[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

                              ----------                              
                                                                   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

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                              Attachment 2

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    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.*
---------------------------------------------------------------------------
    * 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.
---------------------------------------------------------------------------
    \1\ Quality Through Collaboration, The Future of Rural Health, 
Institute of Medicine, National Academies Press, 2004.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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:
---------------------------------------------------------------------------
    \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 
---------------------------------------------------------------------------
        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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.


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