[Senate Hearing 114-]
[From the U.S. Government Publishing Office]



 
                       TESTIMONY ON RURAL HEALTH

                              ----------                              


                         THURSDAY, MAY 7, 2015

                           U.S. Senate,    
    Subcommittee on Labor, Health and Human
     Services, and Education, and Related Agencies,
                               Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10:03 a.m., in room SD-124, Dirksen 
Senate Office Building, Hon. Roy Blunt (chairman) presiding.
    Present: Senators Blunt, Moran, Cochran, Cassidy, Capito, 
Murray, and Schatz.


                 opening statement of senator roy blunt


    Senator Blunt. The Appropriations Subcommittee on Labor, 
Health and Human Services, Education, and Related Agencies will 
come to order.
    We're glad to have all of you here this morning. I want to 
thank the witnesses for appearing before the subcommittee today 
to discuss the unique healthcare needs that face rural 
communities.
    We have two panels this morning. Members should know that I 
expect to call up the second panel around 11 a.m., so we have 
adequate time to hear from both. Of course, if for some reason 
we get done with this panel earlier than that, we will go to 
the second panel quicker. But we will try to go to the second 
panel no later than 11 o'clock.
    We are glad that everybody has come today to help us talk 
about this issue. Certainly, one of the priorities of the 
committee and one of my priorities in Congress has been to 
ensure that all Americans have access to quality and affordable 
health care in their local communities, regardless of where 
they live.
    The obstacles faced by rural healthcare patients and 
providers in rural communities are unique and often 
significantly different from those in urban areas. I'll be at 
the Truman Medical Center in Kansas City tomorrow, and they 
have a whole different set of problems, but they have some 
unique problems, too. Both our inner-city hospitals and our 
rural hospitals have challenges that are unique to them.
    In rural healthcare, the issues can range from lack of 
access to simple primary care physicians to difficulty finding 
specialists. As a result, many patients have to drive long 
distances to receive care or simply just may not seek care 
until it is too late.
    This creates unnecessary disparities in healthcare not 
found in other parts of the country and ultimately costs 
taxpayers more in Medicare expenditures than if we would've 
provided access in a better way. I think it is critically 
important that Washington recognize that healthcare access is 
essential to the survival and success of rural communities 
across the country.
    I am concerned that some of the proposals within the 
department's budget and recent regulations that have been 
issued that would just disproportionately affect rural 
healthcare and jeopardize healthcare access and, in fact, when 
you do that, you really threaten the survival of small towns.
    The Medicare payment system often fails to recognize the 
unique circumstances of rural or small hospitals. And this 
administration has appeared, in my view, to target rural 
hospitals, in particular.
    For example, the department once again has proposed to 
decrease the reimbursement rate for critical access hospitals 
and eliminate critical access hospitals within 10 miles of any 
other hospital. The department has proposed that change for 
years, yet just recently has been able to provide details to 
Congress about which hospitals would be eliminated if we look 
at that new mileage standard.
    The department has continuously issued regulations that 
would disproportionately affect small and rural hospitals more 
than their larger urban counterparts. CMS's abrupt enforcement 
of the 96-hour condition of payment for critical access 
hospitals and the direct physician supervision rules and 
recovery audit contractor audits not only hinder the care of 
patients but consume significant amounts of medical staff time 
and resources to comply with those rules.
    Finally, given the fact that the department requested a 
$4.1 billion increase for the coming fiscal year, it is even 
more surprising, or maybe not so surprising, that the Office of 
Rural Health received a $20 million cut in the proposal that 
the administration issues. The administration, in fact, has 
never once asked for an increase in rural health programs.
    More than 46 million Americans live in rural areas and rely 
on rural hospitals and other providers as their lifeline to 
care. They face ongoing challenges in assessing proper medical 
treatment while rural healthcare providers are overwhelmed with 
Federal rules.
    Certainly, Senator Murray and I both have an interest in 
this. I look forward to working with her and the rest of the 
committee to ensure that all Americans, regardless of where 
they live, have access to affordable health care.
    Senator Murray.


                   statement of senator patty murray


    Senator Murray. Thank you, Mr. Chairman, for calling this 
hearing on such an important topic.
    I'm very pleased to welcome all of our witnesses who are 
here today, but I'm particularly excited to welcome Julie 
Petersen. Julie is the Chief Executive Officer of the PMH 
Medical Center in Prosser, Washington. Through her work at PMH 
and her leadership across the State, Julie is helping make sure 
that rural communities get the healthcare they need.
    So, Julie, thank you for coming all the way out here to 
testify today.
    Over the last few years, we have taken historic steps 
forward when it comes to making our healthcare system work 
better for our families. But I believe strongly there is much 
more we can do to continue to improve affordability, access and 
quality, and to keep building a healthcare system that works 
for women, families, and seniors and puts their needs first.
    In my home State of Washington where about one out of every 
five residents lives in a rural area, a critical part of this 
work is making sure that families can find the doctors they 
need right in their own communities, regardless of whether they 
live in Prosser or in Seattle. Of course, this is true in many 
other parts of the country as well.
    This is a serious challenge I have been focused on for a 
long time. I'm proud that Washington State is doing so much to 
tackle it head on.
    Washington State recently received a Federal grant to 
explore the role of community paramedics in providing home 
follow-up care. This approach could reduce emergency room 
visits and help patients avoid the cost and inconvenience of 
leaving home to get care.
    I also hear repeatedly about the number of new patients 
getting coverage through the Affordable Care Act across my 
State. For example, a network of four rural health clinics in 
Whatcom County reported a 43 percent increase in patients last 
year. That is great news, but it also means we need to think 
carefully about how to make sure there are enough doctors and 
other health care providers to treat all of the patients.
    So I'm glad to have the opportunity today to talk about the 
investments we need to make so we can build on that progress.
    The agreement the President recently signed into law to fix 
the broken SGR system took important steps to support access to 
healthcare in rural areas. It included funding for health 
centers and the National Health Service Corps, each of which 
play a critical role in expanding access to primary care for 
struggling families, especially in our rural areas.
    The SGR legislation also extended funding for teaching 
health center residencies. My home State of Washington was a 
leader in setting up these training programs and now primary 
care providers are being trained in communities with a shortage 
of healthcare providers from Spokane to Yakima to Toppenish to 
our Puyallup Tribe. We know that training in rural areas is 
critical to keeping providers with an interest in rural 
practice in our high-need communities.
    I'm pleased we were able to agree in a bipartisan way to 
sustain those investments, and I hope we will be able to do 
even more moving forward.
    I'm also pleased that the President's budget maintains 
investments in other key programs that support rural health. 
The 340B drug-pricing program, for example, provides outpatient 
drugs to eligible healthcare providers at lower cost. Twenty-
six out of my State's 39 critical access hospitals, which 
provide crucial support to rural communities, participate in 
that program.
    Similarly, the budget continues to support enhanced payment 
for rural health clinics and community health centers. In my 
home State and many others, these facilities help make sure 
that when, for example, a parent needs to take a sick child to 
the doctor or a senior needs follow-up care, it is easier for 
them to get the treatment they need in their own community. So 
we really need to make sure they have the resources that they 
need.
    I do also want to express concern that the budget proposes 
to cut the rural hospital flexibility program. That program 
helps sustain and improve hospitals in the most difficult to 
reach communities, including 10 hospitals in my home State. I 
believe we absolutely need to see continued strong support for 
this investment in the health and safety of families in rural 
communities.
    Finally, I know rural health access is a priority all of us 
here care about, so I want to note that the President's budget 
is able to sustain those investments along with supporting 
other key priorities from education to infrastructure to 
defense because it responsibly replaced the harmful cuts from 
sequestration that are now set to kick back in.
    I'm proud that, last Congress, Republicans and Democrats 
were able to come together to reach an agreement that rolled 
back sequestration for fiscal years 2014 and 2015. Now with our 
deal set to expire, I hope we can build on that bipartisan 
foundation and prevent these harmful cuts to investments in 
families and jobs and our economy, including critical support 
for our rural healthcare.
    I look forward to working with all of our colleagues on 
this in the coming weeks and months.
    Again, I want to thank all of our witnesses for being here.
    Mr. Chairman, again, thank you for holding this really 
important hearing. This is a topic that means a lot to the 
people in my State.
    Senator Blunt. Thank you, Senator Murray.

