished, two major shifts must
occur. First, we must consider public sector expenditures to be
investments, designed to force local grant and loan recipients to
demonstrate long-term benefit. Second, this process must also create
synergy across investment streams, so that the whole of these
investments is greater than the sum of their parts. Today, in most
developed nations, these principles are driving rural regional
innovation approaches, across all public sector policy and program
design.
In discussing this global rethinking before this Subcommittee last
spring, during your consideration of the farm bill rural title, I
offered the following rationale for such an approach:
``. . . The promise of such a Regional Rural Innovation Policy
is premised upon the following realities:
1. National competitiveness is increasingly determined by the
summative impact of diverse regional actions, capturing
asset-based competitive advantage.
2. Support for such an approach will require a substantive
rethinking of core missions across Federal departments,
state agencies, and regional and local governments, and a
commitment to leadership renaissance within these
institutions and organizations.
3. Funding support for these place-based policies are WTO greenbox
compliant, non-trade distorting funding opportunities for
the Federal Government.
4. Finally, such a commitment improves the potential for
Congressional Agriculture Committees to retain existing
funding baselines, and for these Committees to retain
statutory responsibility for rural development policy . .
.''
Nothing has changed since to alter my perspective. In fact, most
OECD nations are now moving to align policies and programs with this
new rural paradigm.
We all recognize the importance and challenge of rural health care
delivery, but this paradigm offers a very specific framework for how
this Committee might approach its work in this regard, to ensure the
emerging cooperation between USDA Rural Development and HHS/Office of
Rural Health Policy is supported and enhanced. Other panelists will no
doubt speak to other specifics within the health sector. I would like
to limit my comments to the very real opportunities which exist to
better align and target USDA investments in rural health care, to
complement and expand HHS/ORHP programs and facilitate even greater
inter-agency alignment.
We are pleased these efforts are already underway, and commend the
leadership of both agencies for these innovative developments. In this
regard, we are perhaps uniquely positioned to comment, since RUPRI
receives significant policy research support from both agencies, and
works across the entire Federal portfolio to assist decision-support in
both rural development and rural health care delivery and finance.
We were very encouraged by the possibility for expanded RD rural
health program support within the rural development title of the new
farm bill, and were very disappointed that these new mandatory
commitments were not included in the final legislation. However, as
these programs were under consideration by the Senate Committee on
Agriculture, Nutrition, and Forestry, our rural health panel was asked
to assist USDA RD Community Facilities program staff in exploring a new
grant and/or loan framework which could be utilized in implementing
this expanded authority, should it be enacted into law. While this
outcome did not materialize, recommendations of our panel could also be
applied to existing RD rural health programs, and could inform future
approaches which better integrate USDA RD and HHS/ORHP investments.
I have summarized our recommendations below, and included the full
working document developed by our panel for USDA RD at the conclusion
of this testimony. Any major policy shift should ensure that core
health services are available locally, that they are integrated into
services outside the local area, and that this is done in a manner
consistent with science-based evidence, to ensure results which both
improve the quality of life for residents and better health quality
integration, across rural geography. USDA investments in rural health
care have implications beyond the bricks and mortar of individual
facilities; they are part of a mosaic readying the rural areas of our
nation to be fully advantaged by systemic improvements in health care
delivery and finance.
Specifically, future USDA Rural Development investments in rural
health care should be framed around these considerations:
I. Access to Affordable Care. USDA loan and loan guarantee programs
sustain the presence of hospitals in rural areas, enabling rural
residents to receive essential hospital services locally.
II. Value of Health Care. As in urban areas, health care value must
be measured in relationship to health care costs. USDA Rural
Development programs should use this goal as one criterion in assessing
applications for loans and loan guarantees. These return-on-investment
considerations ensure that program investments are assessing economic
realities, while helping to create the infrastructure needed to advance
the more ambitious goal of system improvement.
III. Choice Considerations Apply to Both Providers and Treatment
Options. The effective exercise of choice assumes information is
available to compare alternatives. USDA RD facility investments are
assisting in the development of these information systems. Significant
additional work should be done in this area.
IV. Capacity Must Exist in Systems of Care. Beyond affordability,
we must ensure that systems of care exist to address the rural health
needs of a region. One critical element to assure this outcome is
adequate consideration of rural interests in any resource allocation
within the sector. USDA, as a long-standing spokesperson for rural
interests, advances this goal by collaborating with other agencies,
especially HHS, to use its investments in combination with rural
program spending within those agencies.
V. High Quality Health Care is Delivered Through Coordinated Care.
In the enclosed document, the RUPRI Health Panel recommends that USDA
consider targeted investments (through a priority-setting scheme) in
rural institutions with ties to larger geographic systems of care
(formal or informal). USDA investments could create incentives to
leverage interest in building information systems and relationships
necessary to better coordinate patient care across providers not
practicing in the same large groups or even the same localities. This
is one of the most promising potentialities within a USDA/HHS
collaboration, and should be specifically pursued in an interagency
agreement.
VI. A Redesigned System Elevates the Health of Populations. Public
health services are essential in all local areas, including rural
regions. USDA programs supporting local infrastructure can and should
require applicants to demonstrate linkages to local public health
agencies. Examples can include sharing information to help identify
local health issues (e.g., hospital admissions for asthma in children),
programs the loan or loan guarantee institutions support (e.g., special
wellness programs using hospital facilities and hospital-employed
nutrition and health counselors), and organizational participation in
regional efforts designed to improve the health of the public (e.g.,
comprehensive community-based programs targeting important goals, such
as obesity reduction).
These recommendations are more fully addressed within the following
document. I hope they are helpful to this Subcommittee, and I thank
you, again, Mr. Chairman and Members of the Subcommittee, for the
opportunity to testify before you today. Your continuing leadership in
crafting a twenty-first century rural policy is critical, and we look
forward to working with you in the future. I'll be pleased to answer
any questions you have.
Attachment 1
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Attachment 2
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you. Thank you very much.
Dr. Myers?
STATEMENT OF WAYNE MYERS, M.D., TRUSTEE, MAINE HEALTH ACCESS
FOUNDATION; PAST PRESIDENT,
NATIONAL RURAL HEALTH ASSOCIATION, WASHINGTON, D.C.
Dr. Myers. Chairman McIntyre and distinguished Members of
the Committee, thank you very much for this opportunity.
My name is Wayne Myers. I am a past President of the
National Rural Health Association and Trustee of the Maine
Health Access Foundation. National Rural Health Association is
a national nonprofit organization, probably 18,000 members,
whose mission is to improve the health of rural Americans.
The quality of health care is critical to the physical,
mental, and even economic health of rural communities. Often,
the rural health facility is the center post supporting both
the health and the economy of the community. If local health
care disappears, as much as 20 percent of the local economy
goes with it.
Over the past decade, as the nation lost manufacturing
jobs, it has gained health care jobs. In fact, even though
rural manufacturing jobs declined at twice the rate of urban
manufacturing, health care has filled a lot of that void.
Health care and education are now the largest rural employers
and added the most to the rural economy across the nation in
2007. These jobs provide skilled employment, abundant
employment due to recirculation of dollars paid into the
community, and help retain families in the rural community.
My State of Maine has 15 Critical Access Hospitals, 50
federally qualified health center sites and 39 rural health
clinics. Each is vital to rural patients and the rural economy.
Our Maine Department of Labor estimates that statewide, 30
percent, nearly a third, of all new jobs until 2014 will be
health care jobs.
The ancillary or secondary spending impact of all that is
very significant. A typical rural hospital has a multimillion-
dollar payroll, and a lot of that money is re-spent in the
community, generating local jobs and revenue.
But there is a lot of difficulties. Disparities between
rural and urban persist. In 2005, the average health care wage
in Maine's rural counties was $26,800, nearly $10,000 less than
health care job salaries in urban counties.
Rural facilities face significant challenges: budget
constraints, recruitment and retention of health care
personnel, access to capital. Rural populations, as you
mentioned in your opening statement, Mr. Chairman, are older
and poorer. Therefore, rural facilities are terribly reliant on
reimbursement rates of Medicare and Medicaid, which do not
cover the cost of the care that is provided, and those programs
are continually threatened by cuts.
Due to these concerns, NRHA recommends stronger Federal
investment in and partnership with rural America. Capital
investment in rural facilities helps retain and recruit
physicians and improves patient safety and quality.
USDA, through its Community Facilities Loan and Grant
Program, has an impressive record of rural lending. This
program has helped to create some vibrant rural communities by
ensuring that essential structures receive the capital that
they need. Under Secretary Dorr has made, I believe, a personal
commitment to Critical Access Hospitals as an important
component of that program, and we sincerely thank him for his
commitment.
Mr. Chairman, NRHA does strongly support these programs,
but we do need improvements. First of all, more Federal dollars
are needed to replace all those rural hospitals that were built
during the 1960s and the 1970s. NRHA was disappointed to see
Title VI funding levels reduced in the farm bill.
The lending process for USDA loans is complex. A facility
must convincingly demonstrate that private financing is really
not available, and that can be a long and discouraging process.
The loan amount is typically insufficient to fund a project,
and facilities truly in need of the program may fail to qualify
due to rigid lending standards. So NRHA strongly supports
increasing the lending program, easing the red tape and cost of
applying, and improving outreach to facilities that provide
quality care, yet fall short of the stringent USDA lending
criteria.
On a slightly different topic: RUPRI has come forth with a
recommendation for a new capital lending program from USDA, and
we strongly support that. NRHA applauds the Committee for
including language in the 2008 Farm Bill and we regret that
that didn't make it.
We would strongly support any continuing efforts to
strengthen health information technology in rural areas--
terribly important, yet more difficult to implement than in
other communities.
So, Mr. Chairman, in conclusion, thank you for all that you
do for rural America. I and NRHA look forward to working with
you.
[The prepared statement of Dr. Myers follows:]
Prepared Statement of Wayne Myers, M.D., Trustee, Maine Health Access
Foundation; Past President, National Rural Health Association,
Washington, D.C.
Chairman McIntyre, thank you for this opportunity to testify. I am
Wayne Myers, M.D., Trustee of Maine Health Access Foundation and I am a
Past-President of the National Rural Health Association (NRHA). Thank
you for this opportunity to speak on behalf of the NRHA at this
important hearing. I am pleased to tell you why quality health care in
rural America is critical to both the community's citizens and the
community's economy. I will also discuss the impact of Federal programs
with a specific focus on USDA health programs.
The NRHA is a national nonprofit, non partisan, membership
organization with approximately 18,000 members that provides leadership
on rural health issues. The Association's mission is to improve the
health of rural Americans and to provide leadership on rural health
issues through advocacy, communications, education and research. The
NRHA membership consists of a diverse collection of individuals and
organizations, all of whom share the common bond of an interest in
rural health.
Health Care in Rural America is a Vital Component of the Economy
Health care is critical to the physical and mental well-being of
the citizens of a community. In rural America, health care is also
critical to the economic well-being of the community.
As factories and plants across the nation close due to outsourcing,
many parts of rural America's economy are in flux. A vital health care
system is often one of the few bright spots in the local economy.
Over the last decade, cities and towns across the nation lost
manufacturing jobs, but gained heath care jobs. Last year the
manufacturing industry lost 310,000 jobs and the health care industry
gained 363,000 jobs. Rural manufacturing jobs declined at double the
rate of urban manufacturing jobs. In fact, health care and education
are the largest rural employers and added the most jobs to the rural
economy in 2007. According to Health Resources and Services
Administration (HRSA), health care services are consistently a top
employer in rural America and if local health care should disappear, as
much as 20 percent of a local economy could go with it. In brief,
health care services provide skilled employment, abundant ancillary
employment, and help retain young families and the elderly (who rely on
quality health care) in the community.