                DEPARTMENT OF HEALTH AND HUMAN SERVICES

    Senator Blunt. We have two witnesses on the first panel, 
Sean Cavanaugh, the Deputy Administrator and Director of the 
Center for Medicare, Centers for Medicare and Medicaid 
Services; and Tom Morris, the Associate Administrator for the 
Federal Office of Rural Health Policy, Health Resources and 
Services Administration. We are pleased you are both here, and 
we'll listen to your opening statements.
STATEMENT OF TOM MORRIS, ASSOCIATE ADMINISTRATOR, 
            FEDERAL OFFICE OF RURAL HEALTH POLICY, 
            HEALTH RESOURCES AND SERVICES 
            ADMINISTRATION
    Mr. Morris. Mr. Chairman, members of the committee, I want 
to thank you for the opportunity to testify today on behalf of 
the Health Resources and Services Administration (HRSA) and the 
Federal Office of Rural Health Policy (FORHP) on the topic of 
rural health.
    I'm pleased to discuss not only the challenges that you've 
already outlined but also some of the accomplishments of our 
programs. Across the Department of Health and Human Services, 
there are a range of programs and resources that support rural 
communities. In 2014, this included $11 billion in grant 
funding that went to rural communities. FORHP serves as the 
focal point for rural health activities with a continual focus 
on improving access to care.
    Today, there are nearly 50 million people living in rural 
areas. That is about 15 percent of the population spread across 
80 percent of the land mass in the United States. Individuals 
in rural communities often have to travel further for their 
care, and this can have an impact on their health care 
outcomes.
    New research from HRSA shows that, over the past 20 years, 
life expectancy in rural areas has been consistently lower than 
urban, and that gap is widening. HRSA helps to improve access 
to quality healthcare through a variety of initiatives. This 
includes supporting rural health facilities, investing in 
community health centers, building a strong healthcare work 
force, and expanding the use of telehealth.
    FORHP has several initiatives that focus on capacity-
building in rural communities. We fund the State Offices of 
Rural Health Grant Program, and that ensures there's a focal 
point for rural health within each of the 50 States. The Rural 
Hospital Flexibility Grant Program (Flex Program) and the Small 
Rural Hospital Improvement Program (SHIP) work with small rural 
hospitals on quality improvement and stabilizing finances.
    HRSA also supports the Rural Health Care Services Outreach 
Program (Outreach Program), which provides startup funding for 
pilot projects in rural communities.
    Community health centers are obviously an essential 
component of the rural health care delivery system, because 
they provide accessible, affordable, and efficient care in 
underserved communities. HRSA has nearly 1,300 health centers 
that are supported nationally, with 9,000 health center service 
sites, and about 50 percent of those service sites serve rural 
communities.
    HRSA recently announced 164 new access point grants for new 
community health centers. Seventy-four of those are in rural 
communities, totaling about $45 million in investments that 
will go to improve access to care in rural communities.
    HRSA health professional training programs also work to 
increase access to healthcare by ensuring that there are 
providers in underserved areas.
    The National Health Service Corps supports loan repayment 
and scholarships for primary care providers. Almost half of 
those providers that we support are located in rural 
communities.
    In fiscal year 2014, health profession students supported 
by HRSA went to 11,000 training sites that are in rural 
communities. We also invest in community-based rural residency 
training and work with the 34 Rural Training Tracks (RTTs) 
around the country.
    Telehealth plays an important role in enhancing the 
healthcare work force and extending its reach. HRSA is 
currently funding telehealth projects in 230 rural and 
underserved communities, in 48 different clinical areas. And 
this includes mental health. We have seen them pilot new 
initiatives, such as eEmergency care and electronic intensive 
care unit (eICU) services. We also have 14 telehealth resource 
centers around the country that provide free technical 
assistance to communities to either get started in telehealth 
or to enhance what they are doing in telehealth.
    Rural communities have also benefited from the 
collaborative work of the White House Rural Council, which was 
created in July 2011. The council is focused on getting Federal 
agencies and departments to work together to coordinate and 
serve rural communities better.
    I know in our case, this has led to ongoing partnerships 
between FORHP, the U.S. Department of Agriculture, and the 
Department of Veterans Affairs on a number of health projects. 
One example of that is that we have expanded the National 
Health Service Corps to Critical Access Hospitals (CAHs).
    I want to thank you for the opportunity to be here today 
and to talk about rural health issues. I thank you for your 
support of HRSA programs. I look forward to answering any 
questions you might have.
    [The statement follows:]
                  Prepared Statement of Thomas Morris
    Chairman Blunt, Ranking Member Murray, and members of the 
subcommittee, thank you for the opportunity to testify today on behalf 
of the Health Resources and Services Administration (HRSA) and the 
Federal Office of Rural Health Policy (FORHP) on the topic of rural 
health programs. I am pleased to discuss not only the challenges and 
difficulties of rural health delivery but also the accomplishments of 
our programs.
    HRSA is the primary Federal agency charged with improving access to 
healthcare services for people who are medically underserved because of 
their economic circumstances, geographic isolation, or serious chronic 
disease. FORHP serves as a focal point for rural health activities 
within the Department of Health and Human Services (HHS) and advises 
the Secretary on the impact of HHS policies and regulations on rural 
communities.
    Across HHS, there are a range of programs and resources that 
support rural communities. In fiscal year 2014, HHS awarded 
approximately $11 billion in grant funding to rural communities.\1\ 
FORHP ensures that there is a continual focus on improving access to 
care, ranging from the recruitment and retention of healthcare 
professionals to maintaining the economic viability of hospitals and 
rural health clinics to supporting telehealth and other innovative 
practices in rural communities.
---------------------------------------------------------------------------
    \1\ According to data pulled from the Tracking Accountability in 
Government Grants System (TAGGS) on February 24, 2015, HHS awarded 
7,394 rural awards totaling $11,082,510,598 in fiscal year 2014.
---------------------------------------------------------------------------
    To begin, I want to thank members of this Subcommittee and your 
colleagues in the Senate and the House of Representatives for the 
bipartisan, bicameral efforts you have just undertaken in passing the 
Medicare Access and CHIP Reauthorization Act of 2015. That legislation 
extended funding for the Health Centers, National Health Service Corps, 
and the Maternal, Infant, and Early Childhood Home Visiting programs. 
The President's Budget for these and other HRSA programs provides 
important health resources to rural communities.
                          rural health status
    Today, there are nearly 50 million people living in rural areas, 
representing approximately 15 percent of the population spread across 
80 percent of the landmass of the United States. Individuals in rural 
communities have to travel farther for regular check-ups and emergency 
services, which can significantly increase the cost of medical 
treatment and impact outcomes in emergencies when time is critical. 
Fewer doctors (or other health professionals) and access points, 
unfortunately, can translate to fewer check-ups, less early detection 
of disease, and worse outcomes.
    New research from HRSA shows that over the past 20 years, life 
expectancy in rural areas has been consistently lower than in urban 
areas, and the gap is widening. Mortality from cardiovascular diseases, 
injuries, lung cancer, diabetes, and chronic obstructive pulmonary 
disease is much higher in rural areas than in urban areas.
    Rural America has traditionally had lower rates of health insurance 
coverage and higher rates of chronic disease than the population as a 
whole. Therefore, increased access to insurance and healthcare services 
is key to improving the health status of rural America. From September 
2013 to March 2015, insurance coverage for adults in rural areas has 
increased 7.2 percentage points from 78.4 percent to 85.6 percent.\2\
---------------------------------------------------------------------------
    \2\ Karpman, M., et. al. QuickTake: Substantial Gains in Health 
Insurance Coverage Occurring for Adults in Both Rural and Urban Areas. 
Urban Institute: Health Reform Monitoring Survey, April 16, 2015 
(http://hrms.urban.org/quicktakes/Substantial-Gains-in-Health-
Insurance-Coverage-Occurring-for-Adults-in-Both-Rural-and-Urban-
Areas.html).
---------------------------------------------------------------------------
                    hrsa's support for rural health
    Rural healthcare challenges are fairly well known, ranging from 
physical access to services to attracting qualified health 
professionals. Care in rural communities is often delivered through 
rural health safety net providers such as Critical Access Hospitals, 
Community Health Centers, and rural health clinics. HRSA helps support 
this infrastructure to improve access to quality healthcare in rural 
communities through a variety of programs that include supporting rural 
health facilities, investing in Community Health Centers, building a 
strong health workforce, and expanding telehealth usage.
Supporting Rural Health Capacity
    As part of its statutory charge, FORHP continually monitors the 
rural health environment. For example, FORHP's Rural Health Research 
Centers are analyzing issues such as rural health infrastructure, 
access to care, and rates of disease and mortality. Since fiscal year 
2013, 34 rural hospitals have closed or suspended operations. Our 
initial review shows there is no single factor driving this issue, and 
FORHP continues to analyze this issue and the impact on access to care.
    The State Office of Rural Health Grant program supports each of the 
50 States' rural activities, depending on the needs of their State. 
State Offices of Rural Health may support quality improvement networks, 
loan repayment programs for healthcare providers, rural health clinics 
or emergency medical services. FORHP also provides direct support to 
facilities through the Rural Hospital Flexibility Grant program and the 
Small Hospital Improvement Grant program, which work with small rural 
hospitals and Critical Access Hospitals to support quality improvement 
and stabilize finances.
    HRSA also supports the Rural Health Care Outreach program, which 
provides start-up funding for pilot grants in rural communities. This 
includes the Rural Health Outreach Services, Rural Network Development, 
Small Health Care Provider Quality Improvement, and Delta States 
Network grant programs. These community-based programs have a new 
emphasis on performance metrics and program outcomes while building on 
successful models to expand their services with a focus on sustaining 
these projects without Federal funding. All of the grantees who 
completed their pilots in fiscal year 2014 are maintaining their 
programs without continued HRSA grant support.
    HRSA's Maternal and Child Health programs have also improved access 
to care in rural areas. For instance, the Maternal, Infant, and Early 
Childhood Home Visiting Program has expanded services to more rural 
areas. In fiscal year 2014, home visiting services were provided in 321 
rural counties or 17 percent of all rural counties in the United 
States. This is an increase of over 130 percent compared to fiscal year 
2010.
Investing in Health Centers
    Health Centers are an essential component of the rural healthcare 
system because they provide an accessible, affordable, and dependable 
source of primary care for insured and medically underserved patients. 
HRSA supports nearly 1,300 health centers operating approximately 9,000 
health center service sites across the country, and approximately 50 
percent of them serve rural communities. This week HRSA awarded 164 New 
Access Point grants, of which 74, totaling $45.6 million, will create 
new health center sites in rural communities.
Building a Strong Workforce
    A key program focus at HRSA is to increase access for rural 
Americans to a healthcare provider through its health professional 
training programs. In fiscal year 2014, HRSA provided rural health 
exposure to students through 11,389 training sites in rural 
communities. In addition, HRSA's primary care, oral health, geriatrics, 
public health and behavioral health training grants supported 180,401 
students from rural areas.
    The National Health Service Corps supports loan repayment and 
scholarships for primary care providers, with almost half of the 
participants serving in rural areas. As of September 30, 2014, 3,529 
National Health Service Corps members, or 44 percent of the National 
Health Service Corps field strength, were working in rural communities 
and 75 NHSC clinicians were working at Critical Access Hospitals. Half 
of the nearly 5,000 active NHSC-approved sites are located in rural 
communities.
    HRSA also invests in community-based residency training to improve 
access to healthcare in rural areas. Rural Training Tracks (RTT) are an 
innovative model where residents spend 2 of their 3 residency years in 
a rural community. Over the past 6 years, HRSA has worked to expand the 
RTT residencies nationally, and the number of training sites has grown 
from 23 to 34. Our research shows that 70 percent of RTT graduates 
choose to practice in rural locations after completing the program.
    The Affordable Care Act established the Teaching Health Center 
Graduate Medical Education Program to fund primary care and dental 
residency programs with a focus on community-based training. This 
includes a number of rural sites, with over 50 percent of Teaching 
Health Center grantees training residents in rural communities.
Expanding Telehealth Usage
    Telehealth plays an important role in enhancing the reach of the 
healthcare workforce. HRSA is currently funding telehealth projects 
that bring specialty care to 231 rural and underserved communities in 
48 different clinical areas. This initiative has resulted in innovative 
applications, such as E-emergency care, as well as advances in home 
monitoring. Telehealth technology also improves access to and the 
coordination of mental health services in rural areas, where 
psychiatrists and psychologists are often scarce. In addition to 
supporting the development of telehealth networks, HRSA also 
administers a national network of 14 Telehealth Resource Centers, which 
provide free technical assistance to communities and providers 
interested in leveraging this technology including assistance on 
licensure issues.
                          interagency efforts
    Rural communities have also benefited from the collaborative work 
of the White House Rural Council, which was created in July 2011, and 
on which I serve as the HHS representative. The Council is focused on 
enhancing the ability of Federal programs to serve rural communities 
through collaboration and coordination. For instance, through the work 
on the Council, HRSA expanded eligibility for the National Health 
Service Corps Program to Critical Access Hospitals in 2012. This 
resulted in 229 Critical Access Hospitals being designated as service 
sites for National Health Service Corps clinicians. The Council also 
worked with the Centers for Medicare and Medicare Services (CMS) and 
HRSA to include a number of rural provisions in a Regulatory Burden 
Reduction regulation that take into account the unique practice 
environment for clinicians in rural areas; this regulation was 
finalized May 2014. Beyond encouraging collaborations among Federal 
agencies, the Council initiated a public-private partnership with 
approximately 50 private foundations and trusts that focus on improving 
rural healthcare.
                               conclusion
    Thank you again for the opportunity to discuss rural health issues 
with you today and for your support of HRSA's work to improve access in 
rural communities across the country. I would be pleased to answer any 
questions you may have.