My State of Maine is similar to the rest of America. Healthcare
looms large in Maine's present day economy and in 2005 accounted for
15% of all rural jobs. The Maine Department of Labor forecasts that,
statewide, 30% of all new jobs from now until 2014 will be health care
jobs.
Between 1998 and 2007, the Bangor metropolitan area (population
150,000) lost about 3,700 jobs in manufacturing, but gained 3,500 jobs
in health care. For many, the hospital is replacing the mill as the
passport to the middle class. The shift to medicine is evident
throughout Bangor. The local community college's most popular courses
are no longer welding and pipe fitting; they are nursing and medical
radiology. In 1990, 16% of the jobs in the Bangor area were in
manufacturing, while 12% were in health care. In 2007, 6% of the jobs
were in manufacturing and 20% were in health care.
In rural Maine, health facilities are the communities' lifeline,
both literally and figuratively. Maine has 15 Critical Access
Hospitals, 50 Federally Qualified Health Center sites and 39 Rural
Health Clinics. Each of these facilities is vital to the betterment of
the rural patients and the rural economy. Despite this, the disparities
between rural and urban persist. Rural areas have a larger share of
lower-paying health care jobs such as nursing assistants and personal
care attendants. In 2005, the average health care wage in Maine's rural
counties was $26,841 a year, $10,000 less than in the urban counties.
Statewide the average wage for all jobs was $32,393.
The Wall Street Journal recently outlined this concern with a
feature on a 51 year paper mill worker in Millinocket, Maine who was
told he would be laid off his job of 28 years. The mill worker quit his
job, took classes at the local community college and became a certified
surgical technologist. Today he makes $16 an hour, $5 less than what he
made at the paper mill.
Health Care's Influence on Other Sectors of the Rural Economy
The ancillary economic impact of health care in rural America is
significant. A typical rural hospital may employ 20 percent of the
local workforce and possess a multimillion dollar payroll. Much of the
money paid to health sector employees is then spent in the community,
which generates additional local jobs and revenue.
Additionally, health care employers and employees are important
purchasers of goods and services, supporting many local business
establishments. The employees who in work in health care, such as
hospital and nursing home workers, physicians, dentists and
pharmacists, are important sources of income in the community,
supporting services such as housing and construction, retail
establishments, restaurants and other local services. The hospitals and
other health care institutions are also important purchasers of local
inputs such as food, laundry services, waste management and other
resources.
An often-overlooked aspect of the health care system in economic
development is its importance to communities' efforts to attract and
recruit firms. Rural leaders across the nation are becoming
increasingly aware that the presence of quality health care is a vital
component of numerous economic development strategies. From a survey of
community leaders, almost 90% indicated that health care is important
to the local economy. Manufacturers and high tech industries are
unlikely to locate in an area that does not have adequate access to
health care. Health care is also a key factor in attracting and
retaining retirees.
The Challenges of Rural Health Care
Despite the growth of health care in rural America and its
importance to the rural economy, many geographic and demographic
challenges jeopardize its viability. Rural health systems are often
facing severe budgetary restraints. Some rural facilities are on the
verge of closing. In other cases, health care services are being cut.
Recruitment and retention of physicians and other providers are often
extremely difficult and expensive. Access to capital for facility
improvements can be severely limited. Rural populations are older and
poorer than urban. Younger, more prosperous rural citizens are more
likely to seek care in larger, regional urban centers while relying on
local rural resources for emergency care. Therefore, rural healthcare
facilities are heavily reliant on the reimbursement rates of Medicare
and Medicaid, which do not adequately cover the cost of care and are
continually threatened by cuts. Indigent care burdens are increasing
due to rising unemployment and a flagging economy, while states are
struggling to meet their Medicaid budgets.
Recommendations: Federal Investment and Partnership Vital to Rural
Health and Economic Development
A. Grants and Loans for Capital Improvements
Health care will only be an important economic component if rural
facilities can maintain quality structures and equipment. A large
portion of rural hospitals were built using funding provided through
the Federal Hill-Burton Act, in force from 1946 through 1975.
Unfortunately, many quality rural facilities continue to operate in
obsolete and deteriorating buildings, or operate with sub-standard
equipment, because of the difficulty in accessing capital. This does
not have to continue.
According to a 2005 Rural Hospital Replacement Study conducted by
Stroudwater Associates and Red Capital Group, investment in rural
facilities:
Helps physicians and staff recruitment and retention;
Reduces facility expenses (due to improved efficiencies);
Improves patient safety;
Improves quality of care and continuity of care; and
Increases patients use and utilization.
The USDA has a long history of bolstering the rural economy and its
influence on rural health care has been both direct and indirect. The
vehicle for much of the USDA efforts has been the farm bill, which
generates about $100 billion in Federal spending each year.
Rural Development Programs in the farm bill provide some amount of
grant funding for hospital and clinic construction, and leverage much
more through loan guarantees and interest rate subsidies. They help
fund construction of a range of related facilities, including wellness
centers, emergency medical services (EMS), and long-term care centers.
The NRHA strongly supports these programs yet believes improvements can
and should be implemented.
1. Current Loan Guarantee Programs Must be Improved. From our
members who have utilized or attempted to utilize USDA loan
programs, the concerns are consistent:
The process is long and complex.
The process often proves not cost-effective because of the
costly application requirements.
Inter-creditor loan agreements are cumbersome.
The program is often limited to Critical Access Hospitals.
Other rural health facilities are excluded.
The loan amount is typically insufficient to fund the
entire project.
The process precludes facilities that are in true need of
the program from qualifying for the program.
The NRHA often hears complaints from Critical Access Hospitals, who
are in dire need of capital improvements or equipment improvements,
which failed to meet the strict criteria of USDA guaranteed loan
programs. The USDA's stringent lending criteria deserve credit for the
low default rate of these loans. The NRHA commends a low default rate;
however, the NRHA also strongly supports greater outreach to the
facilities in true need.
The USDA guaranteed lending programs' mission is to improve
economic development. That mission is best achieved if the USDA reaches
facilities with significant needs. Since 1977, under the Community
Reinvestment Act (CRA), Federal law has required private lending
institutions to offer credit throughout their entire market area. The
purpose of the CRA is to provide credit to underserved populations and
small businesses that may not have previously had access to such
credit. USDA Federal lending programs should have a similar mission.
The NRHA strongly believes that this type of Federal outreach is the
most effective way to improve quality health care and improve local
economies.
2. Implement New Loan Program Per Recommendations of RUPRI.
In March 2008, the Rural Policy Research Institute (RUPRI)
documented recommendations for implementing a new USDA Rural
Development Program that strengthens rural health care delivery
systems. RUPRI was established in 1990 to address a concern of
Members of the Senate Agriculture Committee that no objective
non-government source of external data, information, and
analysis, regarding the rural community was available for
policy decision makers. NRHA finds RUPRI's recommendations for
expansion of the USDA lending program to be sound and prudent.
Attached to this testimony are RUPRI's complete
recommendations.*
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* The document referred to is located on p. 42.
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3. Grants for Capital Improvements are Needed.
The NRHA applauds this Committee for including language in the 2008
Farm Bill that would have made grant monies available to a wide
range of rural facilities and to improve health care quality
and patient safety. We regret that this section was not
included in the final farm bill.
4. Increase Investment in Information Technology
Health Information Technology (IT) is particularly important for
rural people, yet difficult to secure. Rural people typically
get their primary health care in their home communities, but
travel to larger centers for specialty services. The dangers
and inefficiencies related to moving paper and film record are
great, as are the difficulties of having access to these
records where and when they are needed across the region.
Therefore, the importance of a usable and interoperable health IT
infrastructure and equipment in rural America is critical to patient
safety, quality and facility sustainability. Additionally, technology
can increase access to care, provide remote diagnostic services, and
provide education and training for health care workers who otherwise
have limited access to professional colleagues and continuing
education. Development funds through the farm bill and other programs
have been used to establish telemedicine and support broadband
construction for rural communities. Such funding must continue and
expand.
In it's 2004 report, Quality through Collaboration: The Future of
Rural Health Care, the Institute of Medicine (IOM) stated that the
acceleration of health knowledge is ``pivotal'' to patient safety and
quality health care improvement in rural America. The report calls for
a stronger health care quality improvement support structure to assist
rural health systems and professions, and recognizes the importance of
``investing in an information and communications technology
infrastructure.''
Health IT in rural America faces challenges far more significant
than their urban counterparts. Both the 2004 IOM and Medicare Payment
Advisory Commission (MedPAC) highlight problems with health IT in rural
communities because of the relative scarcity of professional, technical
and financial resources and interoperability issues which arise among
numerous small independent health agencies.
Of these concerns, finance is the overriding challenge. Rural
health facilities are small businesses who struggle to keep their doors
open and meet their mission of providing care to their community.
Investment in health IT or continued operation of the equipment is
prohibitively expensive. (Often in rural areas, there is only a single
telecommunications service provider--which limits competition and
increases costs.)
Additionally, rural hospitals often depend on the Critical Access
Hospital designations and the Universal Services Funds to maintain
operations and access technology. This tenuous existence, however,
doesn't allow for any financial cushion in invest in technology.
Current payment rates are insufficient to cover the costs associated
with overcoming challenges of acquiring hardware and software,
implementing community-based communications networks and obtaining
training and ongoing support.
Investment in health IT can drive the expansion of
telecommunication technologies to rural communities. Other rural
businesses have similar investment and infrastructure issues.
Successful projects driven by health providers such as hospitals,
community health centers, or training facilities have demonstrated how
the entire community can benefit when it is ``wired.'' NRHA strongly
supports provisions in the farm bill to expand broadband services in
rural areas and hopes that more can be done.
Health Insurance Coverage in Rural America
While health insurance is outside the scope of this Committee and
this summit, I would be remiss to not mention this important issue and
help highlight how difficult and complex rural economic development can
be. On this issue, rural America lags behind its urban counterparts and
has disproportionately higher rates of the uninsured and underinsured.
This is true of both adults and children.
As already highlighted, a healthy workforce is vital to having a
vibrant economy. Without insurance coverage of the local populace, most
people cannot afford routine health checkups and must rely on more
expensive emergency care. This is both more costly for the community
and leads to poorer health outcomes. In addition, health insurance
coverage can help provide the monies necessary to keep health providers
in rural communities driving further economic development.
For the future of our rural communities, we cannot continue to see
increasing rates of uninsured adults and children. Nationwide, the
trend has been decreasing employer sponsored health coverage. This
trend has been more acute in our rural communities that tend to have
smaller-sized businesses and more small business owners that cannot
afford to insure their own family. We must find ways to provide
insurance coverage.
Already, rural citizens disproportionately rely more on Medicare,
Medicaid and the State's Children Health Insurance Program (SCHIP) than
their urban counterparts. However, in providing this coverage, we must
be cognizant that health insurance does not equal health care. Federal
insurance programs such as the ones mentioned have a responsibility to
make sure that our rural citizens can access care in their own
communities and that the care they receive is of high quality. Without
it, rural America may lack a productive workforce in the future.
Congress has attempted to pass meaningful SCHIP legislation only to
have it vetoed. This program has been a significant source of health
coverage for rural children. If additional SCHIP legislation is debated
in this Congress, the NRHA asks that considerable improvements in
health insurance coverage and outreach for children in rural
communities be included. For those that care about the future of rural
America, the reauthorization and expansion of SCHIP is of the utmost
importance.
Conclusion
Health care is a vital segment of the rural economy. Quality health
care in rural America not only provides for the health of the
community, but creates jobs, infuses capital into the local economy,
attracts businesses and encourages families and seniors to maintain
residency within the community. Federal, state, and local partnerships
must be formed to protect this critical yet fragile component of the
local economy. Grants and loans must be accessible for both capital
improvements and IT infrastructure and development. Insurance programs
such as SCHIP, Medicare and Medicaid must take into account their
responsibility in providing health insurance for rural beneficiaries
and in making sure those same people can access their care in their
community. And finally, the USDA must continue to establish policies
that help rural health care flourish--for both the sake of the health
of rural Americans and for the economy of rural America.