    Senator Blunt. Mr. Cavanaugh.
STATEMENT OF SEAN CAVANAUGH, DEPUTY ADMINISTRATOR AND 
            DIRECTOR OF THE CENTER FOR MEDICARE, 
            CENTERS FOR MEDICARE AND MEDICAID SERVICES
    Mr. Cavanaugh. Chairman Blunt, Ranking Member Murray, 
members of the subcommittee, thank you for the invitation to 
discuss the Centers for Medicare & Medicaid Services' (CMS) 
efforts to preserve access to quality healthcare for Medicare 
beneficiaries in rural areas.
    Providing high-quality care to the quarter of all Americans 
who live in rural areas presents unique challenges. Rural areas 
often have fewer physicians and hospitals, and Medicare 
beneficiaries in rural areas often reside a significant 
distance from the nearest healthcare provider.
    Medicare beneficiaries often represent a higher percentage 
of the total patients served by rural providers than urban 
providers, making these organizations particularly sensitive to 
changes in Medicare payment policy.
    At CMS, we have taken a number of steps to improve services 
for rural Medicare beneficiaries. First, we have created 
numerous opportunities for rural stakeholders to engage with 
CMS to make sure we understand their concerns and challenges. 
CMS has rural health coordinators at each of our regional 
offices who meet monthly with central office staff and with 
representatives from the HRSA Office of Rural Health Policy to 
discuss emerging issues. CMS also offers regular rural health 
open-door forums to provide current information on CMS 
programs, answer questions, and learn about emerging rural 
health issues.
    We are also trying to remove regulatory barriers for rural 
health providers. Last year, CMS reformed Medicare regulations 
that we identified as unnecessary, obsolete, or excessively 
burdensome, which will save providers nearly $3.2 billion over 
the next 5 years.
    This rule included specific provisions targeted at reducing 
burdens on rural healthcare providers. For example, a key 
provision reduces the burden on critical access hospitals, 
rural health clinics, and FQHCs by eliminating the requirement 
that a physician be held to a prescriptive schedule for being 
onsite. This provision recognizes telehealth improvements and 
other developments that allow physicians to provide care at 
lower costs while maintaining high-quality care.
    We are also expanding access to care in rural areas through 
the use of telehealth and other technologies. Medicare's 
telehealth benefit allows services that would normally require 
a patient and their practitioner to be in the same location to 
be delivered via an interactive telecommunication system. A 
variety of practitioners are authorized as telehealth 
practitioners, including physicians, physician assistants, and 
nurse practitioners. The statute requires that Medicare pay for 
professional consultations, office visits, and office 
psychiatry services.
    Each year, CMS solicits public comments on additional 
services that should be billable under the telehealth benefit 
through the annual Medicare fee schedule rulemaking process. 
For 2015, we have added the annual wellness visits, 
psychoanalysis, family and psychotherapy, and prolonged E&M 
services.
    We are also exploring how we can improve the current 
telehealth benefit. The Center for Medicare and Medicaid 
Innovation (Innovation Center) is testing pilot projects that 
use telemedicine to bring additional services to rural 
communities. For example, the Health Care Innovation Awards 
Initiative has awarded a grant to HealthLinkNow, and they are 
pairing aspects of telemedicine and telepsychiatry with virtual 
care navigators and behavioral health specialists to serve 
patients with chronic mental and behavioral health conditions 
in frontier and rural communities in Wyoming, Montana, and 
Washington State.
    Also this year, we announced the next generation ACO model 
that is currently accepting applications to begin next year, 
and that model will be testing expanded use of telehealth 
services as well.
    As you know, critical access hospitals (CAHs) are small 
rural facilities that serve communities that might otherwise 
lack access to emergency or basic inpatient care. Medicare 
reimburses costs at 101 percent of their reasonable cost, 
rather than the rates set by the applicable prospective payment 
systems. There are currently more than 1,300 CAHs in the United 
States.
    Here, I would pause and just thank Congress also for 
extending the Medicare-dependent hospital program, which was in 
the SGR repeal legislation that you recently passed.
    The Rural Health Clinic (RHC) program helps us increase the 
supply of physicians and nonphysician practitioners serving 
Medicare patients in rural areas. Approximately 4,000 HRCs 
nationwide are providing access to primary care services in 
rural areas.
    And finally, the Innovation Center is uniquely positioned 
to test and evaluate new models to improve access and quality 
of care for rural communities. For example, the Innovation 
Center is testing two models that are designed to support ACOs 
in rural areas. The advanced payment ACO model is meant to help 
entities such as smaller practices and rural providers with 
less access to capital and help them get into the Medicare 
shared savings program.
    Similarly, the ACO investment model is a new model of 
prepaid shared savings that builds upon the experience of the 
advanced payment model to encourage new ACOs to form in rural 
and underserved areas.
    CMS recognizes the challenges faced by beneficiaries and 
providers in rural areas. I look forward to continuing to work 
with HRSA and with Congress on further improvements to deliver 
quality care to Medicare beneficiaries, regardless of their 
location.
    Thank you again, and I'm happy to answer your questions.
    [The statement follows:]
                  Prepared Statement of Sean Cavanaugh
    Chairman Blunt, Ranking Member Murray, and members of the 
Subcommittee, thank you for the invitation to discuss the Centers for 
Medicare & Medicaid Services' (CMS) efforts to preserve access to 
quality healthcare for Medicare beneficiaries in rural areas. 
Effectively providing healthcare to the quarter of all Americans who 
live in rural areas presents unique challenges. Medicare beneficiaries 
in rural areas often reside a significant distance from the nearest 
healthcare providers and in medically underserved areas. Medicare 
beneficiaries often represent a higher percentage of the total patients 
served by rural providers than urban providers, making these businesses 
particularly sensitive to changes in Medicare payment policy. Rural 
areas often have fewer physician practices and hospitals, and face 
longer travel times to specialists. Due to higher rates of uninsured, 
rural providers rely disproportionately on Medicare payments.
    CMS has a number of efforts to improve access to services for rural 
Medicare beneficiaries. CMS has rural health coordinators at each of 
our Regional Offices, who meet monthly with participation from CMS 
central office staff and the Health Resources and Services 
Administration (HRSA) to discuss emerging issues. Through the Rural 
Health Open Door Forum, CMS engages with stakeholders to provide 
current information on CMS programs, answer questions, and learn about 
emerging rural health issues. Through Medicare's teleheath benefit, 
Rural Health Clinics, and Critical Access Hospitals, CMS is making sure 
that rural beneficiaries have access to physician and hospital services 
that may not otherwise be available in their communities. Moving 
forward, the Center for Medicare and Medicaid Innovation is testing new 
payment and delivery models such as Accountable Care Organizations 
(ACOs) with a focus on how to explore and support efforts to make 
further strides in improving the quality of care in rural areas.
              working with stakeholders to minimize burden
    Last year, CMS finalized a rule that included reforms to Medicare 
regulations identified as unnecessary, obsolete, or excessively 
burdensome on hospitals and other healthcare providers, which will save 
nearly $660 million annually, and $3.2 billion over 5 years. This rule 
specifically outlined ways to reduce burdens on rural healthcare 
providers. For example, a key provision reduces the burden on very 
small Critical Access Hospitals, as well as Rural Health Clinics and 
federally Qualified Health Centers, by eliminating the requirement that 
a physician be held to a prescriptive schedule for being onsite. This 
provision seeks to address the geographic barriers and remoteness of 
many rural facilities, and recognizes telehealth improvements and 
expansions that allow physicians to provide many types of care at lower 
costs, while maintaining high-quality care.
    The Rural Health Open Door Forum (ODF) provides an opportunity for 
stakeholder input on any issue that affects healthcare in rural 
settings. We cover topics such as Rural Health Clinic, Critical Access 
Hospital, and federally Qualified Health Center issues, among others. 
For example, CMS recently had a call devoted exclusively to Veterans 
Affairs issues and had an expert from VA to assist rural providers with 
billing for services provided to veterans. Topics that frequently arise 
in this forum often deal with payment policies, claims processing and 
billing for services, cost report clarifications, classifications for & 
qualifications of rural provider types, and the many special provisions 
of law designed specifically to improve rural healthcare. Timely 
announcements and clarifications regarding important rulemaking, 
quality program initiatives, and other related areas are also included 
in the Forums.
               promoting access to care in rural america
    CMS administers a number of programs that seek to expand access to 
services in rural areas. Medicare's telehealth benefit allows 
beneficiaries to receive certain services from physicians located 
outside their community. Rural Health Clinics, help to provide access 
to primary care services in rural areas while Critical Access Hospitals 
provide access to inpatient and outpatient hospital care where care 
would otherwise be unavailable.
Expanding Telehealth Access for Rural Areas
    Advances in telecommunications technology have improved access to 
rural healthcare for such services as radiology and remote monitoring 
without the need for special provisions of regulation or statute. These 
technologies allow the transmission over great distances where the 
practitioner and the patient are remotely located. Medicare's 
telehealth provisions also allow services that would normally require 
the patient and their practitioner to be in the same location to be 
delivered via an interactive telecommunications system. Telehealth can 
help to expand access to specialized services that may not otherwise be 
available at facilities in some rural areas. Medicare payment for 
telehealth services is prescribed in section 1834(m) of the Social 
Security Act. According to the statute, Medicare pays for telehealth 
services that are furnished via a telecommunications system, by a 
physician or practitioner, to an eligible telehealth individual, where 
the physician or practitioner providing the service is not at the same 
location as the beneficiary. The telecommunications system generally 
must include, at a minimum, audio and video equipment permitting two-
way, real-time interactive communication between the patient at the 
originating site and the physician or practitioner at the distant site.
    Beneficiaries eligible for telehealth services are those enrolled 
in Medicare Part B who receive such services at an originating site 
identified by statute, which includes the office of a physician or 
practitioner, a hospital, a rural health clinic, and a skilled nursing 
facility. An originating site must be located in a Rural Health 
Professional Shortage Area or in a county that is not designated as 
part of a Metropolitan Statistical Area. Entities participating in a 
Federal Telehealth Demonstration as of December 31, 2000 also qualify 
as originating sites.
    A variety of practitioners are authorized as telehealth 
practitioners, including physicians, physician assistants, and nurse 
practitioners. Payment for the physician or practitioner furnishing 
telehealth services is made under the Medicare Physician Fee Schedule. 
The statute requires that this payment be equal to the payment for a 
face-to-face service. The originating site, where the beneficiary 
receives telehealth services, is paid a facility fee under Medicare 
Part B.
    Currently, 75 codes are covered as telehealth services under 
Medicare. The statute specifically requires that Medicare pay for 
professional consultations, office visits, and office psychiatry 
services. The statute permits the Secretary to pay for other telehealth 
services which are considered through the annual physician fee schedule 
rulemaking process.
    As we have established in rulemaking, services can be added if they 
are either:
  --Similar to existing telehealth services, or
  --Dissimilar to existing telehealth services and will produce 
        demonstrated clinical benefits to a patient if delivered by a 
        telecommunications system.
    For 2015, CMS added psychoanalysis, family psychotherapy, annual 
wellness visits, and prolonged evaluation and management services as 
telehealth services.
    In addition to Medicare payment for telehealth services as 
prescribed by statute, telehealth is a component of various initiatives 
currently being tested by the Centers for Medicare and Medicaid 
Innovation. For example, under the Health Care Innovation Awards 
initiative HealthLinkNow, Inc. is pairing aspects of telemedicine and 
telephyschiatry, with virtual care navigators and behavioral health 
specialists, to serve patients with a variety of chronic mental and 
behavioral health conditions in frontier and rural communities in 
Wyoming, Montana and Washington State. Also, organizations 
participating in the Bundled Payments for Care Improvement Initiative 
are eligible to waive some of the geographic restrictions so that they 
can bill for telemedicine services and receive Medicare fee-for-service 
payments. The Innovation Center's work may help us better understand 
the potential value of telehealth for improving the quality of care and 
reducing expenditures.
Critical Access Hospitals
    Critical Access Hospitals (CAHs) are small rural facilities that 
serve communities that might otherwise lack access to emergency or 
basic inpatient care. Medicare reimburses CAHs at 101 percent of their 
reasonable inpatient and outpatients costs, rather than at the rates 
set by the applicable prospective payment systems or fee schedules. 
There are currently more than 1,300 CAHs in the United States. In order 
to be designated as a CAH, a Medicare-participating hospital must meet 
the following criteria:
  --Be located in a State that has established a State Medicare Rural 
        Hospital Flexibility Program;
  --Be designated by the State as a CAH;
  --Be located in a rural area or an area that is treated as rural;
  --Be located either more than a 35-mile drive from any other CAH or 
        hospital, or more than a 15 mile drive in areas with 
        mountainous terrain or only secondary roads; OR prior to 
        January 1, 2006, were certified by CMS as a CAH based on State 
        designation as a ``necessary provider'' of healthcare services 
        to residents in the area.
  --Maintain no more than 25 inpatient beds that can be used for either 
        inpatient or swing-bed services;
  --Maintain an annual average length of stay of 96 hours or less per 
        patient for acute inpatient care (excluding swing-bed services 
        and beds that are within distinct part units); and
  --Furnish 24-hour emergency care services 7 days a week.
    Since their creation, CAHs have provided needed hospital services 
to millions of Medicare beneficiaries. CMS is committed to preserving 
the CAH program and believes in ensuring that CAHs provide quality care 
to isolated communities without another nearby source of acute 
inpatient and emergency care.
    When the program was created, States were permitted to designate 
hospitals as ``necessary provider'' (NP) CAHs. Designation as a NP CAH 
exempted the hospital from the CAH distance requirement, although these 
CAHs are still required to comply with all other CAH Conditions of 
Participation, including the rural requirement. Although Congress 
eliminated the ability to designate new NP CAHs after January 1, 2006, 
all existing NP CAHs remain permanently exempt from the distance 
requirement. Currently, about 75 percent of all CAHs are designated as 
necessary providers.
    In 2013, the HHS Office of Inspector General (OIG) found that 64 
percent of CAHs would not meet the distance requirements, including a 
number that are grandfathered and currently exempted from the distance 
requirement and recommended that CMS seek legislative authority to 
remove the distance requirement exemption, thus allowing CMS to 
reassess these CAHs.\1\ OIG conducted an analysis of the services 
provided by nearby hospitals and found that approximately 93 percent of 
hospitals located near CAHs that would be affected provided emergency 
services.
---------------------------------------------------------------------------
    \1\ Department of Health and Human Services Office of Inspector 
General, Most Critical Access Hospitals Would Not Meet the Location 
Requirements if Required to Re-enroll in Medicare, August 2013, OEI-05-
12-00080.
---------------------------------------------------------------------------
    The President's fiscal year 2016 Budget proposes a more limited 
change than OIG called for that would prevent CAHs, including those 
currently designated as necessary providers, which are within 10 miles 
of another CAH or hospital from maintaining certification as a CAH. 
This change is necessary to ensure that only facilities whose 
communities depend upon them for emergency and basic inpatient care 
will be certified as CAHs and receive reasonable cost-based 
reimbursement. Under this proposed change, CAHs that are within ten 
miles of another CAH or hospital would be provided the opportunity to 
convert to certified hospital status, and would then continue to 
receive Medicare reimbursement through the ordinary inpatient and 
outpatient prospective payment systems, under which the majority of 
acute care hospitals are paid.
    As requested by this Committee, CMS conducted an analysis on the 
impact of this proposal on access to services in rural communities.\2\ 
Our analysis estimated that a maximum of 47 CAHs, out of a total of 
1,339 certified CAHs, might be affected by this proposal. Moreover, 
facilities losing their CAH designation would not necessarily close. 
Instead, it is anticipated that many of these CAHs would continue to 
participate in Medicare as hospitals paid under the applicable 
prospective payment system, and would continue to provide hospital 
services to their communities without reliance on CAH designation. 
Hospitals that transitioned from their CAH status would be eligible for 
the Hospital Value-based Purchasing Program, which provides financial 
incentives for high quality of care and improvement in quality.
---------------------------------------------------------------------------
    \2\ Centers for Medicare and Medicare Services, Report on Critical 
Access Hospitals, March 26, 2015.
---------------------------------------------------------------------------
    In the event that some of the potentially affected CAHs were to 
close, CMS analysis found that there likely is sufficient capacity in 
nearby facilities to provide the services any closed CAH had previously 
provided. CMS conducted an analysis of recent Medicare and cost report 
data for the potentially affected CAHs, as well as for the hospitals 
located within 10 miles of these CAHs. Overall, the data suggests that 
there would be no significant issues related to access to inpatient 
acute care services or skilled nursing services for the communities 
currently being served by the potentially affected CAHs should the CAH 
cease to provide services rather than convert its Medicare agreement to 
participate as a hospital.
    The President's fiscal year 2016 Budget also proposes changing 
reimbursement of CAHs to pay them for their actual costs of providing 
care. This change would generate savings to the Medicare program while 
protecting access to care by reimbursing hospitals for 100 percent of 
their costs.
Rural Health Clinics
    The Rural Health Clinic (RHC) program was created to address an 
inadequate supply of physicians serving Medicare patients in rural 
areas and to increase the use of non-physician practitioners such as 
nurse practitioners and physician assistants in rural areas. 
Approximately 4,000 RHCs nationwide provide access to primary care 
services in rural areas. Through this program, CMS provides 
advantageous reimbursement as a strategy to increase rural Medicare and 
Medicaid patients' access to primary care services. An RHC is a clinic 
that is certified by CMS to receive special Medicare and Medicaid 
reimbursement. RHCs are required to employ a nurse practitioner (NP), 
or a physician assistant (PA), and a NP, PA, or certified nurse midwife 
must be on-site to see patients at least 50 percent of the time the 
clinic is open, subject to State and Federal supervision requirements. 
RHCs provide outpatient primary care services and basic laboratory 
services. RHCs must be located within non-urbanized areas that have 
healthcare shortage designations.
rural health efforts at the center for medicare and medicaid innovation
    Congress created the CMS Innovation Center for the purpose of 
testing innovative payment and service delivery models to reduce 
program expenditures while preserving or enhancing the quality of care 
for those individuals who receive Medicare, Medicaid, or Children's 
Health Insurance Program (CHIP) benefits. The Innovation Center is 
uniquely positioned to test and evaluate efforts to identify and 
address challenges to access and quality of care for rural communities. 
In addition to these efforts to test improvements to telehealth, the 
Innovation Center is testing two models designed to support Accountable 
Care Organizations (ACOs) in rural areas. The Advance Payment ACO Model 
is meant to help entities such as smaller practices and rural providers 
with less access to capital participate in the Medicare Shared Savings 
Program. The ACO Investment Model is a new model of pre-paid shared 
savings that builds on the experience with the Advance Payment Model to 
encourage new ACOs to form in rural and underserved areas.
    Several projects focused on rural areas are also being tested 
through the Innovation Center's Health Care Innovation Awards 
initiative:
  --The University of Kansas Hospital Authority is testing a model to 
        implement the Rural Clinically Integrated Network (RCIN) to 
        improve heart health and stroke survival for rural Kansas.
  --Catholic Health Initiatives Iowa Corporation received an award to 
        test a model to transition a network of rural critical access 
        hospitals in Iowa to value-based care through improved chronic 
        disease management, increased clinical-community integration 
        and 'lean' process improvement initiatives.
  --Northland Healthcare Alliance is implementing a modified version of 
        the Program of All-Inclusive Care for the Elderly (PACE) model 
        in rural North Dakota.
  --St. Luke's Regional Medical Center is testing remote intensive care 
        unit (ICU) monitoring and care management in rural areas of 
        Idaho and Oregon.
    In addition, the Innovation Center is implementing the 
Congressionally-mandated Frontier Community Health Integration Project 
(FCHIP) demonstration, focused on supporting essential health services 
in sparsely populated rural counties served by CAHs.
                               conclusion
    CMS recognizes the challenges faced by beneficiaries and providers 
in rural areas. We are helping to address provider shortages through 
the Critical Access Hospital and Rural Health Clinic programs, and 
expanding the use of telehealth. We continue to test new delivery 
models to improve rural healthcare through the Innovation Center. I 
look forward to continuing to work with HRSA and the Congress on 
further improvements to deliver quality healthcare to Medicare 
beneficiaries, regardless of their location.