The Chairman. Thank you. And thank you for the work you all
do with the National Rural Health Association, which I know our
rural health care coalition has worked very closely with
through the years.
Dr. Karen Rheuban?
STATEMENT OF DR. KAREN RHEUBAN, PEDIATRIC
CARDIOLOGIST, SENIOR ASSOCIATE DEAN FOR CONTINUING MEDICAL
EDUCATION AND MEDICAL DIRECTOR, OFFICE OF TELEMEDICINE,
UNIVERSITY OF VIRGINIA HEALTH SYSTEM; PRESIDENT-ELECT, AMERICAN
TELEMEDICINE
ASSOCIATION; MEMBER OF THE BOARD OF DIRECTORS, CENTER FOR
TELEMEDICINE AND E-HEALTH LAW;
PRESIDENT, VIRGINIA TELEHEALTH NETWORK,
CHARLOTTESVILLE, VA
Dr. Rheuban. Chairman McIntyre, Mr. Goodlatte and Members
of the Subcommittee, thank you for the opportunity to testify
today.
I serve as Professor of Pediatrics, Senior Associate Dean
for CME, and Medical Director of the UVA telemedical program,
and I am President-elect of the American Telemedicine
Association.
Although all Americans face challenges in access, quality
and cost of care, disparities attributable to a host of factors
disproportionately impact the health of our rural citizens.
Over and over again, I have seen the challenges faced by my own
pediatric cardiology patients and countless others needing
specialty care not locally available. The Institute of Medicine
cites core health care services as being considerably less
accessible in many rural communities. Access to specialty care
presents an even greater challenge. When one considers the cost
of overnight stays, lost time from work, and the increasingly
high cost of fuel, travel for health care imposes great burdens
on our rural families.
Tomorrow I will join more than 200 UVA volunteers to
participate in the Remote Area Medical Clinic held at the
Virginia-Kentucky Fair Grounds, where more than 3,000 patients
will receive free medical, dental and vision care, and cancer
screenings. Patients arrive at all hours of the night to stand
in line to obtain a ticket for entry to the clinic and then
wait uncomplainingly, often in the hot sun, to receive health
care provided in barns and in tents. For many participants,
this is the only time they will see a physician or dentist.
And since I am limited to only a few moments and since a
picture is worth a thousand words, this is a photograph from
one of our more recent Remote Area Medical Clinic expositions.
For many decades, the University of Virginia has tried to
address the challenges of access for our rural patients. We
staff subspeciality outreach clinics in communities remote from
our medical center.
In 1995, with Federal and state grant support, we
established our telemedicine program. We serve as the hub of a
60 site network in the Commonwealth of rural clinics, federally
qualified health centers, community hospitals, Critical Access
Hospitals, schools, prisons and health department sites. To
date, we have facilitated more than 12,500 patient encounters
in more than 30 different medical and surgical subspecialties
that are provided on a scheduled basis or emergently using
interactive videoconferencing.
We also offer store-and-forward services, such as
screenings for diabetic retinopathy, interpretation of cardiac
ultrasound for critically ill newborns, and mobile digital
mammography to screen for breast cancer. We have saved lives,
supported timely interventions, and spared patients and their
families needless travel and extensive transfer.
We offer distance learning for health professionals.
Telehealth spans the entire spectrum of health care and across
the continuum, from prematurity to geriatric care. Cardiology,
dermatology, ophthalmology, neurology, mental health and
critical care are but a few of the many applications of
telehealth.
With the aging of our population and greater numbers of
patients with chronic illness, home telehealth offers an
effective mechanism to provide for early intervention, with
improved outcomes and reduced hospitalization.
Federal investment is critical to the development of
telehealth networks across the nation. Sound Federal and state
policies are required for the integration of telehealth into
mainstream health care. Rural Virginians have benefited greatly
from telehealth grants from the USDA and other Federal
agencies. We applaud the Rural Utility Service for its
definition of rural with regards to eligibility for telehealth
grants.
Despite a favorable revision of the Medicare telehealth
rules following passage of BIPA 2000, the Benefits Improvement
and Protection Act, many critical telehealth-facilitated
services remain ineligible for Medicare reimbursement based on
the location and/or type of consult origination site. CMS has
interpreted the statute narrowly, and as a result, the
opportunity to serve rural Americans in need has been limited.
CMS recently reported that total Medicare expenditures for
telehealth in the past 6 years were less than $5 million, far
below the level of several hundred million dollars that
Congress anticipated. Practitioners eligible for reimbursement
for in-person services delivered in the home should be
reimbursed for similar services through telehealth. Store-and-
forward services are only available in Alaska and Hawaii. Many
Medicaid programs still do not reimburse telehealth-facilitated
care, and yet Medicaid funds the high cost of long-distance
patient transportation and the serious consequences of delays
and access to health care.
Rural grants will be of much less value without reasonable
Medicare and Medicaid reimbursement policies. Federal
investment in our rural broadband infrastructure remains
crucial to expanding and sustaining telehealth programs and
health information exchange nationwide. The rural health care
support mechanism of the Universal Service Fund is still
fraught with statutory limitations that pose barriers to many
programs. Finally, there are enormous opportunities to help
patients with chronic illnesses, such as congestive heart
failure, through programs that provide remote monitoring
support.
In conclusion, through robust investments in telehealth and
expanded favorable Federal policy, Congress has the opportunity
to greatly enhance access to quality health care services that
improve the health of our rural Americans.
Thank you. I would be happy to respond to any questions.
[The prepared statement of Dr. follows:]
Prepared Statement of Dr. Karen Rheuban, Pediatric Cardiologist, Senior
Associate Dean for Continuing Medical Education and Medical Director,
Office of Telemedicine, University of Virginia Health System;
President-Elect, American Telemedicine Association; Member of the Board
of
Directors, Center for Telemedicine and E-health Law; President,
Virginia Telehealth Network, Charlottesville, VA
Chairman McIntyre, distinguished Members of the Subcommittee, my
name is Dr. Karen Rheuban. I am a Pediatric Cardiologist, and also
serve as Senior Associate Dean for Continuing Medical Education and
Medical Director of the Office of Telemedicine at the University of
Virginia Health System in Charlottesville. I am also the President-
elect of the American Telemedicine Association, a member of the Board
of Directors of the Center for Telemedicine and E-health Law, and
President of the Virginia Telehealth Network.
It is an honor and a privilege to provide testimony that will
address:
(a) the status of rural healthcare, and in particular, data
regarding healthcare in rural Appalachian Virginia
(b) the role of telemedicine in the delivery of healthcare and
educational services to rural Americans,
(c) the enormous benefits of Federal programs that support the
development and deployment of telehealth technologies and
networks, and
(d) opportunities to further expand innovation in telemedicine and
e-health so as to enhance the quality of life of all Americans.
A. The status of rural healthcare
Rural patients face challenges of access to quality healthcare.
Twenty percent of our U.S. population resides in heterogenous rural
communities which vary in character from towns adjacent to suburban
areas to remote and/or frontier communities with extremely low
population densities. Although all Americans face challenges in access,
quality and cost of care, disparities attributable to a host of factors
disproportionately impact the health of our rural populations.
The Institute of Medicine, in its report, ``The Future of Rural
Healthcare'', cites ``core health care services'' of primary care,
emergency medical services, long term care, mental health and substance
abuse services, oral health and other services as being considerably
less accessible in rural communities.\1\ Access to specialty care
presents an even greater challenge. The implications of a lack of
timely access to quality healthcare are well known, and include delayed
diagnoses of preventable or treatable illnesses and a higher cost of
care, when and if such care is received.
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\1\ Quality Through Collaboration, The Future of Rural Health,
Institute of Medicine, National Academies Press, 2004.
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Rural patients tend to be older, and participate in adverse health
behaviors (smoking, lack of fitness, obesity) which leads to chronic
diseases at rates higher than their urban counterparts. The challenges
of a less robust infrastructure in support of economic development,
lower educational levels of achievement, high rates of uninsured
status, and the financial burdens of travel for healthcare all
contribute to the health disparities of rural citizens. As an example,
although nationally we have increased access to screening mammography
over the last decade, due to the impact of distance, limited income,
and uninsured status, women residing in rural areas are screened for
breast cancer at significantly lower rates than women residing in urban
areas, particularly if travel more than twenty miles for screening is
required.\2\-\3\
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\2\ Peek, M.A., Disparities in Screening Mammography: Current
Status, Interventions, and Implications, J. Gen. Intern. Med. 2004
February; 19(2): 184-194.
\3\ Brustrum, J.E., Going the Distance: How Far Will Women Travel
to Undergo Free Mammography? Military Medicine, 2001, 166 (4), 347-349.
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It has been forecast that our nation faces a shortage of physician
providers, in the range of 85,000 to 200,000 physicians by
2020.\4\-\5\ Lack of access in rural areas is exacerbated by
the limited numbers of specialists who practice in rural communities
and the limited resources generally available in those communities.
Attracting health professionals to rural communities remains a daunting
task; retaining those health professionals is equally difficult. Rural
healthcare providers tend to work longer hours, see more patients, lack
cross coverage opportunities and experience a greater sense of
isolation than their urban counterparts. Rural health professionals
have been slower to adopt electronic medical records in their
practices.
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\4\ Cooper, R.A., Weighing the evidence for expanding physician
supply, Ann. Intern. Med. 2004: 141:705-714.
\5\ Blumenthal D. New steam from an old cauldron: the physician
supply debate, N. Engl. J. Med.: 2004:350:1780-1787.
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To craft a strategy for improving the health of patients residing
in the most rural and underserved regions of the Commonwealth of
Virginia, in collaboration with Virginia Department of Health, the
University of Virginia recently conducted an analysis of the health
status, the health workforce and relevant economic indicators impacting
the citizens of the Coalfields regions of western Appalachian
Virginia.\6\ These rural regions of Virginia are: (1) economically
depressed, (2) medically underserved, and (3) geographically isolated.
The findings of that report showed that:
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\6\ Cattell Gordon, D., ``Healthy Appalachia'', Report to the
Southwest Virginia Health Facilities Authority, May 2008.
20% of the residents of the region live below the poverty
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level as compared to 10.2% for Virginia.
Only 62% of the region's population has completed high
school and 11% completed college compared with 82% and 30%
respectively for Virginia.
Per-capita income levels in the region are a little more
than half of the levels of state for 2000.
The numbers of unemployed and those not in the work force is
twice that of the rest of the Commonwealth.
19% of adults in the region do not have health insurance
coverage.
The death rate from cardiovascular disease is 1.7 times
higher than that of the Commonwealth of Virginia.
The death rate from solid tumors is 1.4 times greater than
that of the state.
The probability of dying of chronic lung disease in this
area is twice the probability of dying of the same cause
elsewhere in Virginia.
The mortality rate in the region from diabetes is nearly
twice the mortality rate of the state.
Although University of Virginia physicians regularly staff
specialty outreach clinics in many rural regions of the Commonwealth,
the ongoing need for locally provided specialty services is very great.
When one considers the cost of overnight stays, lost time from work,
the increasingly high cost of fuel and other automotive expenses,
travel for healthcare imposes great burdens on our rural families.
Tomorrow, I will join two hundred of my University of Virginia
Health System colleagues to participate in the Remote Area Medical
(RAM) Clinic held at the Virginia-Kentucky Fairgrounds, a 6 hour drive
from Charlottesville. At that annual weekend event, more than 3000
patients from Appalachian Virginia and surrounding states receive free
medical care, dental care, vision care, patient education and cancer
screenings. Patients arrive at all hours of the night to stand in line
to obtain a ticket for entry to the clinic, and then wait
uncomplainingly, often in the hot sun, to receive services. At that
clinic, healthcare is provided in barns and in tents (see photograph,
below).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Photograph: Remote Area Medical Clinic (courtesy St. Mary's
Health Wagon).