                  FISCAL YEAR 2016 PRESIDENT'S BUDGET

    Senator Blunt. Thank you both. Let me ask you a couple 
questions, and we will do 5-minute rounds here.
    Mr. Morris, the budget the administration submitted would 
have cut your budget by $20 million. Did you ask for that cut?
    Mr. Morris. Mr. Chairman, we support the President's budget 
and the request that came forward. We think that it supports 
the key programs for our office. It includes continued funding 
for the outreach program, for the Rural Hospital Flexibility 
Grant Program, for our policy and research activities. We think 
that those are the programs that can be most effective in 
meeting needs.
    Senator Blunt. So where are going to spend $20 million less 
than you are spending this year?
    Mr. Morris. The President's budget, there is that decrease, 
yes, sir.
    Senator Blunt. What programs are you going to decrease?
    Mr. Morris. There is no request for the funding of SHIP, 
and there is no request for the funding of the Rural Access to 
Emergency Devices (RAED) program. In the case of these programs 
in the administration's request, these are challenging budget 
times, and they require some tough choices sometimes. So I 
think the President's budget reflects a request for the 
programs that we think are really effective in meeting the 
need.
    In the case of SHIP, we have the Flex Program and there's a 
$25 million request for that. That program focuses on what we 
see as the most vulnerable of the rural hospital sector, which 
are the CAHs. So there will be $25 million requested to support 
quality improvement and performance improvement, working 
through the Flex Programs and partnering with the States in 
those activities.
    In the case of the RAED Program, this is a program that 
places automatic external defibrillators in rural communities. 
We think that the need has largely been met in that program, 
not only through Federal funding but also through State and 
private sector funding. But we do allow people to come in 
through our Outreach Program funding to get at the same issue. 
So an applicant could come in for Outreach Program funding or 
network funding under the program that is requested in the 
budget and do the same thing as the RAED program in the sense 
that they could develop a program that seeks to purchase those 
defibrillators and put them in rural communities.
    So for the remaining need that is out there, we feel it can 
be met through the Outreach Program.
    Senator Blunt. And the hospital improvement program that 
you would continue is a $25 million program?
    Mr. Morris. Yes, sir.
    Senator Blunt. Is that in the current year that you are 
spending $25 million and proposing to spend another $25 million 
next year?
    Mr. Morris. Correct.
    Senator Blunt. And then the $20 million that you would have 
this year for similar purposes would go away in the President's 
budget?
    Mr. Morris. Yes, sir. The SHIP program, the Small Hospital 
Improvement Program, there's no request for that. It had been 
funded historically at $15 million. And the other $5 million is 
from the request for the Rural Access to Emergency Devices 
Program.

                               TELEHEALTH

    Senator Blunt. What obstacles do you see in telehealth? We 
have people telling us that there are still issues that they 
are trying to work through with your department in telehealth. 
What would you say would be the top obstacles to move forward 
on telehealth?
    Mr. Morris. One of the issues we're trying to get at for 
telehealth is the whole issue of cross-state licensure, and the 
fact you may have providers who are located in one State but 
providing telehealth services in another State. So Congress has 
provided funding through our Telehealth program for the 
Licensure and Portability Grant program.
    We currently have grants with the Federation of State 
Medical Boards and also with the State and provincial 
psychology boards. What we are trying to do with those grants 
is work with licensing boards so that if, say, a psychologist 
was practicing in Missouri but was providing services in 
another State, rather than having to complete two completely 
different licensure grant applications, they could adopt a 
common licensure so it makes it easier for somebody to practice 
across those State lines, but it still protects patient safety, 
in terms of the licensing and credentialing for that provider. 
So that is one way we're trying to get at it.
    The other thing I think that we found, we have been 
investing in telehealth for a number of years and we know it 
improves access to care. One of the challenges is finding out 
which applications have the best clinical outcomes. So the 
evidence-base for telehealth could be expanded, so one of the 
things we did this past year was put money into an Evidence-
Based Network Grant Tele-Emergency program. What we are trying 
to understand is how does that outcome from using tele-
emergency care compare to when you have those services face-to-
face.
    I think that is a question any insurer would want to know. 
The more we can learn about the evidence base and what works 
best in telehealth I think can then help us target investments 
moving forward.
    Senator Blunt. Maybe we can move forward on that a little 
bit, even with the next panel and our telehealth witness there.
    Senator Murray.

                            HEALTH WORKFORCE

    Senator Murray. Mr. Morris, I'm a strong supporter of 
HRSA's health care work force training programs. In particular, 
the National Health Service Corps provides critical support to 
physicians and other providers that agree to work in our rural 
and underserved areas.
    I also just want to recognize your agency's important role 
in documenting work force shortages through the National Center 
for Health Work Force Analysis.
    I wanted to ask you, what do the current projections say 
about our national healthcare work force shortage?
    Mr. Morris. Sure. Demand is expected to increase for 
primary care services through 2020. This is due to the fact 
that the population is aging, the population is growing, and 
then there are also impacts that you referenced earlier in 
terms of more folks having coverage may result in them seeking 
more services.
    So the national center has done some projection work, and 
what they are projecting is that there will be a shortage of 
approximately 20,000 full-time equivalent physicians by 2020. 
Now this is mitigated somewhat if we are able to really take 
advantage of the supply of nurse practitioners (NPs) and 
physicians assistants (PAs) and use them to the full extent of 
their training. So if that really happened and if the trends in 
NP training and deployment continue, and the same thing for 
PAs, if that happens, I think the shortage drops down to about 
6,000.
    Senator Murray. So what kind of healthcare providers are 
most needed in our rural communities?
    Mr. Morris. I think the full spectrum of providers, primary 
care and that includes both the physician and nonphysician 
providers. But we see shortages in mental health, and that is 
for everything from licensed clinical social workers to 
psychologists. Psychiatry is not a service you often find in 
rural communities. But even some rural communities have 
challenges in terms of the allied health work force and regular 
nursing.
    So those are all challenges I think that rural communities 
face.
    Senator Murray. Talk to me about how the additional 
resources that you requested for the National Health Service 
Corps in the budget help address shortages like we have in 
rural Washington.
    Mr. Morris. The administration's request would dramatically 
increase the funding for the National Health Service Corps. The 
advantage is that right now we fund National Service Corps Loan 
Repayment Scholarships down to the level of funding that is 
available based on how underserved they are, basically what 
their score is in a Health Professional Shortage Area (HPSA).
    So the more funding that is available, as in the 
President's budget, will allow us to fund more clinicians to be 
supported in those communities. So that would mean a lower HPSA 
score, which would mean more rural communities would have 
access to it.
    It has been a lifeline for rural communities. As I noted 
before, just under 50 percent of the placements for the 
National Health Service Corps go to rural communities, while 
rural only represents about 17 percent of the population.

                        TEACHING HEALTH CENTERS

    Senator Murray. How can we continue to leverage the 
Teaching Health Centers program to make sure that residents 
stay in rural areas? Is there anything we can learn from this 
program to attract other specialists? Talk to me about that.
    Mr. Morris. Well, one of the big lessons from the Teaching 
Health Centers program is that you can do residency training in 
a community-based setting. So much of our traditional residency 
training takes place in large academic health centers, and if 
we can get more folks exposed to community-based training, the 
hope is that they will be interested in that community-based 
training, so we will see them working in our rural health 
clinics and our community health centers and our small 
hospitals.
    So I think the Teaching Health Centers shows a path 
forward, and that informed the President's request around 
really reshaping how we train physicians and creating a new 
grant program to do community-based training, and that would 
include rural communities.
    We know also from some of the work we do at the RTTs, which 
started in your State in Colville, Washington. This is a unique 
model where they do 1 year in an academic health center and 
then 2 years in a rural setting, and 70 percent of the 
graduates of those are RTTs end up practicing in rural 
communities.
    So I think the evidence is pretty strong, that if we do 
more community-based training, we will meet those needs better. 
The Teaching Health Centers are the first step, and I think the 
President's request is another step toward that.
    Senator Murray. I completely agree. I've seen this working 
in my State. Where you practice and do your residency really 
makes a difference on where you stay. When we have such a need 
in our rural communities, having those residents in those rural 
communities during their residency, it works really well. So I 
hope we can continue to build on that. Thank you.
    Senator Blunt. Senator Cochran.

                               TELEHEALTH

    Senator Cochran. Mr. Chairman, thank you for convening this 
hearing on the challenges that we are facing in our rural 
communities throughout America in making available health care 
services, some of which are partially paid for by Federal 
Government agencies. We hope to learn from this hearing ways to 
provide the needed resources, up to the point where we are 
authorized to do so.
    It has been brought to my attention that the Health 
Resources and Services Administration has released a grant 
notice regarding the intent to provide funding for a 
telehealth-focused research center cooperative agreement.
    Could you tell us more about what that is? What are you 
looking for in an applicant? What are the goals that would be 
funded by this cooperative agreement?
    Mr. Morris. I think this builds on the comment I made 
earlier that, again, we know telehealth improves access. I 
think the real challenge is finding out what the impact of that 
increased access is. So what we are hoping to do with this 
research center is to help build the evidence base for finding 
out which applications work best and deliver the best outcomes.
    So what we are looking for are experienced researchers who 
can do comparative outcome research, so we can look at you 
provide a telehealth service and here's the outcome. How does 
that compare to whether you had it face-to-face?
    I think that will really inform the evidence base.
    Senator Cochran. Are you encouraged by the results of your 
applications and those who are petitioning the government to 
choose them?
    Mr. Morris. We have gotten a lot of calls on this funding 
opportunity just in the week it has been out there.
    Senator Cochran. Mr. Cavanaugh, I understand the Centers 
for Medicaid and Medicare Services restrict reimbursement for 
telehealth based on geographic locations.
    How do you administer that? How do you choose which urban 
areas, for example, are more eligible than others for 
telehealth reimbursement?
    Mr. Cavanaugh. Thank you for the question, Senator.
    In the statute, it gives us instruction to allow telehealth 
to be provided in certain geographic areas. I'm pleased that, 
with help from our colleagues at the Office of Rural Health 
Policy, a few years ago we changed our regs to expand the 
definition of rural areas that qualify. But, the geographic 
restrictions really originate in the statute.
    The good news is, through the Innovation Center, which 
Congress created, we are able to move beyond those barriers and 
test new models of telehealth without regard to the geographic 
barriers and some of the other statutory restrictions. We have 
a number of very interesting telehealth models that are being 
tested currently, including the health link model that I 
mentioned in my testimony.
    Senator Cochran. Thank you very much.
    Senator Blunt. Senator Moran.

                        RURAL HOSPITAL CLOSURES

    Senator Moran. Mr. Chairman, thank you very much. Thank you 
for you and Senator Murray having this hearing, a very 
important one, certainly for a Senator from Kansas, but really 
for the country.
    Let me start with Mr. Morris. Tell me, what statistics are 
there that demonstrate, over a period of time, how many rural 
hospitals are closing or in addition to that are threatened to 
close?
    I've seen an AP story just in the last few days indicating 
that 50 rural hospitals have closed, a total 50 hospitals in 
the rural U.S. have closed since 2010, and the pace has been 
accelerating with more closures in the past 2 years than in the 
previous 10. This is according to National Rural Health 
Association.
    I have also seen the study from the North Carolina research 
organization indicating 47, I think is the number of hospitals 
that have closed.
    My question is, do you consider those numbers accurate? And 
what kind of study or analysis, do you have about cause? What 
can we pinpoint the cause for those closures? And what is your 
expectation for that trend in the future?
    Mr. Morris. Senator Moran, thank you for that question.
    This is an issue we have been tracking, and those numbers 
align with what we found. We are working with the North 
Carolina Rural Health Research program. They are one of our 
rural health research centers, and their work is very solid.
    We are trying to get a better handle on what is driving the 
closures. There is not one single factor behind it. I think it 
is a very community-specific sort of issue.
    In some cases, it may be that the community has lost 
population and may not have the volume to support a full-
service hospital. But there are also a variety of other market 
pressures that may be having an impact on it.
    It is, certainly, something we are going to continue to 
study further, and the North Carolina Rural Health Research 
program will probably lead those efforts. We will be happy to 
share with you all of those findings.
    They are looking at a study that we hope to have out next 
year that looks at what happens in a community after a hospital 
closes.
    Just doing some informal calling around to get a handle on 
this, in some communities, hospitals close and we have seen a 
situation where another provider can step in and still provide 
a broad range of ancillary services. Maybe they expanded their 
telehealth. Maybe they expanded the clinic hours, so they're 
not just open 9 to 5, and the community seems largely okay with 
how it played out.
    In other cases, there is a definite gap when a hospital 
closes, specifically around emergency department services.
    But with the 34 hospitals that closed since 2013, that is 
an uptick from the previous 2 years. What is interesting is the 
same number of hospitals have closed in urban areas, but I 
think, as you know, when a hospital closes in a rural area, it 
is a little different than when it closes in an urban area.
    So this is going to be a real priority for us from a 
research perspective over the next couple years. We will 
certainly work with our colleagues at CMS and across the 
department to better understand it and see what other resources 
can be brought to bear.
    Senator Moran. Mr. Morris, I would be interested in knowing 
the research outcome of what happens to a community following a 
hospital closure, but I also would encourage for research to be 
conducted that would indicate what steps could have been taken 
to have prevented the closure in the first place. I'm pretty 
certain that in most instances the research will demonstrate 
significant consequences related to hospital closures, often 
pretty dire, to a community and to patients. I think we ought 
to be more prospective as how we avoid this, what are the 
precipitating causes.
    I agree with you. It is not one thing. Population and 
demographics is something maybe we can't control here. But, 
certainly, the regulatory environment, the cost structure, is 
important to those hospitals, physician and other healthcare 
provider recruitment, retention, and then the reimbursement 
rate.

                         HOSPITAL REIMBURSEMENT

    And on that topic, I wanted to ask you about the idea of 
cost-based reimbursement. What is the evidence that when we say 
we are reimbursing costs at 101 percent of cost that that has 
any real meaning in the real world? Isn't the reality that when 
we say we are reimbursing more than cost, not all costs are 
reimbursable, so we create this misperception that a critical 
access hospital is getting something more than what it actually 
costs them to operate.
    Is there an analysis? Can you quantify really what is going 
on in hospital when we tell them, or when we tell the public 
that your hospital is getting 101 percent of costs when it 
really is reimbursable costs?
    Mr. Morris. As you know, that is a very complicated 
question. It goes back to historical costs of the hospital, and 
if they converted to critical access, what those historical 
costs feed into, what they would be paid under this CAH 
reimbursement status.
    So it does vary from State to State. But I would be happy 
to get back with you and also with your staff. We can connect 
you with some of the folks at the University of North Carolina 
as well as some of our experts to better understand it.
    Senator Moran. I would welcome that, but in today's 
setting, can you confirm for the record that when we talk about 
reimbursing a hospital its costs, that it is receiving 
something significantly less than actual cost of operating a 
hospital?
    Mr. Morris. I think in some cases, that may be true. It's 
hard to say that nationally, because it's different, depending 
on the historical cost structure of the hospital. It might be 
different for Kansas than it is for Alabama.
    As you know, how hospitals structure their cost is a 
science unto itself. So I'm happy to get back to you on more of 
that.
    To respond to your earlier question, we are trying to do 
what we can to avoid closures. I think what we have done with 
investments in the flex program, we are really focusing on 
making sure that hospitals--CAHs are not required to report 
quality data to Medicare, but we encourage them to do that. So 
we've seen a significant increase in the number of CAHs 
reporting their quality, because if they can do that, if they 
can benchmark their quality, they can demonstrate more value 
back to their community.
    We also awarded a contract last year to work with rural 
hospitals that are struggling in high poverty counties. So we 
have an example in Tallahatchie, Mississippi, Mr. Cochran's 
State, where we were able to send consultants in there to help 
them turn around their finances and improve their financial 
bottom line. So with the resources we have, we are keenly aware 
of the precarious nature of some rural hospitals. And whether 
it is our Flex Program, or that contract, or even our outreach 
and network funding, we can begin to get at that.
    So we do want to do all we can to help stabilize folks so 
that we're not in a closure situation.
    Senator Moran. I would tell you that very few critical 
access hospitals in Kansas who receive ``cost-based 
reimbursement'' are able to survive in the absence of a tax 
levy to support the hospital.
    Mr. Morris. Yes, sir.
    Senator Moran. Thank you, Mr. Chairman.
    Senator Blunt. Thank you, Senator Moran.
    Senator Capito.
    Senator Capito. Thank you, Mr. Chairman.
    I want to thank the panel. I am from the State of West 
Virginia, so I would like to ask a question to Mr. Cavanaugh. 
In your testimony, you talked about the new initiative 
HealthLinkNow, which is pairing telemedicine and 
telepsychiatry. This program is currently being tried in three 
States, and I was wondering what measurable data the pilot 
program is showing you, and what are the prospects of expanding 
this to other rural communities? As we know, there is a 
shortage of mental health professionals everywhere and rural 
America is probably exponentially so.
    Mr. Cavanaugh. You are correct, Senator. Before I was at 
the Center for Medicare, I was at the Center for Medicare and 
Medicaid Innovation. When we did the innovation awards, there 
were quite a few telehealth and telemedicine proposals, and I 
was surprised at the number that had a link to behavioral 
health and psychiatry, just as you mentioned.
    We have some early evaluations of those, but they are very 
qualitative, meaning case studies of how they've fared in 
standing up the program. We hope in the next year to have some 
quantitative data.
    I will remind the committee, the statute set up the 
Innovation Center and said these models can be tested and they 
can be expanded if they meet certain cost savings and/or 
quality improvement standards. So, we intensively evaluate all 
of these models. So, we hope in the next year to have some more 
quantitative results.
    One of the things that I would say is many of the 
Innovation Center models are being tested at very large scale. 
Some of them are being tested at smaller scale, and this would 
be one that is at smaller scale. So, I think, even if we get 
very promising data, I don't think the next step would be to go 
national with it. It would probably be to incrementally move to 
more communities.
    So, we are hopeful to have data soon. We've made all of our 
evaluations public. And we will, certainly, share it with this 
committee as soon as we have news.
    Senator Capito. Well thank you. One of the obstacles that I 
think all of us who live in rural States are combating every 
day is the lack of high-speed rural broadband access. And 
certainly, that has to be impacting telehealth into the rural 
health initiatives.
    Are you running into this in some of your telemedicine 
initiatives? Is this a problem that you have identified as 
well? Or do you have anything on that?
    Mr. Cavanaugh. Certainly, anecdotally, we talked to some of 
our awardees. It does affect what communities they think they 
can test these models in and what communities they wish they 
could test these models in.
    We don't feel like we, at Medicare, have the tools to help 
with that. But, we do recognize it as a barrier, and it is 
important because I do think, whether it is telehealth or other 
technology, telemedicine technologies, I do think broadband is 
going to be essential to that.

                         RURAL TRAINING TRACKS

    Senator Capito. And it's a challenge.
    Anecdotally recently, Mr. Morris, in talking with our 
hospitals and emergency room physicians, we were talking with 
an anesthesiologist the other day, one of the things that is 
cropping up now is the lack of total number of residencies so 
that there are several hundred. I've heard 500, and then may be 
into a thousand graduates of medical schools who don't match 
and they don't get a residency. That obviously stalls out their 
professional career. They've got student loans and all sorts of 
other issues.
    I think we should be looking at rural health as a way to 
expand the availability of residencies to fill this gap. I know 
you talked a little bit about residencies in your opening 
statement.
    Mr. Morris. We do recognize the challenge you've just laid 
out, and one of the things we initiated about 5 years ago was 
to put a grant together with the National Rural Health 
Association to expand these RTTs. There were about 23 of these 
across the country, and that number had been fairly static over 
the years, and now there are about 34.
    So we have increased the number of RTTs. And what is unique 
about the RTTs is that although there is a cap on the total 
number of Medicare residencies that can be supported, there is 
flexibility under that cap for new RTTs. So there is an 
opportunity to create rural residencies and to work with our 
partners at CMS through that flexibility under the residency 
cap.
    And again, we know this is an evidence-based model. It 
works. And we have seen some real success from it.
    Senator Capito. Well, I, certainly, would be very 
supportive of any kind of way--this could help solve more than 
just one problem here, if we were able to expand that and use 
it wisely.
    And I'll just make comment at the end. I think those of us 
who live in rural America are always frustrated that it is 
assumed by the more urban areas that it is cheaper to deliver 
medical services in a rural area because typically wages are 
maybe a little bit lower. But you have workforce shortages. You 
have travel time. You have all kinds of other issues that it's 
frustrating for us, I think, to make the case. I mean, we are 
always having to make the case, as you know. You are in this, 
too.
    So I applaud your efforts in helping us deliver the 
message. All of the health care dollars need to be--it is not 
as easy in rural America as some in the urban areas might think 
it is. Thank you.
    Senator Blunt. Dr. Cassidy.
    Senator Cassidy. Hey, gentlemen. I was looking down but 
listening. So one of you pointed out the cause for closures is 
multifactorial. I accept that. But I'm curious.
    It seems like the only business model that is going to 
actually work in a rural setting is volume, because you don't 
have the critical mass of capitated patients, even if you did, 
partly because so many are uninsured or partly because your 
payer makes Medicaid, for example, is so poor.
    So I say this because we just passed an SGR bill, which 
promoted alternative payment models. The Accountable Care 
Organizations all rely upon value-based purchasing, with the 
implication that volume decreases.
    So is one of the factors in this multifactorial problem 
that the business model can only survive with certain volumes 
and the big push now is away from volume and more toward 
quality? Have you run models on that? Do you have studies 
regarding this? Because I'm wondering if there is any hope for 
these hospitals besides an outright subsidy, be it through the 
tax base or be it through some Federal legislation.
    Mr. Cavanaugh. I think, Senator, you're putting your finger 
on a very important challenge that we all face as we move 
forward, which is, as you say, how do rural health providers 
not just survive but thrive into the new setup of the SGR 
reform bill.
    I think there are multiple ways this can happen. One is----
    Senator Cassidy. Let me ask, before you go forward, because 
I have a specific question. Do you have studies showing the 
effect of, say, an Accountable Care Organization, which needs a 
critical mass of people with a very good payer mix on a 
capitated basis receiving their preponderance of care at this 
institution? Is there such a study looking at whether or not 
this model will work for rural hospitals?
    Mr. Cavanaugh. So, I am not aware of any studies. We are 
pleased to say, though--there has been a lot of skepticism 
whether ACOs can work in rural areas. In the shared savings 
program, which I'm responsible for, we have about 7.3 million 
Medicare fee-for-service beneficiaries aligned with ACOs, and 
about 15 percent of those beneficiaries are living in rural 
America.
    Senator Cassidy. Let me ask, though, because you can live 
in rural America, but still get your health care at Geisinger. 
So it wouldn't be that you had a local hospital. It could be 
that you are linked with an urban hospital or semi-urban or 
something such as that.
    So are these in the rural hospitals? What is the health of 
rural hospitals in those settings in which you just described, 
the ACOs you just described?
    Mr. Cavanaugh. So, you make a good point. I would remind 
you, though, that the beneficiaries are aligned with an ACO 
through their use of primary care, not necessarily where they 
get their inpatient care.
    Senator Cassidy. I thought it was the preponderance of 
care.
    Mr. Cavanaugh. Preponderance of primary care, though.
    Senator Cassidy. Okay.
    Mr. Cavanaugh. But, you make a good point, which is you 
could live in a rural area and be an ACO that has a significant 
urban presence, because there are ACOs that span both types of 
communities, and there are those that are strictly in rural 
areas.
    There's one ACO called a national rural ACO, which is 
combining rural communities across the country.
    I think it is early for us to know the relative success of 
rural versus urban ACOs. We really only have about 2 years----
    Senator Cassidy. I'm sorry. I have limited time, so I'm 
trying to focus.
    What is the health of the rural hospitals in those areas in 
which there is an ACO which has responsibility, if you will, 
for the rural patient?
    This is about hospitals. So if we have ACO which kind of 
aggregates the care into an urban hospital setting, that would 
actually be starving the rural hospital.
    Mr. Cavanaugh. I don't have the data that you are 
requesting. We can, certainly, go back and see if it is 
something we could compile for you.
    Senator Cassidy. Okay.
    Continue then, because that was kind of the point. You had 
another point. I'm sorry I interrupted, so continue.
    Mr. Cavanaugh. I just wanted to make the broader point, 
Senator, that we have heard from a lot of rural providers that 
they are excited about the prospects of getting into new 
payment models, because they do find fee-for-service payments 
frustrating. They think they are efficient providers, and in 
many cases probably are.
    We do have one large initiative out of the Innovation 
Center called transforming clinical practice, and this is where 
we are going to help small practices, not the hospitals 
necessarily, but small physician practices, give them technical 
assistance so they can develop the infrastructure and the 
knowledge----
    Senator Cassidy. In that, I will just go back to this, 
because the hub is what matters here. If the hub is a rural 
hospital, that could potentially help, although under value-
based purchasing, you are still going to be emphasizing keeping 
people out of the hospital.
    You tell me, is there a business model that works for a 
small rural hospital which is not volume-based? I can see it 
working for the primary care provider, but I don't see a 
nonvolume-based business model working for a rural hospital.
    Mr. Cavanaugh. I think, if you are looking for that, our 
best hope is probably the Accountable Care Organization with 
the ACO being a primary player in that. And, as I mentioned in 
my testimony, we have two different programs to help rural 
hospitals. We provide them seed capital to help them form an 
ACO and get into the shared savings program. It is very early, 
both in the ACO program and in these models that we are 
running, to----
    Senator Cassidy. I'm sorry. So in that model--I'm sorry. I 
am going a little bit long.
    Senator Blunt. Go ahead.
    Senator Cassidy. What is the minimum number of patients you 
would need in order for that rural ACO to work?
    Mr. Cavanaugh. So, the ACO, it doesn't change the minimum 
number that is in the basic program, which is 5,000 aligned 
Medicare patients.
    Senator Cassidy. Now that would be for a primary care 
provider, but 5,000 patients would not support a rural hospital 
with a CT scan and an OR, et cetera. So do you have the minimum 
number to maintain a certain X number of hospital beds?
    Mr. Cavanaugh. I'm sorry. I should've been clear. Five 
thousand is the minimum to getting to the ACO program, the 
shared savings program. You are asking from an actuarial 
standpoint, do we have some sense of what the aligned lines 
would be needed, and I don't know the answer.
    Senator Cassidy. I can tell you, we cannot make wise 
decisions regarding public policy unless you have those 
numbers, because ultimately they have to make money. Unless you 
can give us some data that there is a business model that works 
under an alternate payment model, we are wasting our time.
    I say that not to scold. I'm just saying that we have to 
make decisions. We would ask you all to come back with that, if 
I can ask the indulgence of my chair and ranking member. I 
yield back. Thank you.