Rural Americans experience disproportionate disparities in
healthcare as compared to their urban counterparts.
B. The role of telehealth in the delivery of services to rural
Americans:
Telehealth can reduce many of the barriers of access to locally
unavailable healthcare services. The societal integration of advanced
technologies into everyday venues has profound implications for the
development, support and delivery of a new paradigm of healthcare
services in the digital era. The powerful tools of health information
technologies are critical to the transition from a culture in which
health related services are primarily delivered in a balkanized model
on an episodic basis to an integrated systems approach focused on
disease prevention, enhanced wellness, chronic disease management,
decision support, quality, ease of access and patient safety. Through
the incorporation of such tools and technologies, clinicians will be
able to satisfactorily manage the exponentially expanding volumes of
medical information, research and decision support analytic tools.
The incorporation of telehealth technologies into integrated
systems of healthcare offers tools with great potential to address the
challenges of access, specialty shortages, and changing patient needs
in both the rural and urban setting. Clinical services delivered via
telehealth technologies span the entire spectrum of healthcare, and
across the continuum from prematurity to geriatric care, with evidence
based applicability to more than 50 clinical specialties and
subspecialties. Cardiology, dermatology, ophthalmology, neurology, high
risk obstetrics, pulmonary medicine, mental health, pathology,
radiology, critical care, and home telehealth, are but a few of the
many applications in general use, and for which a number of specialty
societies have developed telehealth standards.\7\-\11\ These
services can be provided in live-interactive modes and some,
asynchronously, using store and forward applications. Examples of the
latter include the acquisition of digital retinal images of patients
with diabetes by a trained nurse. These images can be sent for review
by a retinal specialist to identify patients at risk for diabetic
retinopathy, the number one cause of blindness in working adults.
Digital images can be integrated into the patient's electronic medical
record to follow changes over time. In these and so many other
applications, telehealth supports the goals of the Federal Healthy
People 2010 initiative, and is aligned with the President's 2004
Executive Order to ``advance the development, adoption, and
implementation of health care information technology standards
nationally through collaboration among public and private
interests''.\12\
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\7\ Williams, J.M. et al., Emergency medical care in rural America,
Ann. Emer. Med. 2001: 38(3):323-327.
\8\ Burgiss, S.G. et al., Telemedicine for dermatology care in
rural patients, Telemed. Journal 1997; 3 227-33.
\9\ Chiang, Michael, Lu Wang; Mihai Busuioc; Yunling E. Du et al.,
Telemedical Retinopathy of Prematurity: Diagnosis, Accuracy,
Reliability, and Image Quality Arch Ophthalmol, 2007: 125 1531-1538.
\10\ Flowers, C.W. et al., Teleophthalmology: rationale, current
issues, future directions, Telemed. J., 1997: 3(1): 43-52.
\11\ Breslow, M.J., Effect of a multiple site intensive care unit
telemedicine program on clinical and economic outcomes: An alternative
paradigm for intensivist staffing, Crit. Care. Med. 2004 32(1): 31-38.
\12\ George W. Bush, Executive Order, Incentives for the Use of
Health Information Technology and Establishing the Position of the
National Health Information Technology Coordinator, April 27, 2004.
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The aging of our population has already created increased demand
for specialty healthcare services to address both acute and chronic
disease in the elderly. Such a demand, in the face of anticipated
provider shortages, requires a fundamental shift from the model of
physician centered care to one focused on patient centered care using
interdisciplinary teams, evidence based medicine, the use of
informatics in decision support and telehealth technologies where
specialty care services are either not locally available or for other
consultative needs. As an example, nationally, only 2% of eligible
(ischemic) stroke victims receive brain saving thrombolytic therapies,
primarily because this treatment must be administered within 3 hours
from the onset of an ischemic stroke under the direction of a trained
neurologist. The use of telehealth technologies offers immediate access
to stroke neurology and neurointensive care with improved outcomes, and
an increase in the delivery of thrombolytic therapies to as many as 80%
of eligible stroke patients.\13\-\15\
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\13\ Schwamm, L.E. et al., Virtual telestroke support for the
emergency department evaluation of acute stroke, Acad. Emer. Med. 2004:
11(11) 1193-1197.
\14\ Vespa, P., Intensive care unit robotic telepresence
facilitates rapid physician response to unstable patients and decreased
cost in neurointensive care, Surg. Neurol., 2007 (67) 331-337.
\15\ Fessler, R., Michigan Stoke Network, An 18 month update, 3rd
Annual Remote Presence Clinical Innovations Forum, Santa Barbars, CA,
July 18, 2008.
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With the aging of the population and greater numbers of patients
with chronic illness, home telehealth, home monitoring tools and
biosensor devices offer an effective mechanism to improve health, and
provide early intervention where appropriate. The evidence has
demonstrated improved outcomes and reduced hospitalizations for
patients with congestive heart failure, diabetes, and other chronic
diseases through the use of home monitoring and home telehealth
technologies.\16\-\17\
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\16\ Field M.J. and Grigsby, J. Telemedicine and remote patient
monitoring, JAMA 2002:288(4):423-425.
\17\ Noel, H.C., Home telehealth reduces healthcare costs,
Telemedicine J. and E. Health, 2004, 10(2): 170-183.
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Telehealth technologies should be viewed as integral to rural
development. Data from some telehealth providers have indicated that
more than 85% of patients seen via telehealth technologies remain
within their community healthcare environment, resulting in a reduction
in unnecessary transfers, less hospital lost revenue, as might occur
with patient transfers, and enhanced economic viability of the
community hospital. A viable community healthcare environment and
workforce ultimately provides incentives for the relocation of
industry, thereby enhancing community economic development. The
benefits of shared utilization of bandwidth for other applications in
rural communities cannot be overstated.
In an effort to address the significant rural-urban disparities in
the Commonwealth of Virginia, we established the University of Virginia
Telemedicine program in 1995, specifically to enhance access to
specialty healthcare services and health related education for
distantly located patients and health professionals using broadband
telecommunications technologies. With Federal and state support, we
have created and serve as the hub of a 60 site network of community
hospitals, Critical Access Hospitals, a veteran's hospital, veteran's
clinics, federally qualified community health centers, rural clinics,
prisons, schools and state health department clinics located primarily
in rural communities in western, southwestern, central and eastern
Virginia.
To date, we have facilitated more than 12,500 patient encounters
linking remotely located patients and our University of Virginia health
professionals representing more than 30 different medical and surgical
subspecialties. These services are provided on a scheduled basis or
emergently, as needed, at any time, day or night. We offer store and
forward services such as screenings for diabetic retinopathy or breast
and cervical cancer. We have provided more than fifty thousand
radiographic interpretations through our teleradiology program. We
provide live interactive consultations using traditional models of
video-teleconferencing and critical care applications, such as acute
stroke evaluation and treatment, using traditional videoconferencing
and robotic ``remote presence'' technologies connecting emergency
physicians with stroke neurologists. We have saved lives, supported
timely interventions, and spared patients and their caregivers
unnecessary travel and expensive transfer when feasible.
At the Remote Area Medical Clinic in Wise, in addition to on-site
clinical services, we offer telemedicine facilitated subspecialty
consultations and mobile digital mammography services transmitted over
broadband linkages for immediate interpretation by our radiologists.
Through our telehealth network, we have broadcast thousands of
hours of health professional, student and patient education programs
otherwise not locally available. We offer access to cancer clinical
trials for patients and collaborative tumor boards for health
professionals serving those patients.
C. The enormous benefits of Federal programs that support the
development and deployment of telehealth technologies and
networks (such as the USDA Rural Utilities Service Distance
Learning and Telemedicine Grant Program).
Federal funding has been critical to the development and deployment
of telehealth technologies and networks across the nation. The
University of Virginia Telemedicine network has benefited greatly from
USDA funding through the Rural Utilities Service Distance Learning and
Telemedicine (DLT) Grant Program and through the USDA Community
Facilities Program. We have expanded services to more than a dozen
healthcare facilities with USDA grants and recently have launched a
major rural cancer outreach initiative with a 2007 grant from the USDA
DLT program.
Since the inception of the program in 1993, hundreds of RUS grants
have been awarded to telemedicine projects similar to our own. This
funding has been critical to the development of rural telemedicine
networks nationwide. The USDA Rural Broadband Grant and Loan Program
has supported the deployment of communications infrastructure which
underpins successful telemedicine, E-health applications and health
information exchange.
We have also received critical funding from other Federal agencies
including the Health Resources Services Administration (HRSA), the
Department of Commerce, the Federal Communications Commission (FCC),
the Dept. of Housing and Urban Development, and the Appalachian
Regional Commission.
We applaud the Rural Utilities Service for its process of
identification of rurality re eligibility for the DLT program. These
USDA definitions are simple and practical and are very much aligned
with community gaps in specialty health professional services.
Ironically, these definitions include communities otherwise deemed
ineligible for other Federal telehealth-related services--such as
reimbursement under Medicare or communications discounts in the FCC
Rural Healthcare Support Mechanism of the Universal Service Fund. These
issues will be addressed below but raise the concern that the long-term
sustainability of telemedicine projects established through this
program and other Federal telehealth programs may be at risk.
We urge Congress to support greater levels of funding for USDA and
other Federal programs that expand telehealth initiatives, and to
facilitate policies that more broadly integrate telehealth into
mainstream healthcare.
D. The role of Congress in fostering greater deployment of telehealth
technologies:
The telehealth community is indebted to Congress for its commitment
to foster an environment that enhances access to healthcare for all
Americans, regardless of rural or urban location.
Notwithstanding an initial climate of non-reimbursement from third
party payers, high telecommunications costs, limited deployment of
broadband services in many rural communities, high equipment costs,
restrictive state licensure regulations and a general skepticism of the
ability to provide quality care via such technologies, we and other
telehealth providers have persevered in our efforts to offer our rural
patients access to the same quality healthcare and educational services
enjoyed by our urban citizens.
Such programs have only been realized with the help of the Congress
for the funding of telemedicine demonstration projects in all 50
states, in fostering a climate of competition in the telecommunications
sector, in mandating reimbursement through the Medicare programs and as
feasible, by encouraging states to do the same through their Medicaid
programs.
Despite a favorable revision of Medicare telehealth rules brought
about by the Medicare Benefits Improvement and Protection Act of 2000
(BIPA), many critical telehealth facilitated services are still
considered ineligible for Medicare reimbursement based on the location
and the type of consult origination site. Indeed, Medicare expenditures
for telehealth in the 6 years that followed BIPA were reported by the
Center for Medicare and Medicaid Services (CMS) as less than $5
million.
We applaud Congress for the passage of the very recent Medicare
legislation that expands the eligible consult origination sites. Still
there are many appropriate and worthy clinical sites from which
telehealth consultative services are not reimbursed, such as non-
hospital based dialysis facilities. Medicare will only reimburse
telehealth services that originate in rural locations, based on a
definition of rural far less inclusive than that of the USDA or even
the FCC. Consults cannot be reimbursed by Medicare if that originating
site is not located in a designated health professional shortage area,
or a federally designated county wide metropolitan statistical area
(MSA).
Store and forward services are ineligible for Medicare
reimbursement other than services provided in Alaska and Hawaii. Home
telehealth technologies provide well documented improvements in health
status, and should be reimbursable as a part of a comprehensive care
program designed to reduce improve clinical outcomes and lower
healthcare costs. Practitioners eligible for Medicare for in-person
services delivered in the home should be reimbursed for similar
services provided using telehealth technologies.