                         HOSPITAL REIMBURSEMENT

    Senator Blunt. Thank you, Senator.
    Anybody have a follow-up question? We maybe have time for 
one or two other questions, if anybody has one.
    Mr. Morris, in response to Senator Moran's question, are 
you saying you believe there are States that reimburse the 
total cost of a critical access hospital's operation?
    Mr. Morris. No, sir. What I was saying is that, and Sean 
can correct me if I'm getting this wrong, when you set the 
cost-based reimbursement rate, it is based on historical costs. 
We just see some fluctuations from State to State in what that 
initial base is.
    But it's more complicated than that, and I can get back to 
you with more information.
    Senator Blunt. I think we expect you to get back to us on 
that, but I think the point is well made that these rural 
hospitals are not in the profit-making business, even if they 
get 101 percent of the allowable reimbursement. But if there 
are States that have a formula that allows that, we will be 
anxious to see which States are doing that and how they figured 
out how to calculate everything that is spent by the hospital 
to operate into their cost basis.
    Mr. Morris. To respond to Mr. Cassidy's question, too, I 
would say that we do have examples of hospitals even with low 
volume that have been able to make it work. I mean, I think it 
really is situationally dependent. There's a base level of 
volume you need. I agree with that. But we have some success 
stories out there where folks have been able to bring primary 
care aligned with physicians and hospitals in a way to figure 
out what lines of service they can get into that make sense to 
that community, arrange relationships with upstream providers 
that make it work.
    So what we would like to do is use our funding to sort of 
be the connecting of the dots between that, identify those 
models, and maybe replicate them in other communities.
    Senator Blunt. All right.
    Senator Moran. Thank you, Mr. Chairman. And thank you for 
helping me ask my question. I appreciate the answer.
    This is a home health care question. Some of our hospitals, 
fewer than used to, provide home healthcare services. But the 
Affordable Care Act includes a provision that requires Medicare 
beneficiaries to have a face-to-face encounter with a physician 
who certifies the need for the home healthcare services.
    The implementation of this face-to-face requirement raises 
lots of concerns with home health care providers, hospital-
based or otherwise. And the documentation that is necessary, it 
sure seems to the providers as unclear. And the backlog of 
audits is increasing.
    There's a real uncertainty as to what the CMS standard is 
for providing satisfactory face-to-face encounters. Most of the 
appeals have been overturned in favor of the home health care 
provider.
    My question is, do you see this as a problem? Does CMS have 
a plan to respond to clear up the confusion, provide certainty, 
and reduce the backlog?
    Mr. Cavanaugh. Yes, Senator. I think you've put your finger 
on a challenge that we have been taking on head on. The first 
thing is, in rule-making last year, we simplified--you're 
correct that the Affordable Care Act created the face-to-face 
standard. Our initial rulemaking, in addition, required a 
narrative from the physician, a narrative writing, which 
providers found ambiguous. So, we withdrew that requirement.
    So, we still have the face-to-face requirement, but not the 
requirement for a narrative description of the need.
    We continue to have dialogue with the home health industry 
to make sure they understand what we are looking for. We are 
exploring avenues. Personally, I'm very interested in finding a 
way to facilitate people making the documentation, because as 
you say, there are a lot of auditor reviews to these. And some 
get overturned, but many are upheld. Even when they are upheld, 
it's often about the documentation and not about whether the 
service was needed, whether it was provided.
    Granted, there's fraud, but I'm not talking about that. I'm 
talking about a lot of services that were truly needed, truly 
provided, but poorly documented. I'm trying to find out if 
there's anything the agency, any role we can play to facilitate 
that without facilitating bad behavior by a subset of the 
industry.
    Senator Moran. Thank you for the answer. I appreciate your 
attitude and approach toward attempting to solve this. It is 
finding that place in which you don't punish those who are 
doing the right thing, and you do punish or prevent those who 
do bad things.
    Mr. Chairman, thank you.
    Senator Blunt. Thank you. Thank you to the panel. I'm sure 
we'll have some questions submitted in writing as well. 
Appreciate your time today.

                       NONDEPARTMENTAL WITNESSES

    Senator Blunt. Now we will move to the second panel, and as 
that second panel is coming up, that panel includes Tim 
Wolters, the director of reimbursement at Citizens Memorial 
Hospital in Bolivar, Missouri, and he also is a reimbursement 
specialist at the Lake Regional Health Center System at Osage 
Beach, Missouri; Dr. Kristi Henderson, Chief Telehealth and 
Innovation Officer, University of Mississippi Medical Center in 
Jackson, Mississippi; Ms. Julie Petersen, the CEO of PMH 
Medical Center in Prosser, Washington; and Mr. George Stover, 
the CEO of Rice County Hospital District #1 in Lyons, Kansas.
    Thank you all for being here.
    Mr. Wolters, if you want to start with your testimony, we 
will go right down the line.
STATEMENT OF TIM WOLTERS, DIRECTOR OF REIMBURSEMENT, 
            CITIZENS MEMORIAL HOSPITAL, AND 
            REIMBURSEMENT SPECIALIST, LAKE REGIONAL 
            HEALTH SYSTEM
    Mr. Wolters. Thank you, Chairman Blunt, Ranking Member 
Murray, members of the subcommittee. I appreciate the chance to 
discuss current challenges facing rural hospitals.
    Again, I am Tim Wolters. I oversee government reimbursement 
programs at Citizens Memorial Hospital in Bolivar, Missouri, 
and Lake Regional Health System in Osage Beach, Missouri.
    Fifty rural hospitals have closed since January 2010. A 
rural hospital closure means more than just the loss of access 
to healthcare for a community. As a rural hospital is 
frequently the largest employer in town, a closure represents 
an economic blow as well.
    My written testimony provides several examples of what is 
working in rural hospitals, including quality healthcare at a 
reasonable price to the Medicare program and programs like the 
medical home program, which improves the health in our 
communities. I want to focus my oral comments, though, on four 
specific challenges rural hospitals face.
    First, patient volumes are lower at rural hospitals and 
often fluctuate significantly on a day-to-day basis, making it 
difficult to manage staffing levels. My written testimony has a 
graph on page 3 that shows the daily census at Lake Regional 
for the month of January, showing significant daily 
fluctuations, including a high census of 103 patients on 
January 15 and a low of 66 patients on January 25, a 
significant fluctuation.
    Second, Medicare utilization is significantly higher at 
rural hospitals than at urban hospitals. The table on page 4 of 
my testimony shows that urban hospitals average only 30 percent 
Medicare utilization compared to 42.5 percent at rural 
hospitals. The challenge of such high Medicare utilization is 
that Medicare cuts represent a higher percent of our budget, 
and we have less commercial and managed-care volume to 
subsidize the Medicare losses.
    The third challenge is the cumulative impact of Medicare 
cuts. The graph on page 5 compares estimates using CMS data of 
hospital costs versus payments from 2011 through 2023. The top 
line represents the growth in hospital costs over this time, 
while the bottom-line represents estimated growth in Medicare 
payments, factoring in the productivity and fixed cuts under 
the Affordable Care Act and the sequestration cut under the 
Budget Control Act. The difference between the lines represents 
Medicare's lost reimbursement and it grows annually, exceeding 
17 percent by 2023.
    The cumulative impact of these cuts over this time period 
for my two hospitals is estimated to be about $120 million. 
Beyond all the cuts we have been facing, the recovery audit 
contractor, or the RAC, program is also draining our hospital 
resources.
    Lake Regional currently has over 500 Medicare inpatient 
claims languishing at the ALJ level of appeal worth about $3.5 
million in Medicare reimbursement.
    The final challenge we face is the increasingly complex 
regulatory environment in which we operate. Page 7 shows six 
different Medicare prospective payment systems and six 
different Medicare fee schedules we must manage with each of 
these systems changing on a regular basis, including changes 
such as the two-midnight rule that CMS implemented in 2013.
    Also, we understand the reason for the change to the IDC-10 
this fall, and we've been training extensively for the 
conversion. But this is one more significant change in our 
operations that we must implement with scarce funds available.
    Both my hospitals were early adopters of electronic health 
records and have achieved stage 2 status. However, with 
meaningful use funding nearing an end, and requirements 
continuing to increase, this has also become an administrative 
burden for us to keep up with the changes that CMS implements.
    In conclusion, with 50 rural hospitals closing since 
January 2010, Congress must act to prevent further erosion of 
healthcare in rural communities.
    We appreciate congressional action to protect the funding 
we receive. For example, H.R. 2 eliminates the annual threat of 
a significant reduction in the Medicare physician fee schedule. 
It also provides a 30-month extension in the Medicare low-
volume and Medicare-dependent hospital programs, and extends 
the ambulance and home health rural add-ons.
    For rural PPS hospitals to survive, Congress must continue 
to support these programs, in fact, making them permanent. 
Likewise, rural hospitals should be exempt from sequestration 
and future Medicare cuts.
    We also need continued support for programs like the 340B 
drug discount program, a lifeline for CMH, which also saves 
money for the State and the Federal Government.
    Finally, grant funding should be made available for rural 
hospitals to assist with the transition to ICD-10 and the 
larger conversion to future care delivery and payment models.
    Thank you for the opportunity to present this testimony 
today, and I look forward to answering questions you may have.
    [The statement follows:]
                   Prepared Statement of Tim Wolters
    Chairman Blunt, Ranking Member Murray and Members of the 
Subcommittee, thank you for the opportunity to discuss current 
challenges facing rural healthcare providers. According to the Sheps 
Center at the University of North Carolina, 50 rural hospitals have 
closed since January 2010. My two hospitals, Citizens Memorial Hospital 
in Bolivar, Missouri (CMH), and Lake Regional Health System in Osage 
Beach, Missouri (Lake Regional), are striving not to be included in 
that statistic. A hospital closure means not just the loss of access to 
healthcare for a community. As a rural hospital is frequently the 
largest employer in the community, its closure represents an economic 
blow as well. The long-term impact is also significant, as businesses 
are reluctant to locate in a community without a hospital.
    Legislation in recent years requires hospitals to improve quality 
and patient satisfaction, while receiving less Medicare reimbursement. 
While all hospitals feel the impact of cuts in Medicare reimbursement, 
rural hospitals are particularly susceptible to these cuts. Before 
describing several key challenges rural hospitals face that make them 
more vulnerable to Medicare cuts, I want to talk about what's working 
in rural healthcare.
    Rural hospitals provide quality care close to home. And, in many 
cases Medicare spends less on this care in rural hospitals than in 
urban hospitals. Looking at the most recent data CMS reports on 
Medicare Spending per Beneficiary, CMH has a ratio of 0.93, while Lake 
Regional has a ratio of 0.92. Both of these ratios are well below the 
national average, meaning Medicare spends less on care initiated at 
these hospitals than at the average hospital. CMH is also exploring the 
possibility of joining an accountable care organization (ACO) under the 
CMS ACO Investment Model recently announced. This program offers funds 
to assist with the large investment required to start an ACO.
    Rural hospitals provide personalized care, and focus on the 
patient's needs. Both CMH and Lake Regional have certified our primary 
care clinics as patient centered medical homes, which focus on the 
patient's health, offering care coordination, education, and assistance 
with self-management of chronic conditions. CMH is participating in the 
Missouri Medicaid medical home program, with over 1,100 Medicaid 
patients receiving assistance in managing their chronic health 
conditions. We have seen measurable improvements in health status since 
we began offering this program.
    Rural hospitals try to find solutions. Sac-Osage Hospital in 
Osceola, Missouri, 35 miles north of Bolivar, closed on November 1, 
2014, due to declining patient volumes and lack of financial resources. 
Rather than leaving that community without local healthcare, CMH took 
over the operations of the ambulance service, primary care clinic, and 
retail pharmacy, the only pharmacy in Osceola, and operates an 
outpatient rehabilitation clinic. Our primary care clinic includes 
walk-in clinic services 12 hours per day, 7 days per week. While the 
loss of jobs, inpatient beds, and a 24-hour emergency department are 
all significant, we are trying to find the most feasible solution to 
make sure healthcare is available to the residents of Osceola and the 
surrounding area.
    But rural hospitals do face many challenges. The four challenges I 
would like to highlight regarding rural hospitals are patient volumes, 
Medicare utilization, the cumulative impact of Medicare reimbursement 
cuts and the increasingly complex regulatory environment in which we 
operate.
Patient Volumes
    Medicare's prospective payment systems generally rely on averages 
in setting rates applicable to hospitals, with special adjustments for 
different classifications of hospitals. Rural hospitals are generally 
smaller than urban hospitals and have lower patient volumes. This 
creates challenges as we spread fixed costs over lower volumes, trying 
to keep costs reasonably in line with PPS payment rates. We also have 
to manage our workforce on a day to day basis as patient volumes 
fluctuate.
    Looking at the past 12 months of data, CMH's lowest average daily 
census was in July 2014, with an average of 26 patients. Our highest 
average census occurred in February 2015, with an average of 34 
patients, 31 percent higher than the July average. Likewise, Lake 
Regional had an average daily census of only 39 patients in May 2014, 
increasing by 49 percent to an average daily census of 58 patients in 
January 2015. To put this in more perspective, the following graph 
shows Lake Regional's daily census for January 2015, including 
traditional inpatients plus skilled nursing, nursery and outpatient 
observation patients using inpatient beds. The graph shows the month 
started with a census of 72, peaked on January 15th with a census of 
103 patients and hit a low of 66 patients on January 25th. The census 
rebounded rapidly to a census of 98 patients 2 days later and we ended 
the month with 86 patients.


    The significant volume fluctuations shown in this graph make it 
extremely difficult to manage our workforce. When possible, we try to 
manage staffing levels based on the daily census, but if we reduce 
staff hours too often, we risk employee dissatisfaction. We experience 
patient care staff leaving the area to work at urban facilities with 
more stable work hours and patient volumes, and frequently higher pay 
rates.
Medicare Utilization
    Rural hospitals generally have significantly higher Medicare 
utilization than urban hospitals. The American Hospital Association 
provided the table on the next page, showing Medicare and Medicaid 
discharges for urban hospitals compared to several subsets of rural 
hospitals.

                                           Fiscal year 2013 Medicare and Medicaid Discharges by Hospital Type
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  Medicare                     Medicaid
                                                                    Number of      Medicare      Discharge      Medicaid      Discharge        Total
                                                                    Hospitals     Discharges      Percent      Discharges      Percent      Discharges
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Hospitals....................................................        4,683       9,583,416         31.5       3,872,807         12.7      30,425,687
Urban............................................................        2,565       8,035,725         30.0       3,354,041         12.5      26,786,587
All Rural........................................................        2,118       1,547,691         42.5         518,766         14.3       3,639,100
CAH..............................................................        1,202         298,666         49.4          64,825         10.7         604,217
MDH..............................................................          192         171,974         48.5          50,784         14.3         354,279
SCH..............................................................          377         533,742         41.4         182,658         14.2       1,289,173
Other Rural......................................................          347         543,309         39.0         220,499         15.8       1,391,431
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: fiscal year 2013 Medicare cost report data from CMS HCRIS file, 1st quarter 2015 update. Note the `CAH' category includes rural CAHs only--urban
  CAHs are in the urban category. The `Other Rural' category includes only rural hospitals with no special payment status (i.e., non-SCH, non-MDH, non-
  CAH).

    The table shows urban hospitals average only 30 percent Medicare 
utilization, while rural hospitals average 42.5 percent Medicare 
utilization. Every classification of rural hospitals averages 
significantly higher Medicare utilization than urban hospitals. In 
fact, rural hospitals average higher Medicaid utilization as well. 
During this same time period, CMH had 38.7 percent Medicare utilization 
while Lake Regional had 47.0 percent Medicare utilization. The 
challenge of such high Medicare utilization is that cuts to the 
Medicare program represent a higher percent of our budget. And, because 
of the high Medicare utilization, we have less commercial and managed 
care volume available to subsidize the Medicare losses.
Cumulative Impact of Medicare Reimbursement Cuts
    Lower overall volumes and higher Medicare utilization make it 
particularly difficult for PPS hospitals to adjust to the ongoing and 
increasing Medicare cuts. The largest ongoing cuts affecting PPS 
hospitals are the productivity and fixed cuts under the Affordable Care 
Act, as well as the 2 percent sequestration cut that started April 1, 
2013. The graph on the next page compares actual and projected growth 
in costs and payments for PPS hospitals from fiscal year 2011 through 
fiscal year 2023. The top line shows actual and projected growth in 
costs using CMS projected market-basket inflation factors. The bottom 
line shows these market-basket inflation factors, reduced by required 
productivity and fixed cuts under the ACA, and sequestration cuts under 
the Budget Control Act, and thus represents the expected growth in 
Medicare payments over this same time period.


    The widening gap between the lines demonstrates the increasing 
pressure PPS hospitals will feel to reduce expenses, or increase 
charges to other third parties, to make up for the escalating Medicare 
cuts. The gap grows annually, and is expected to exceed 17 percent by 
2023. The cumulative impact of these cuts over this 13-year period is 
estimated to total approximately $43 million for CMH and approximately 
$78 million for Lake Regional.
    Note that the cuts reflected in the graph represent only a portion 
of the cuts PPS hospitals are experiencing or soon will experience 
under the ACA and other legislation. Other cuts or funding lapses not 
measured in the graph include the following:
  --Effective for fiscal years beginning on or after 10/1/12, Medicare 
        bad debts are reimbursed at 65 percent of the actual bad debt
  --Effective 1/1/13, Medicare outpatient hold harmless reimbursement 
        for rural hospitals was allowed to expire
  --Effective 10/1/13, cuts in Medicare disproportionate share payments 
        began
  --Effective 10/1/13, CMS implemented a 0.2 percent Medicare cut 
        because they felt the 2-midnight rule would result in more 
        inpatient admissions, although it hasn't
  --Effective 1/1/14, sole community hospitals experienced a 
        significant reduction in TRICARE payments for inpatient 
        services
  --Effective 10/1/14, a 1 percent Medicare cut for the lowest quartile 
        of PPS hospitals with high rates of hospital-acquired 
        conditions
  --Effective 10/1/17, cuts in Medicaid disproportionate share payments 
        will begin which will total $43 billion by 2025
  --Effective 10/1/17, the Medicare-dependent hospital and low-volume 
        hospital payment provisions recently extended in HR 2 will be 
        at risk of expiring
    Beyond all of these legislative and regulatory cuts and funding 
lapses, PPS hospitals are also experiencing the end of the cash flow 
cycle under the electronic health records meaningful use program. The 
meaningful use program generated $6 to $8 million in funding for PPS 
hospitals the size of CMH and Lake Regional, funds that were vital to 
reimburse us for the heavy investments made on meaningful use 
technology. However, those funds helped mask the impact of the ACA and 
other cuts that took effect during the past few years and now that 
meaningful use funds are diminishing, the full impact of other cuts is 
being felt. And, hospitals that do not maintain their status as 
meaningful users risk incurring penalties under the meaningful use 
program.
    Finally, the recovery audit contractor (RAC) program has consumed 
extensive hospital resources to manage those requests in recent years 
and appeal the excessive denials issued by the RACs. Although activity 
has diminished while CMS works on the new round of RAC contracts, 
hospitals continue to deal with a huge backlog of RAC appeals. Lake 
Regional currently has over 500 claims in the RAC appeals pipeline, 
with approximately $3.5 million in reimbursement tied up in this 
process. There are a number of other similar programs operated by 
Medicare, Medicaid and other payers. At CMH, for example, we have 
experienced 17 denials by Humana's Medicare HMO plan where the 
admission was preauthorized, but subsequently denied several months 
after the patient was discharged.
    Increasingly Complex Regulatory Environment
    Those not involved in day-to-day hospital operations may assume a 
PPS hospital learns to operate under a prospective payment system and 
ongoing operations are not that difficult. The reality is that a PPS 
hospital must learn multiple payment systems to ensure accurate payment 
for services to Medicare patients. There may also be significant 
variations in payment systems for Medicare managed care plans, State 
Medicaid plans, Medicaid managed care plans and other payers. For 
example, CMH must maintain medical records and learn the billing 
requirements to ensure compliance with the following Medicare 
prospective payment systems and fee schedules:
  --Inpatient acute care PPS
  --Inpatient psychiatric PPS
  --Inpatient skilled nursing PPS
  --Outpatient PPS
  --Home health PPS
  --Hospice PPS
  --Physician fee schedule
  --Outpatient rehabilitation fee schedule
  --Outpatient laboratory fee schedule, for tests not bundled under 
        outpatient PPS
  --Ambulance fee schedule
  --Durable medical equipment fee schedule
  --Pharmacy fee schedule
    The value-based purchasing and other quality programs under the ACA 
and other legislation have increased the need for hospitals to maintain 
data on various patient indicators and ensure prompt reporting of the 
data. In fact, CMH has two full-time nurses spending substantially all 
of their time on quality reporting data collection and verification. 
Likewise, CMS changes billing and documentation requirements on a 
regular basis, making it essential hospitals monitor such developments 
to ensure we remain in compliance, and ensure we don't miss out on 
vital reimbursement for the services we render. A well-known example of 
such changes is the 2-midnight rule CMS implemented on October 1, 2013. 
CMS has also been implementing significant changes in the outpatient 
PPS as well, in particular bundling many laboratory tests into the PPS 
rate. These are just two examples of the ongoing changes in payment 
systems we must educate our staff about and ensure we implement 
compliantly.
    Beyond the payment systems themselves, a new coding system takes 
effect October 1, 2015. While we understand the reason for the change 
to ICD-10, and have been training extensively for the change, this is 
one more significant change in our operations that must be implemented, 
with scarce funds available for the implementation.
    Both of my hospitals were early adopters of electronic health 
records and have achieved Stage 2 status. However, with the funding 
drying up and the requirements continuing to advance, this has also 
become an administrative burden to keep up with the changes CMS 
implements.
    The complex regulatory environment also affects our physicians. 
While recruiting physicians to rural areas is a longstanding problem, 
the complex environment of implementing electronic health records, ICD-
10 and various quality reporting programs means most physicians are 
unwilling to practice in rural areas unless a hospital is willing to 
manage their practice and ensure income stability. In urban areas, 
independent physicians can join larger clinics with the expertise to 
manage these complex issues outside of a hospital. In rural areas, 
these large clinics do not exist, with the hospital taking on the role 
of managing clinic operations on behalf of most physicians.
The Future for Rural PPS Hospitals
    With 50 hospitals closing since January 2010, Congress must act to 
prevent a further erosion in the availability of hospital services in 
rural America. We appreciate Congressional actions to protect the 
funding we receive. For example, HR 2, the Medicare Access and CHIP 
Reauthorization Act of 2015, eliminates the annual threat of a 
significant reduction in the Medicare physician fee schedule. The 
legislation also provides a 30-month extension in the Medicare low-
volume and Medicare-dependent hospital programs, and extends several 
other rural programs. Finally, the legislation includes an additional 
6-month delay preventing post-payment patient status reviews under the 
2-midnight program. We greatly appreciate the support Congress has 
shown for these rural programs, as well as the delay in the 2-midnight 
patient status reviews.
    For rural PPS hospitals to continue to survive, we need Congress to 
continue to support these rural reimbursement programs, in fact, making 
them permanent. Likewise, rural hospitals should be exempted from 
sequestration and any future cuts to Medicare programs. We also need 
continued support for programs such as the 340B drug discount program, 
a lifeline for hospitals such as CMH, which also saves money for the 
State of Missouri and the Federal Government.
    Finally, grant funding or funding similar to meaningful use funds 
should be made available to rural hospitals to assist with the 
transition to ICD-10 and the larger transition of rural hospitals into 
future care delivery and payment models. This could include expansion 
and extension of programs such as the CMS ACO Investment Model 
mentioned previously, and Federal funding for Medicare and Medicaid 
medical home programs.
    Thank you for the opportunity to present this testimony today and I 
look forward to answering any questions you may have.