We strongly commend Congress for the passage of the
Telecommunications Act of 1996, and its effect in bringing about a
reduction in the cost of communications services and an increase in the
deployment of broadband connectivity to our rural communities. In 1995,
the monthly ongoing cost of a T1 connection from Charlottesville to
Wise, Virginia was $5,800 per month. In 2008, with Universal Service
Fund discounts, that same service now costs $200/month. And yet, the
Rural Healthcare Support Mechanism, as mandated in the
Telecommunications Act, still remains significantly underutilized, in
part because statutory barriers prevent the program from achieving the
goals envisioned by Congress. Many communities designated as rural by
USDA standards do not qualify for Universal Service Fund support by
virtue of uncoordinated agency definitions of rurality.
The time limited Rural Healthcare Pilot Program, launched in
November 2007, holds promise to expand the deployment of broadband
services for purposes of telemedicine and e-health, however, this
program is also fraught with limitations that pose barriers to its
success. As an example, neither administrative costs of managing the
project nor programmatic evaluation are eligible for support in the
Rural Healthcare Pilot Program.
Any effort to coordinate and facilitate greater utilization and
cost-effective deployment of telemedicine initiatives will ultimately
enhance the sustainability of rural telemedicine programs and by
inference, the health of our rural citizens. Without coordination
across all the agencies, we are at risk of engendering obsolescence in
the Federal Government's considerable investment in telemedicine
programs.
Conclusion:
In conclusion, by
a. Increasing Federal funding for quality demonstration projects
and grant programs,
b. Further reducing both statutory and regulatory barriers to
telehealth in Medicare,
c. Aligning Federal agency definitions of rural with specialty
healthcare shortages, and in particular, using as a model, the
definitions of rural applied by the USDA Distance Learning and
Telemedicine Grant Program,
d. Encouraging the use of (and reimbursement for) store and forward
telemedicine, and home telehealth, and
e. Further improving the Rural Healthcare Support Mechanism,
Congress has an opportunity by to improve access to locally unavailable
quality healthcare services that reduce rural--urban disparities and
improve the health of all Americans.
Thank you for this opportunity to offer testimony before the
Committee today. I would be happy to respond to any questions.
The Chairman. Thank you.
Thanks to each of you and for speaking right to the point.
I want to invite Mr. Goodlatte, if he has any questions.
Mr. Goodlatte. Well, thank you, Mr. Chairman. I do, indeed.
You are right, a picture is worth a thousand words. And you
mentioned that clinic. Do you have any means of providing
follow-up care to all those people when they come in and wait
in line like that and get some initial advice? Is there a way
to follow up?
Dr. Rheuban. Absolutely. What we try to do is refer
patients to a medical home in their community. So we refer
patients to their federally qualified health centers and rural
clinics.
And since we make every effort to register every patient
that we see as a UVA patient, they have an electronic medical
record, and we can provide telehealth-facilitated follow-up
care for those patients when they go to the community health
centers and hospitals that are connected back to UVA.
Mr. Goodlatte. I imagine you find people of every kind of
circumstance--some people who have minor problems, some people
who have very major problems, some people have health
insurance, some people who don't, some people who are under
Medicaid. Tell me about how you sort through all that.
Dr. Rheuban. We actually see everyone, every comer; it
doesn't matter what their health insurance status is. And then,
again, when they go to the community health centers, that is
where the sliding scale applies for them. And we provide free
care during those clinics.
We bring a mobile digital mammography van. We do cancer
screenings. We do sigmoidoscopies for patients who
unfortunately have to be prepped using porta-potties at that
clinic. It is a very dire situation, but we are there to serve.
And no patient is ever turned away.
Mr. Goodlatte. So, do you have a whole array of people back
at UVA or other hospitals that are waiting to take a look at
them, as they are trying to do their other jobs back at the
hospital at the same time?
Dr. Rheuban. We do provide follow-up at UVA, and------
Mr. Goodlatte. No, I mean during the------
Dr. Rheuban. Oh, we do telemedicine, yes, sir. We provide
telehealth encounters in this clinic, but we bring a host of
subspecialists with us to participate in that clinic. And the
Virginia Dental Association brings 60 dental chairs and
provides dental care, as well, from VCU dentists.
So we do do telehealth for what we don't have onsite, but
we bring a lot of specialists as well.
Mr. Goodlatte. What would you say is the biggest challenge
that you face in providing more telemedicine, telehealth
services?
Dr. Rheuban. The largest challenge that we face, quite
frankly, is the lack of reimbursement. We do not turn away any
patient. We see everyone via telehealth. I think telehealth
would exponentially increase nationwide if consultant
physicians would be able to be paid for the services we
provide. And there are provisions through Medicare, but as I
articulated, it is not nearly enough.
Mr. Goodlatte. And has this continued to grow
exponentially, or is it leveling off? Where would you say it
is?
Dr. Rheuban. Telehealth is continuing to grow. And,
certainly, we are very grateful for the infrastructure grants
that we get from HRSA, from USDA. But it would be very
important to orchestrate policies across the various agencies
so that we can further facilitate the use of telehealth, such
as the rural definition, such as reimbursement, such as the
cost of telecommunications services.
Mr. Goodlatte. Other than the cost, maybe that is the
biggest problem with the broadband programs, but are there
things that need to be retooled with regard to broadband
programs to do a better job in enhancing what you can do with
telemedicine?
Dr. Rheuban. We are very grateful for the rural health care
support mechanism. And if you polled all the telehealth
providers around the country, each one of them would say,
without that discount program, our programs would go away. It
would still be unaffordable. We still have many areas in the
Commonwealth of Virginia where there is no competition, and so
we rely on that program.
That being said, there are statutory barriers in that
program that could be improved by Congress, if and when you are
willing to relook at the Telecommunications Act, so that we can
serve more individuals through telehealth.
Mr. Goodlatte. Good.
Dr. Myers, do you believe that health information
technology legislation that has been drafted in other
committees--it is not our jurisdiction--accommodates the
concerns specific to rural areas?
Dr. Myers. I am sorry to say that I don't believe that I am
comparatively well enough versed in the materials in those. We
can certainly work on that and get you a report in a very few
days. But I would hesitate to answer off the top of my head.
Mr. Goodlatte. Sure. I have been in that situation myself
when a question comes right out of left field.
Anybody else have any thoughts on that subject?
Mr. Fluharty. Just quickly, I would say overwhelmingly the
reimbursement challenge is the issue. I think that is something
that could be statutorily addressed. It is the overwhelming
challenge.
Mr. Goodlatte. Very good.
Mr. Chairman, thank you very much. I think my time has just
about expired.
And I want to thank all of our panelists.
The Chairman. Thank you, Mr. Goodlatte. Good to have you
with us.
Mr. Pomeroy?
Mr. Pomeroy. I just observed the Ranking Member may not
have had well-formulated answers to off-the-wall questions, but
it never stopped him from trying to------
[Laughter.]
Mr. Goodlatte. Never.
Mr. Pomeroy. Thank you, panel. This is a very interesting
panel.
Extraordinary, Dr. Rheuban, I represent very rural areas in
North Dakota. But you are dealing with some issues that are new
to my understanding of rural health care in that region of the
country.
One of the things we are talking about in the context of
health reform is information technology as a means to improve
our collective understanding of what works, what doesn't work
in medicine. It seems to me we have been very slow on the
uptake on moving to more data-based medicine in this country.
It was a topic that was often discussed when I was an insurance
commissioner, and I haven't been an insurance commissioner
since 1992. So we have really been slow at getting moving here.
But it is going to take some considerable infrastructure
investment. And we are worrying about rural practices that are
going to have a harder time costing this out because they don't
see as many patients.
I am wondering, Mr. Fluharty, if you have looked at this
area.
Dr. Myers, you might want to comment on what it is going to
take to have the rural sector fully participating in health IT
in ways that aren't financially punishing to our practitioners.
Mr. Fluharty. I would also just like to commend UVA. It is
a phenomenal program. I think it also points to the
unbelievable need that exists in our current institutional
challenge.
Congressman, while you are here, I would just simply say
for the Congressman that asked before, the Rural Access Center
at North Dakota has indeed everything online that was asked
for, Mr. Chairman. And our colleague, Mary Wakefield, who is a
constituent of the Congressman's, heads that center. And in
response to that question, that is an example of how technology
is starting to move in the field.
Let me simply say the Senate language that would have
looked at, within the Agriculture Committee, infrastructure for
IT development, quality control and information systems as a
potential infrastructure grant to USDA under the Agriculture
Committee, we felt was very good legislation.
The challenge is going to be in the small grants program at
HHS, securing sufficient capital to move that infrastructure
design into the field at a scalable level. And that is going to
be one of the challenges, who will step up with the
infrastructure commitment? Is it Federal, is it state, is it
the private sector?
And, when we move to the quality considerations that is
going to drive CMS and we look at e-prescription, we have a
huge disconnect, Congressman, in the capacity of all our rural
providers. And I am sure the rest of the panel would like to
comment on that.
Mr. Pomeroy. Dr. Myers?
Dr. Myers. I think I would add that the different silos in
information technology and telecommunicated health care are
converging, in a way, and yet we still operate in some patterns
that were set up way back in the 1970s and 1980s. And by that I
mean that imaging; all your X-rays are now digitized the same
as an electronic medical record. And the way you abstract those
for quality studies are all in the same medium now. But we tend
to think of those in different boxes.
I personally believe that we could use help resolving the
interoperability issues so that different small shops work for
each other. If you are running a half-billion-dollar
enterprise, you can figure out those interoperability problems.
But if you are a little place out in the country, you really
can't.
So I see technical assistance--and that is not to
undervalue the Office of Telemedicine Coordination. I have the
title wrong, and I am sorry. But the technical assistance
issues and coordination issues are very important. And for a
success story, we could look at Denmark and Scandinavia for
putting all these things together.
Mr. Pomeroy. Final point: I want to thank you, Dr. Myers,
by the way, an aside, for your work on behalf of the National
Rural Health Association, Co-Chair of the Rural Health Care
Alliance. I think it has gotten a lot accomplished for rural
medicine, and we appreciate your work, sir.
Dr. Myers. Thank you.
Mr. Pomeroy. This is to Mr. Fluharty.
As you look at rural health policy, we are always talking
about, gosh, you have to pay us more, you have to pay us more,
you have to pay us more fairly, this differential doesn't cut
it. Those are standard rural arguments relative to Medicare
reimbursements.
More recently, I have become intrigued with the notion of
advancing the argument that we ought to pay for systems that
are achieving better results at lower cost. And we have tried
to learn from the financial--we should reverse financial
incentives that drive care to costly inefficient places even at
the expense of quality. Where we pay more and get less, by way
of quality outcome, than systems that you are more likely to
see in rural America that are primary care medicine-based and
achieve better value, better outcome, lower cost.
Is there anything within your body of work and the
substantial research capacity within your organization that can
help us flesh out some of this?
Mr. Fluharty. Congressman, you know the work probably
already, given all of your service on the caucus. But there is
a body of work, and we would be glad to forward some things. I
would make two or three comments.
The research is very, very clear that there are a set of
quality indicators in which our rural practitioners are
advantaging patients vis-a-vis urban areas. Our overall concern
is the development of innovation systems of care that think
about return on investment but use population health as an
indicator. And you have named it essentially, Congressman.
I will simply say in our next SEBAS work with RUPRI--and we
are building that system for USDA--looking at community
facilities, we are trying to indigenize, essentially,
population care dynamics with a return on investment that talks
about new quality of care systems. If we can do that, it is
going to advantage the Agriculture Committee because there are
many ways in which a rural presentation of a problem is
resolved at a lower cost and a higher quality outcome. We just
don't have those numbers yet. It is difficult. But we clearly
need to move to those systems.
When we do that, what Dr. Myers raises is the real
question. If we think about continuum of care, we are going to
have to have some jurisdiction say, it may be linked to a
system outside of our county, and how do we build that? And
many states are already doing that. UVA is but one example.
North Carolina is doing great work.
But if this Committee would stay on that from a viability
standpoint within USDA, we might move the SEBAS facility
assessment to beginning to make those investments so that the
indicators are more than just economic return on investment.
Mr. Pomeroy. I know my time has expired. I think that would
be very, very helpful.
Thank you, Mr. Chairman.
The Chairman. Yes, that sure would be. Thank you. Thanks
very much.
All right. Mr. Spade, you had mentioned that Congress can
improve collaboration by creating incentives for rural health
providers to work together with their rural communities. Can
you just list for us what types of incentives you are talking
about to make sure that collaboration happens?
Mr. Spade. Sure. For instance, the alignment of quality of
care incentives between physicians and hospitals would be a
great example, where physicians are now moving into an
incentive-based system, pay for performance, if you will, and
hospitals as well. Right now those are not aligned. You know,
physicians have different ways that they are receiving
reimbursement for their hospitalized patients versus the
hospitals. The hospitals are going to be incentivized on
quality performance. The physician working that needs to also
be in alignment.
Outpatient settings, as well: If you think about, let's
say, evidence-based practice in diabetes or asthma care, those
need to be aligned with federally qualified health clinics,
community health centers, migrant health centers, as well as
the private practice of medicine, Medicaid programs for
instance. So that is one example.
Another example would be in the FQHC and community health
clinic program where more funding is being put into creating
those. But, in North Carolina, we have had to work quite a bit
to try to engage across the health care settings to bring
community health clinics and FQHCs into the local health care
environment, to be a part of working with a hospital, as part
of working with private physicians.
So those types of things are key. For instance, in that
program, you could incentivize it in their grant program, make
it a much stronger incentive piece. Make it very clear what
collaboration is in those organizations.
So there is a ton of opportunity. Also, you had the--this
is a great question that Representative Pomeroy asked.
Community care of North Carolina is an award-winning program
that is using Medicaid to bring together physicians, hospitals
and public health to operate a health care system, an
integrated health care system, based on quality and preventing
disease for Medicaid clients and uninsured residents of North
Carolina.
The cool thing about that program and the reason it is
award-winning is it saved $230 million over a 2 year period of
time. It drove incentives together where we improved the care,
saved money for the government program, and had increases of
health status of the clients being served.
Those are the kind of opportunities we need to find, where
we are saying, across the health care spectrum, we are working
together--public health, federally funded health centers,
private medicine plans, health care plans that are also engaged
in this work and activity. And that is the kind of alignment we
need to see.
The Chairman. Thank you very much.
Dr. Myers, you mentioned that current loan program
guarantees for rural health care facilities are a burdensome
process. What specific changes would you recommend to make sure
that the costly application requirements in these cumbersome
requirements would not be put on the applicant?
Dr. Myers. I would say, starting out, that I don't think
anybody in the field would undervalue the work that Under
Secretary Dorr has put into doing his best, given the terrain
he was dealt, to make that process work better.
One of the real problems just is sheer duration, and part
of the duration goes into proving that you are not really able
to get private money. And so you have to accumulate three,
four, five failures before you can go forward with access to
the USDA money.
It might be possible to devise an annually negotiated
formula that would specify eligibility rather than going
through a repetitive failure process to qualify for some of
that loan money.
People that have worked with this far more than I may have
other suggestions, but that would be one for starters.
The Chairman. If you could, please follow up with how you
would suggest doing that. Because I know with the network you
have in the National Rural Health Care Association and since
you are here on behalf of that association, would you go back
to their staff and ask them specifically to make a
recommendation?
Because if it is a burdensome process, we do want to make
specific changes or make suggestions for those changes. And we
would welcome, with the great respect that the National Rural
Health Association has, we would welcome your input. And if you
could do that, that would be most helpful.
Dr. Myers. Absolutely.
The Chairman. I know we are going to be going into votes
momentarily. I want to thank all of you for your attendance
today at this important hearing.
Under the rules of the Committee, the record of today's
hearing will remain open for 10 additional calendar days to
receive additional material and supplementary written
responses, as we have specifically asked of witnesses today.
We would ask you to please submit those within 10 calendar
days from today.
This hearing of the Subcommittee on Specialty Crops, Rural
Development and Foreign Agriculture is now adjourned.
I want to thank you all for your attendance and support.
May God bless you in the very important work you are doing to
help rural citizens in America. Thank you very much.
The meeting is adjourned.
[Whereupon, at 4:10 p.m., the Subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
Submitted Questions
Responses from Hon. Thomas C. Dorr, Under Secretary for Rural
Development, U.S. Department of Agriculture
Question Submitted by Hon. John Barrow, a Representative in Congress
from Georgia
Question. Please provide a response to the concerns expressed
regarding Medicare C payment disparity. I recognize that this is not
your jurisdiction, but Mr. Dorr indicated that he would get back to him
on this.
Answer. The scope of the concern raised at the hearing is not
within USDA's jurisdiction. We respectfully defer to HHS to answer this
question.
Question Submitted by Hon. Henry Cuellar, a Representative in Congress
from Texas
Question. Please provide list of the different rural health care
programs for all agencies within the Working Group and plan for
creating a ``one-stop shop''/web link, along with information on what
is available on distance learning/telemedicine. Same request made to
HHS.
Answer. The USDA Rural Development Telecommunications Program
manages the Distance Learning and Telemedicine Program (http://
www.usda.gov/rus/telecom/dlt/dlt.htm). The American Telemedicine
Association has a link to the USDA Distance Learning and Telemedicine
Program on its website (http://www.americantelemed.org/news/links.htm).
The Federal Communications Commission also links to the USDA site
(http://www.fcc.gov/cgb/rural/ and http://wireless.fcc.gov/outreach/
index.htm?job=broadband_home). We have coordinated with the Dept. of
HHS on their Health Information Technology initiative and with the FCC
on their telehealth pilot program. The www.grants.gov website provides
information on grant programs available from Federal agencies, and
there is a search capability.
USDA Rural Development welcomes any further suggestions concerning
websites.
Question Submitted by Hon. Mike McIntyre, a Representative in Congress
from North Carolina
Question. How telemedicine would best be accomplished in states,
using medical universities and research centers.
Answer. The Telecommunications Program's Distance Learning and
Telemedicine (DLT) loan and grant programs provide funding for
telemedicine projects throughout rural America. We do not believe that
there is one ``best'' model for deploying telemedicine services.
Flexibility, innovation, and the ability to adapt delivery mechanisms
to local circumstances are important considerations. As technology
advances, we are prepared to explore new options.
Many medical universities and research centers have participated in
the telemedicine program. Participation may evolve over time as
institutions gain experience with the program and identify new
opportunities for deployment.
DLT grantees have included for-profit and nonprofit organizations,
universities, private hospitals, clinics, etc. Program staff interacts
with telemedicine industry associations and organizations to stay
current on best practices and approaches. Information on grant projects
is available on the Rural Development website, with project
descriptions and contacts. Headquarters and field staff provide
information and support to prospective applicants, including how to
apply workshops. Outreach activities are conducted at the national,
state and local level.
Responses from Tom Morris, Acting Associate Administrator, Office of
Rural Health Policy, Health Resources and Services
Administration, U.S. Department of Health and Human Services
Question Submitted by Hon. John T. Salazar, a Representative in
Congress From Colorado
Question. A list of the different programs, including retention
programs, HHS has directed toward rural areas.
Answer. Below is a list of HHS rural and retention programs:
Health Center Program--Health Centers are community-based
and patient-directed organizations serving populations with
limited access to care. Health Centers are open to all
regardless of ability to pay. Moreover, the Health Centers
provide comprehensive primary care service on a sliding fee
based on the patient's income. Health Centers improve the
health status of underserved populations living in isolated
rural communities, where residents often have no where else to
go. To meet this need, over half (53 percent) of Health Centers
serve rural populations. (HRSA)
National Health Service Corps (NHSC)--The NHSC Scholarship
Program awards scholarships to health professions students
committed to a career in primary care and service in
underserved communities of greatest need. Awards are targeted
to individuals who demonstrate characteristics that are
significantly related to a probable success in a career of
service to the underserved. The NHSC Loan Repayment Program
offers fully trained primary care clinicians the opportunity to
receive assistance to pay off qualifying educational loans in
exchange for service in a HPSA of greatest need. Both NHSC
scholars and loan repayers are equally ready to serve. This
service commitment is for a minimum of 2 years in an
underserved community. (HRSA)
Nursing Education Loan Repayment Program (NELRP)--This is a
competitive program that repays 60 percent of the qualifying
loan balance of participating registered nurses in exchange for
2 years of service at a critical shortage facility.
Participants may be eligible to work a third year and receive
an additional 25 percent of the qualifying loan balance. (HRSA)
Nursing Scholarship Program (NSP or ``Nursing
Scholarship'')--This is a competitive program for individuals
attending schools of nursing. The scholarship consists of
payment for tuition, fees, other reasonable educational costs,
and a monthly support stipend. In return, the students agree to
provide a minimum of 2 years of full-time clinical service (or
an equivalent part-time commitment, as approved by the NSP) at
a health care facility with a critical shortage of nurses.
(HRSA)
National Rural Recruitment and Retention Network (3RNet)--
This network links together rural health care provider
recruitment experts in 45 states. The 3RNet links providers in
search of rural practice opportunities with rural communities
in need of practitioners. More information on the 3RNet is
available at http://www.3rnet.org. (HRSA)
Capacity Building to Develop Standard Electronic Client
Information Data System (http://www.raconline.org/funding/
funding_details.php?funding_id=1754)--Funding to organizations
funded under Part A-D of the Ryan White HIV/AIDS Treatment and
Modernization Act of 2006 to promote the development of
standard electronic client information data. (HRSA)
Community Economic Development Program Operational Projects
(http://www.raconline.org/funding/
funding_details.php?funding_id=516)--Grants to provide
technical and financial assistance for community economic
development activities designed to address the economic needs
of low-income individuals and families through the creation of
employment and business opportunities. (ACF)
Empowering Older People to Take More Control of Their Health
Through Evidence-Based Prevention Programs: A Public/Private
Collaboration (http://www.raconline.org/funding/
funding_details.php?funding_id=1267)--These grants are designed
to mobilize the aging, public health and nonprofit networks at
the state and local level to accelerate the translation of HHS
funded research into practice. (AoA)
Faculty Loan Repayment Program (FLRP) (http://
www.raconline.org/funding/funding_details.php?funding_id=314)--
A loan repayment program for individuals from disadvantaged
backgrounds who serve as faculty at eligible health professions
schools for a minimum of 2 years. (HRSA)
Office of Child Support Enforcement Special Improvement
Project (SIP) Grants (http://www.raconline.org/funding/
funding_details.php?funding_id=325)--Funding for special
improvement projects which further the national child support
mission, vision, and goals. (ACF)
Projects of National Significance: Family Support 360 for
Military Families (http://www.raconline.org/funding/
funding_details.php?funding_id=1896)--Grants to plan and
implement up to three Family Support 360 Centers for military
families of children with developmental disabilities. (ACF)
Rescue & Restore Victims of Human Trafficking Regional
Program (http://www.raconline.org/funding/
funding_details.php?funding_id=1681)--Grants to continue and
expand the efforts through regional grantees who will serve as
the focal point for an intensification of local outreach to and
identification of victims of severe forms of trafficking in
persons. (ACF)
Take Action: Healthy People, Places, and Practices in
Communities Project (http://www.raconline.org/funding/
funding_details.php?funding_id=1452)--Funding to evaluate
activities in local communities across the HHS regions that
support and promote healthy lifestyles. (OPHS)
Delta Health Initiative Cooperative Agreement (http://
www.raconline.org/funding/
funding_details.php?funding_id=1183)--This Cooperative
Agreement Program is to provide funding to an alliance to
address longstanding unmet rural health needs (access to health
care, health education, research, job training and capital
improvements) of the Mississippi Delta. (HRSA)
FLEX Critical Access Hospital Health Information Technology
Network Implementation Grants (CAHHITN) (http://
www.raconline.org/funding/
funding_details.php?funding_id=1610)--Funding for up to 15
grantees to support the development of one (1) Flex CAH-HIT
Network pilot programs in each state that is awarded a grant.
Only current Flex Grantees may apply. (HRSA)
In Community Spirit--Prevention of HIV/AIDS for Native/
American Indian and Alaska Native Women Living in Rural and
Frontier Indian Country Program (http://www.raconline.org/
funding/funding_details.php?funding_id=1190)--To support
collaborative efforts to provide accurate prevention education
to Native/American Indian and Alaska Native (AI/AN) women
living in rural and frontier Indian Country. (OWH)
Medicare Rural Hospital Flexibility Program (http://
www.raconline.org/funding/
funding_details.php?funding_id=1609)--Grants to improve and
sustain access to appropriate healthcare services of high
quality in rural America by supporting conversion of small
rural hospitals to critical access status, helping develop
rural health care networks, and strengthening rural EMS. (HRSA)
Medicare Rural Hospital Flexibility Program Evaluation-
Cooperative Agreement (http://www.raconline.org/funding/
funding_details.php?funding_id=1864)--The evaluation project
will continue to assess the effectiveness of implementing the
grant program in states and in rural communities and to provide
recommendations for increasing the impact of the program to
improve healthcare in rural America. (HRSA)
One-Year Rural Health Research Grant Program (http://
www.raconline.org/funding/funding_details.php?funding_id=679)--
Grants to conduct and disseminate policy-relevant research on
issues of national significance in the area of rural health
services. (HRSA)
Targeted Rural Health Research Grant (TRHR)--This grant
provides funding for policy-oriented research projects which
address critical issues facing rural communities in their quest
to secure affordable, high quality health services. (HRSA)
Rural Health Care Services Outreach Grant Program (http://
www.raconline.org/funding/funding_details.php?funding_id=60)--
The emphasis of this grant program is on health care service
delivery through creative strategies requiring the grantee to
form a consortium with at least two additional partners. (HRSA)
Rural Health Network Development Grant Program (RHND)
(http://www.raconline.org/funding/
funding_details.php?funding_id=61)--This grant program is
designed to support organizations that wish to further ongoing
collaborative relationships among health care organizations to
integrate systems of care administratively, clinically,
financially, and technologically. (HRSA)
Rural Health Network Development Planning Grant Program
(RHNPGP) (http://www.raconline.org/funding/
funding_details.php?funding_id=218)--This Rural Health Network
Development Planning Grant Program supports 1 year of planning
to develop integrated health care networks in rural areas.
(HRSA)
Rural Health Research Center--Cooperative Agreement Program
(http://www.raconline.org/funding/
funding_details.php?funding_id=361)--Grant awards for Rural
Health Research Centers. (HRSA)
Rural Policy Analysis Cooperative Agreement (http://
www.raconline.org/funding/
funding_details.php?funding_id=1572)--Grant to support research
and analysis into key policy issues affecting rural
communities. (HRSA)
Small Rural Hospital Improvement Grant Program (SHIP)
(http://www.raconline.org/funding/
funding_details.php?funding_id=64)--This program provides
funding to small rural hospitals to help them do any or all of
the following: pay for costs related to the implementation of
PPS, comply with provisions of HIPAA and reduce medical errors
and support quality improvement. (HRSA)
State Rural Health Coordination and Development Cooperative
Agreement (http://www.raconline.org/funding/
funding_details.php?funding_id=947)--Grants to build and
sustain rural health infrastructure in states. (HRSA)
Targeted Rural Health Research Grant Program (http://
www.raconline.org/funding/
funding_details.php?funding_id=1824)--Grants for Rural Health
Research studies on a selected number of topics. (HRSA)
Research on Emergency Medical Services for Children (http://
www.raconline.org/funding/funding_details.php?funding_id=831)--
Grants to improve the quality and quantity of research related
to emergency medical services for children (EMSC). (HHS)
Frontier Extended Stay Clinic Program (FESC)--Cooperative
agreement demonstration program to examine the effectiveness
and appropriateness of a new type of provider, the FESC, in
providing health care services in certain remote clinic sites.
The FESC is designed to address the needs of patients who are
unable to be transferred to an acute care facility because of
adverse weather conditions, or who need monitoring and
observation for a limited period of time. (HRSA)
State Offices of Rural Health Grant Program (SORH)--Grants
to strengthen rural health care delivery systems by creating a
focal point for rural health within each state. (HRSA)
Delta States Rural Development Network Grant Program
(Delta)--The purpose of this grant program is to fund
organizations located in eight Delta States (Alabama, Illinois,
Kentucky, Louisiana, Mississippi, Missouri, and Tennessee)
which address unmet local health care needs and prevalent
health disparities through the development of new and
innovative project activities in rural Delta communities.
(HRSA)
Rural Access to Emergency Devices (RAED)--This grant program
provides funding to rural community partnerships to purchase
automated external defibrillators (AEDs) that have been
approved, or cleared for marketing by the FDA; and provide
defibrillator and basic life support training in AED usage
through the American Heart Association, the American Red Cross,
or other nationally-recognized training courses. (HRSA)
Small Health Care Provider Quality Improvement Grant Program
(Rural Quality)--This grant program supports rural public,
rural nonprofit, or other providers of healthcare services,
such as Critical Access Hospitals or rural health clinics. The
purpose of the program is to improve patient care and chronic
disease outcomes by assisting rural primary care providers with
the implementation of quality improvement strategies, with a
focus in quality improvement for chronic disease management.
(HRSA)
Radiation Exposure Screening and Education Program (RESEP)--
RESEP supports healthcare organizations to improve the
knowledge base and health status of persons adversely affected
by the mining, milling, or transporting of uranium and the
testing of nuclear weapons for the nation's weapons arsenal.
(HRSA)
Black Lung Clinics Program (BLCP)--This program seeks out
and provides miners (active or inactive) with the intention of
minimizing the effects of respiratory impairment or improving
the health status of miners or coal miners exposed to coal dust
as a result of employment and to increase coordination with
other services and benefits programs to meet the health-related
needs of this population. (HRSA)
Program of All-Inclusive Care for the Elderly (PACE)--The
PACE program provides a range of services to help certain
Medicare and Medicaid beneficiaries who meet their state's
standards for nursing home care to continue living safely at
home rather than be institutionalized. (CMS)
Telehealth Network Grant Program (TNGP)--Grant program that
provides grants to health care networks to develop and evaluate
the use of Telehealth technologies to improve access to
underserved communities. The TNGP focuses on providing
innovative telehealth services to rural areas. From March 2007
through February 2008, nearly 140 thousand telehealth visits
for 46 different specialty services were provided to patients
in rural communities under this Program. (HRSA)
Telehealth Resource Center Grant Program--HRSA supports five
regional and one national telehealth resource centers to
provide technical assistance to rural communities interested in
providing or receiving telehealth services. The five regional
centers work together to make available technical assistance
from the nation's experts on practical approaches to creating a
successful telehealth program, whereas the national center
focuses on technical assistance to address the legal and
regulatory barriers to sustaining successful programs. (HRSA)
Question Submitted by Hon. Jim Costa, a Representative in Congress from
California
Question. Information on rulemaking status and effects on rural
areas.
Answer. HRSA received many substantive comments on the February 29,
2008 Proposed Rule on the Designation of Medically Underserved
Population and Health Professional Shortage Areas and will consider
these comments.
Question Submitted by Hon. John Barrow, a Representative in Congress
from Georgia
Question. A response to the concerns expressed regarding Medicare C
payment disparity.
Answer. We understand that in 2006 and 2007 there were complaints
from Critical Access Hospitals (CAH) that Medicare Advantage (MA) plans
were not making timely payments and were requesting certain
documentation in order to receive payment. Most of these complaints
were related to payments from non-network private fee-for-service
(PFFS) plans. The Centers for Medicare & Medicaid Services (CMS) has
provided instructions to contracted MA plans on making appropriate
payments to contracted and non-contracted CAHs.
MA comprises a number of different health plan options, from
traditional managed care HMOs to PFFS options that provide a wide range
of providers. In PFFS plans that use ``deeming'' to obtain services for
their beneficiaries at providers with whom the plan has no contract,
the plan is required to pay the CAHs based on standard Medicare FFS
rules--in other words, 101% of their costs--just as FFS does--even if
they are used by the PFFS plan's members on a non-emergent basis. CAHs
that choose to contract with an MA plan to become part of its network
are reimbursed at the rate that was agreed upon between the CAH and the
MA plan. Since there is no Federal guarantee of supplemental payments
to CAHs, CAHs that contract with any type of MA plan must negotiate the
most advantageous rate to the best of their ability. CMS is prohibited
from interfering in the contracting process between MA plans and
providers.
We also understand there have been complaints that MA plans are not
cost settling with CAHs, in order to be paid like Medicare. Although
CAHs may cost settle with their Fiscal Intermediary (FI) for FFS
claims, MA plans are not required to cost settle. FIs work directly
with CAHs during the course of the CAH's fiscal year to set estimated
(a.k.a. ``interim'') payment rates amounts based on their costs;
therefore, in order to pay the interim rate to the CAH, MA plans may
ask a billing CAH to submit a copy of their most recent interim rate
letter from their FI. The interim rate is sufficient compensation for
cost-reimbursed providers. Sometimes the CAH ``wins'' when the cost
settlement is downward, sometimes the MA plan ``wins'' when the cost
settlement is upwards. Interim rates may change one or more times
during the year, therefore, it is important plans are aware of the
correct rate, since they must reimburse the CAH for the rate that is in
effect at the time of service.
Question Submitted by Hon. Henry Cuellar, a Representative in Congress
from Texas
Question. A list of the different rural health care programs for
all agencies within the Working Group and plan for creating a ``one-
stop shop''/web link, along with information on what is available on
distance learning/telemedicine.
Answer. A list of HHS programs is provided above (Rep. Salazar
list). HRSA does not maintain a list of rural programs across the
Federal Government. However, HRSA funds the Rural Assistance Center
(RAC) which offers rural residents one-stop shopping on health-related
rural issues. The RAC collects information about rural health funding
opportunities from across the Federal agencies. The link to the website
is www.raconline.org.
Question Submitted by Hon. Mike McIntyre, a Representative in Congress
from North Carolina
Question. How telemedicine would best be accomplished in states,
using medical universities and research centers.
Answer. University medical centers play a critical role in
developing telemedicine programs throughout the country, usually acting
as the pioneers in establishing telemedicine networks and documenting
the contribution of these networks to improving access to care.
However, the role of the universities differs dramatically from state-
to-state.
The University of California, Davis is a prominent example of a
university and state that invest heavily in telemedicine. UC Davis
launched one of the earliest programs in 1992, focusing on fetal
monitoring in rural communities. Over the years, UC Davis created the
Telemedicine Learning Center, providing educational programs for health
professionals, administrators, and technologies on how to develop a
sustainable telemedicine program. It is a key provider of telemedicine
services to rural communities within the state. In 1996, California was
the first state to pass a law that required providers to be reimbursed
for delivering services via telemedicine and in 2006, the legislature
allocated $200 million for designing, building and equipping facilities
in the University of California system that enhance medical education,
with an emphasis on telemedicine.
Universities not only play key roles in service provision and
educating/advocating for telemedicine, they are often the nexus in
statewide initiatives to obtain funding. For example, in both Virginia
and Arkansas, universities were pivotal players in obtaining
significant funds to support the development of pilot programs under
the FCC's Rural Pilot program to improve the telecommunications
infrastructure for telehealth services in rural areas.
Response from Wayne Myers, M.D., Trustee, Maine Health Access
Foundation; Past President, National Rural Health Association
Question Submitted by Hon. Bob Goodlatte, a Representative in Congress
from Virginia
Question. How would health information technology legislation that
has been drafted in other committees accommodate concerns specific to
rural areas?
Answer. Representative Goodlatte, thank you for your leadership on
issues addressing the high-tech needs of America.
The main concern of rural health providers is their financial
ability to both purchase and then maintain health information
technology systems. In most of the HIT bills that have been introduced,
Congress has sought to address these concerns in one of two ways--
incentive payments as a percentage of the Medicare payment or
competitive grant programs to purchase equipment. Rural providers need
more.
Rural facilities have less volume than their urban counterparts.
Most of the purchase cost of HIT equipment has a single fixed cost. No
matter how many patients a provider sees, such equipment is still going
to cost approximately the same basic amount both to purchase and
maintain. So while incentive payments may seem to help defer some of
the maintenance costs or seem to reward facilities that use the
technology the most, the neediest rural facilities will not ever be
able to use these payments to make such purchases.
Alternatively, grant programs have the promise of providing the
upfront cost of purchasing HIT equipment. Unfortunately, the grant
programs proposed in a number of Congressional HIT bills do not carve
out rural providers with a separate pot of money or help to weigh rural
providers appropriately. Our experience with competitive grants is that
it is the largest providers that have the staffing needed to compete
for such monies. And, even if rural providers end up receiving these
grants, there is not follow up funding to help them operate these
systems. Often ongoing maintenance costs exceed the purchase cost
within a very short time frame.
Obviously, some combination of the two with a rural emphasis would
be helpful to increase HIT utilization in rural America.
One last thing that I would note, Congress has introduced a variety
of different programs over the years that have been housed in a number
of Federal agencies--the Department of Agriculture, Department of
Health and Human Services, Federal Communications Commission--we would
strongly recommend using a single lead agency to advance these
potential initiatives, such as the Office of the National Coordinator
for Health Information Technology. Doing so makes it much easier for
rural providers to access the adequate assistance than dealing with a
variety of Federal agencies.
Response from National Rural Health Association by Charles A. Wells,
Jr., President, Healthcare Financial Advisers, Inc.
Question Submitted by Hon. Mike McIntyre, a Representative in Congress
from North Carolina
Question. What changes would you recommend to make sure that
application requirements for loan guarantee programs are less
burdensome and costly for the applicant?
Answer. The following comments about the suitability of the USDA
loan programs for rural hospitals are based on my 30 years of
experience working as a financial and strategic adviser in this market.
During that time, I have assisted several clients in pursuing USDA
financing, although none of these transactions have occurred in the
last 3 years.
As an aside I've had relatively good experience with USDA on
smaller nursing home financings, as these projects are typically much
smaller and significantly less complex.
Background
Prior to 2003/2004 there was very limited access to capital for
rural hospitals (Critical Access Hospitals in particular). Accordingly,
the USDA and HUD programs were in the forefront of options under
consideration. Then the ``conventional'' tax exempt bond markets (sold
primarily to institutional investors such as bond funds, banks, and
insurance companies) and the underwriting firms who sell to those
sources warmed up to the cost reimbursement elements of Critical Access
Hospitals, and the situation improved dramatically. The period from
2004-August 2007 was the best time in my working lifetime (1970-2002)
for rural hospitals to access capital through conventional, non-
governmental sources. From my vantage point, during this period, the
governmental programs were non-competitive.
When USDA and HUD were the only games in town, the deficiencies in
their offerings were tolerated, but now the market has changed.
However, the last 12 months have been very tumultuous in the tax exempt
markets for rural hospitals, and USDA and HUD could once again become
relevant.
When I first encounter a new client situation with a rural hospital
(critical access or otherwise), I do a fairly quick assessment of their
financial history and prospects to determine where they might access
capital under the most favorable terms. For the past 4-5 years, the
only clients I would recommend pursuing USDA or HUD would be those that
I am absolutely certain would be turned down by the conventional
markets.
The following summarizes some of the reasons for this viewpoint:
Direct Loan Program
Loan Size Limitations/Inter-creditor agreement complexities
To my knowledge, the largest USDA direct loan ever made to a
hospital was $7 million (for a CAH in Iron County, MO). Most USDA
direct loans are in the range of $2-$4 million. Most major replacement
projects for Critical Access Hospitals will require funding in excess
of $20 million. This means that the USDA Direct loan must be married
with another debt instrument. At the conversational level, the USDA
people will say ``no problem, we're happy to do a loan on a parity
basis with another lender(s).'' However, it has been my experience that
this can be a troublesome once the USDA attorneys become involved,
resulting in USDA seeking a preferred position. This is an enormously
important ``detail.'' Whatever savings might occur with the lower rate
on $5 million of a USDA direct loan will be offset by increases in the
costs of the remaining $15+ million.
Prevailing Wage
If a hospital accepts governmental money, it will subject the
entire project to ``prevailing wage'' (which I believe is part of the
Davis-Bacon Act). For example, in a recent rural Illinois project this
meant that unskilled laborers were making $41/hr to push a broom on the
construction site. This can add 3%-7% to overall construction costs.
This can also upset the local labor market significantly.
Time Required for the Application Process
Almost all decisions on the direct loan program are made in August-
September (the end of the government's fiscal year is 9/30). One
typically submits an application in June seeking preliminary approval
in August with final approval in either September or October. For
applications not funded through the state allocation, the next step is
to access the ``pooling'' process to see if there are unused funds from
other states. This could delay acceptance until October/November or
rejection at that time. In order to file this application, you will
need an ``examined'' forecast versus the ``compiled'' forecast. This
typically increases the hospital's cost by $25,000-$50,000.
Hospital projects that don't fit the government's calendar are at a
disadvantage and are faced with the decision to either slow down their
efforts or seek other, more flexible sources of capital.
The most cumbersome part of the application process is that the
construction drawings must be substantially complete so USDA architects
can review the plans. The practical implications of this are that the
hospital must spend several hundreds of thousands of dollars in
architectural fees without having any assurance that their project will
be funded. In contrast, in the commercial market the underwriters give
reasonable assurances about the viability of the financing much earlier
in the process (after the ``schematic'' design is complete) and before
the hospital then undertakes the major expense of completing ``detailed
design'' and ``construction drawings.'' In addition I know several,
capable hospital architects who have been through this, and find that
the USDA architectural review is very cumbersome and can result in many
expensive, unnecessary changes.
There is also a requirement to receive a letter from a lender
saying ``we won't lend money on this deal.'' In theory, the USDA
programs are supposed to be for the deals conventional lenders will
pass on.
Based on personal, and painful experience with clients in the pre
2003 era, there is a distinct possibility that you can go through this
expensive, time-consuming process and receive a rejection. On a $20
million project, assuming 10% inflation, wasting 6 months chasing USDA
can erode a hospital's borrowing power by $1 million.
USDA Loan Guarantee Program
If turned down in the direct loan program, USDA will often promote
their ``loan guarantee'' program which shares all of the undesirable
qualities of the Direct program, but with added disincentive of high,
taxable interest rates (usually over 7.5% and usually variable).
The loan guarantee program is even more cumbersome than the direct.
This application process involves finding a bank willing to make the
loan with the guarantee. It is also worth noting that the USDA
guarantee doesn't take effect until the project is completed and the
hospital is certified for occupancy. The lender then has to bear the
full risk of the construction phase of the loan, thus increasing the
cost of capital.
Additional Borrowing Covenants
One of the worst aspects of a USDA loan relates to covenants.
Conventional bonds have ``additional borrowing'' covenants that specify
``you meet these financial criteria, then you can issue additional debt
on a parity basis with the current bonds.'' The USDA covenant says
``you can issue additional debt with our permission.'' This can be a
very perilous trap and forces the hospital to either refinance, or go
through an entire re-application process, with a significant chance of
getting ``no'' for an answer.
State Differences
USDA is organized by districts within states. It has been my
experience that some states have staff that understand rural hospitals,
such as Missouri, and some states that don't.
Questions for the USDA Representative
During the past few months I have had conversations with the USDA
representatives in Kansas and Iowa who are responsible for promoting
the ``Loan Guarantee'' program in their states. I asked each the
following questions:
How many such deals have been done in your state? Answer:
``None''.
What interest rates might my clients expect through this
program? Answer: ``Don't know.''
Can you get me a list of rates/banks from any transactions from
other states? Answer: ``I don't have access to that
information.''
What banks have the most experience in working with USDA on
this program? Answer: ``I don't know.''
What is your underwriting criteria? And if my client meets that
criteria what is the probability of getting approval? Answer:
``I don't know.''
I can assure you that those promoting other financing options for
rural hospitals are better informed about their offerings.
Recommendations
As of today rural hospitals that are reasonably strong have several
non governmental options in accessing capital and have little reason to
consider USDA. Weaker hospitals could benefit from an improved USDA
offering. I would, however, be gravely concerned if improvements in the
USDA program were such that the result was the diminution of the
private capital markets from this market. Then we would be back to the
pre 2003 era.
Here's a quick list of some suggested changes USDA might consider
to improve their offerings:
Process:
--Establish reasonable underwriting standards to give applicants a
reasonable idea whether their application will be accepted
before undertaking a lengthy process. For those meeting the
criteria provide a written approval subject to certain
conditions. As a practical matter those of us who live and
breath rural hospitals can undertake this analysis in a matter
of hours from readily available data. Much of the information
required on the USDA application is of no value in assessing
the creditworthiness of the loan.
--Eliminate the requirement to have detailed construction drawings
before approving a loan.
--Eliminate the requirement for USDA architects to review the plans.
Every project will be reviewed by the state's architect, the
state fire marshal, and Medicare certifying authorities. The
USDA architect's review adds little value and in some cases
reduces value.
--Accept a compiled forecast vs. examined.
--Change loan covenants to make them more competitive with
conventional tax exempt bonds, specifically pertaining to the
topic ``additional borrowing'' on a parity basis.
--In the case of the direct loan program revise USDA thinking about
parity ``Inter-creditor'' agreements on a parity basis. There
are many excellent examples of how this can be accomplished by
borrowing from the private markets. There is no need to
reinvent this ``wheel''.
--Allow hospitals to use ``guaranteed maximum price'' contracts with
construction managers. Currently USDA requires that all
construction be done on a ``hard bid'' basis. The advantage of
GMPs is that it speeds up the process.
Loan guarantee program:
--Expand the guarantee to cover the construction period. Banks
typically view construction loans as distinct from permanent
financing, with major differences in the credit analysis. Many
banks consider the construction period to be much higher than
the post construction period and they price their capital
accordingly. In contrast, tax exempt revenue bonds issue
combine the two components. For the USDA program to be
successful they need to act more like the conventional tax
exempt markets.
The greatest improvement that could be made to the loan guarantee
would be to allow the loans to be tax exempt, but I am also aware of
the complex dynamics associated with a change of this nature. A change
of this nature could have an adverse affect on other sources of capital
for the rural hospitals.
Summary
I grew up in a small town, have worked with several hundred rural
hospitals, and have traveled many blue highways. I am a passionate
believer in the value of rural hospitals to their communities, and I
would welcome the chance to assist in anything that would increase
their access to capital under favorable terms. I am also quite aware of
the unintended consequences that can result from good intentions. I
would be guardedly optimistic about the potential for good to occur
from significant revisions in the way USDA approaches the rural
hospital market. I hope these thoughts are helpful. I'd be happy to
discuss this topic further at any time.
Chuck Wells.