    Senator Blunt. Thank you, Mr. Wolters.
    Dr. Henderson.
STATEMENT OF DR. KRISTI HENDERSON, CHIEF TELEHEALTH AND 
            INNOVATION OFFICER, UNIVERSITY OF 
            MISSISSIPPI MEDICAL CENTER
    Dr. Henderson. Chairman Cochran, Chairman Blunt, Ranking 
Member Murray, and distinguished members of the subcommittee, 
it is my pleasure to join you today to discuss how telehealth 
is improving healthcare in rural communities.
    My name is Kristi Henderson, and I am a nurse practitioner 
and serve as the Chief Telehealth and Innovation Officer at the 
University of Mississippi Medical Center in Jackson.
    Mississippi ranks at the bottom for overall health, 
obesity, heart disease, diabetes, and preventable 
hospitalizations. More than half of Mississippi's 3 million 
citizens live in a rural community and almost a quarter live at 
or below the Federal poverty level. Two-thirds of Mississippi's 
hospitals are located in rural areas and lack sufficient 
resources in specialty care.
    Despite these facts, telehealth in our State is increasing 
access to healthcare and improving outcomes and lowering costs. 
The UMMC Center for Telehealth began in 2003 with the tele-
emergency program connecting critical access hospital emergency 
departments to physicians at our trauma center. Twelve years 
later, telehealth allows us to provide over 35 medical 
specialties to 166 sites around the State, including community 
hospitals and clinics, mental health facilities, schools and 
colleges, corporations, prisons, and even in patients' homes. 
We connect to sites in 52 of the States' 82 counties and serve 
an average of 8,000 patients a month.
    Since 2003, we have been awarded over $9.7 million in 
Federal grants to purchase devices, conduct work force 
training, and enable the technology that we use to serve 
patients daily. This early funding allowed us to test delivery 
systems, areas of practice, and service locations in order to 
craft an effective and impactful model worth replicating.
    Without early critical support from USDA, HRSA, FCC, and 
others, our network would've been very slow to deploy, taking 
the longest to reach those with the most need. Today our system 
is completely self-sustaining.
    A critical factor to our continued sustainability is the 
reimbursement parity available in Mississippi. Prior to 2013, 
insurance companies in Mississippi did not reimburse for 
telehealth services. We argued that Mississippi would 
ultimately save money if they did, and undertook a series of 
pilot projects to prove it. We were successful.
    In 2013 and 2014, Governor Bryant signed legislation 
mandating that health insurance companies reimburse for 
telehealth services at the same rate as in-person services. 
These policy changes were the catalyst for the rapid growth of 
our system. While increased reimbursement may cost more in the 
short term, years of data from our State, and numerous others, 
prove that the cost savings achieved through better chronic 
disease management, fewer ER visits, and aggressive preventive 
care, far outweighed expenditures.
    Given the success that we have seen in Mississippi, I can 
only imagine the exponential impact of offering similar Federal 
parity for telehealth.
    I commend CMS for opening new code sections for 
reimbursement and hope the committee will encourage them to 
expand coverage for more services and more communities, be they 
rural or urban.
    Without reliable connectivity, we cannot serve rural 
patients. Thanks to support from Universal Service Funds and 
our telecom partners, we are able to bring much-needed 
healthcare to rural Mississippi. It is this connectivity, 
enabling remote patient monitoring in the home, that is 
changing lives in Ruleville, Mississippi.
    Last fall, we launched a research pilot aimed at managing 
200 uncontrolled diabetics through aggressive in-home 
monitoring and intervention. Once enrolled, patients are sent 
home with an electronic tablet that monitors glucose readings 
daily, provides educational information, and transmits health 
data to specialists monitoring them hundreds of miles away.
    For the first time, these patients have access to a medical 
team dedicated to their care--ophthalmologists, 
endocrinologists, pharmacists, nutritionists, diabetic 
educators, and nurses. Preliminary results show that the 
majority of patients have already met or exceeded the goals 
that were set for the end of the study. With one exception, 
none of our patients have gone to the ER or have been admitted 
to the hospital for their diabetes. The results are improved 
care at a reduced cost.
    So we look forward to working with the committee and would 
like you to consider these few points.
    The need to test reimbursement parity at the Federal level, 
particularly for remote patient applications: The only way for 
us to know if the success of pilots like ours can be replicated 
at the Federal level is to test it. Now is the time for CMS to 
pilot new reimbursement parity models for telehealth, 
especially in-home monitoring where impact is the greatest.
    The need for continued coordinated Federal support for 
telehealth: While our network has become self-sustaining, it 
will not be complete until we reach every Mississippian. The 
need for Federal funding remains, and efforts to coordinate 
opportunities across the agencies should be encouraged.
    The need to remove geographic barriers for reimbursement: 
Rural or urban, telehealth is a powerful tool in improving 
access to care and should be incentivized. We recommend that 
geographic restrictions for CMS reimbursement be removed.
    Then lastly, the need for continued support for Universal 
Service Funds: A reduction in any of the USF funding will not 
only impact current operations but will significantly hinder 
our efforts to offer remote patient monitoring in rural 
communities. Funding should be protected.
    Our mission is to increase access to health care, improve 
outcomes, and reduce cost. Telehealth allows that to happen.
    I thank the subcommittee for the opportunity to testify 
today and look forward to answering your questions. Thank you.
    [The statement follows:]
               Prepared Statement of Dr. Kristi Henderson
    Chairman Cochran, Chairman Blunt, Vice Chairwoman Mikulski, Ranking 
Member Murray and other distinguished Members of the Committee, it is a 
pleasure to appear before this subcommittee to discuss how telehealth 
is improving healthcare in rural communities. I thank the Subcommittee, 
and especially my Senator, Chairman Cochran, for the opportunity to 
testify and look forward to a robust discussion.
    My name is Kristi Henderson, and I serve as Chief Telehealth and 
Innovation Officer at the University of Mississippi Medical Center in 
Jackson. I also bring my clinical experience as a nurse practitioner to 
my testimony. I am pleased to tell you that telehealth in our State is 
increasing access to care in rural communities, improving health 
outcomes and lowering costs.
    Telehealth was born out of necessity. Patients living in rural 
areas always have lacked access to healthcare, and, even today, those 
who are not able to travel often receive inadequate care, or no care at 
all. Many patients are not able to see a specialist or get the 
treatment they need without traveling long distances. Long gone are the 
days when each small town had its own ``Jack of all trades'' doctor who 
could deliver babies, set broken bones and check on Grandma's aching 
back. While patients in urban areas may be located in closer proximity 
to medical services, the waiting time for appointments with specialists 
can be several weeks, resulting in increased severity of disease 
equivalent to that in the rural areas.
Why is this?
    The physician shortage is partially to blame. The Association of 
American Medical Colleges (AAMC) predicts that by the year 2020, there 
will be a national shortage of more than 90,000 doctors, including 
45,000 primary care physicians.\1\ Rural communities rely on family 
medicine physicians because they are often the only healthcare 
providers in the area, yet in the last decade, the number of medical 
school graduates choosing to specialize in family medicine has 
declined.\2\ Of those who do elect to study family medicine, only 11 
percent choose to practice in rural areas.\3\
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    \1\ Association of American Medical Colleges, 2010.
    \2\ Rosenblatt, Roger A.; Chen, Frederick M.; Lishner, Denise M.; 
Doescher, Mark P. The Future of Family Medicine and Implications for 
Rural Primary Care Physician Supply. WWAMI Rural Health Research 
Center. Final Report, #125 (2010).
    \3\ Chen, F., Fordyce, M., Andes, S., & Hart, L. (2010). Which 
Medical Schools Produce Rural Physicians? A 15-Year Update. Academic 
Medicine, 594-598. Retrieved April 17, 2015, from http://
www.siumed.edu/academy/jc_articles/Distlehorst_0410.pdf.
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    Chronic disease is another major challenge, particularly for poor, 
rural Americans. A review of data provided by the CDC reveals that 
approximately 117 million people--about half of all adults in the 
U.S.--have one or more chronic health conditions. More than 75 percent 
of healthcare costs are due to chronic conditions, nearly $7,900 for 
every American with a chronic disease.\4\ \5\ Approximately, 1 in 5, or 
2.6 million Medicare patients are readmitted to the hospital within 30 
days of discharge due to chronic conditions, which generates costs of 
over $26 billion each year. In Mississippi alone, seven of the leading 
causes of death in 2011 were chronic disease-related.
---------------------------------------------------------------------------
    \4\ Centers for Disease Control and Prevention. 2009. Retried on 
March 27, 2014, from http://www.cdc.gov/chronicdisease/resources/
publications/aag/chronic.htm.
    \5\ Center for Disease Control and Prevention. Chronic disease 
overview: Costs of chronic disease. 2012. Available at http://
www.cdc.gov/nccdphp/overview.htm.
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    Due to limited local medical services and lack of transportation, 
patients are often unable to access vital primary care services that 
focus on prevention and management of chronic illnesses, which leads to 
inadequate continuity and coordination of care. The result is inflated 
healthcare costs, poor outcomes and repeated readmissions. Telehealth 
is a critical tool in addressing these challenges, one that Mississippi 
has used with great success to increase access to healthcare and reduce 
cost.
The Telehealth Solution
    In its infancy, telehealth simply connected hospital sites to rural 
clinical sites, linking health providers to each other and bringing 
much needed services to remote areas. Telehealth, however, can be used 
in many different settings beyond the traditional hub and spoke model. 
From corporations to correctional facilities, telehealth is providing 
access to care and reducing costs for both providers and patients.
  --In the workplace--In 2011, 11 percent of employers with at least 
        5,000 employees said that they have a telehealth program in 
        place, up from 5 percent in 2010, according to a study by 
        Mercer. Participating employers are seeing productivity savings 
        of up to three hours and an average cost savings of $55 in 
        medical costs per visit.
  --In correctional facilities--From a baseline of 94,180 transports 
        made annually from correctional facilities to emergency 
        departments at a cost of $158 million, telehealth technologies 
        could avoid almost 40,000 transports with a cost savings of 
        $60.3 million a year. Further, from an annual baseline of 
        691,000 physician office visits at a cost of $302 million, 
        telehealth could avoid 543,000 inmate transports with a cost 
        savings of $210 million.\6\
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    \6\ Vo, Alexander. ``The Telehealth Promise: Better Health Care and 
Cost Savings for the 21st Century.'' AT&T Center for Telehealth 
Research and Policy, no. May 2008 (2008): 10. http://
telehealth.utmb.edu/presentations/The Telehealth Promise-Better Health 
Care and Cost Savings for the 21st Century.pdf.
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  --In schools--School-based telehealth provides access to healthcare 
        for students to receive needed healthcare, mental health, 
        chronic disease management and other care in schools. In an 
        Onondaga County, New York, remote diabetes care program, 
        students' A1C levels were lowered and urgent visits and 
        hospitalizations during the course of the study were 
        reduced.\7\ The availability of telehealth in schools has been 
        shown to reduce students' absenteeism, enabling healthy 
        children to become better students.\8\
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    \7\ Daniels, Stephen R. School-centered telemedicine for type 1 
diabetes mellitus. The Journal of Pediatrics. September 2009; 155(3): 
A2.
    \8\ McConnochie KM, Wood NE, Herendeen NE, ten Hoopen CB, and 
Roghmann KJ. Telemedicine and e-Health. June 2010, 16(5): 533-542. 
doi:10.1089/tmj.2009.0138.
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  --In nursing homes--From a baseline of 2.7 million transports made 
        annually from nursing home facilities to emergency departments 
        at a cost of $3.62 billion, telehealth could avoid 387,000 
        transports with a cost savings of $327 million. In addition, of 
        the 10.1 million physician office visits made annually from 
        nursing facilities at a cost of $1.29 billion, telehealth could 
        avoid 6.87 million transports with a cost savings of $479 
        million.\9\ \10\
---------------------------------------------------------------------------
    \9\ Center for Information Technology Leadership Partners 
HealthCare System, Inc., 2007.
    \10\ State Health Care Spending Project, 2013. Pew Charitable 
Trusts and John D. and Catherine T. MacArthur Foundation. 
www.pewstates.org.
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  --Into the home--Remote patient monitoring is a form of telehealth 
        that is being used to address chronic disease. A national home 
        telehealth program started by the Veterans Administration 
        resulted in a 25 percent reduction in numbers of bed days of 
        care, a 19 percent reduction in numbers of hospital 
        readmissions and mean satisfaction score rating of 86 percent 
        after enrollment into the program. This is just one example of 
        how remote monitoring can lead to a dramatic reduction in costs 
        and an equally dramatic increase in quality.\11\
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    \11\ Care Coordination/Home Telehealth: The Systematic 
Implementation of Health Informatics, Home Telehealth, and Disease 
Management to Support the Care of Veteran Patients with Chronic 
Conditions. Adam Darks, Patricia Ryan, Rita Kobb, Linda Foster, Ellen 
Edmonson, Bonnie Wakefield, Anne E. Lancaster. Telemedicine and e-
Health. December 2008, 14(10): 1118-1126.
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Telehealth in Mississippi
    Nowhere in this great Nation are healthcare challenges greater than 
in Mississippi. Not only do we lead the Nation in prevalence of 
multiple chronic diseases, we also have the lowest number of doctors 
per capita of any State in the Nation. Add to that persistent poverty 
and low educational achievement spread throughout a rural, agrarian 
State, and you can begin to see why telehealth is our best option for 
changing health outcomes for Mississippi.
    Mississippi has a population of roughly 2.9 million people, with 
more than 1.6 million people living in a rural community and 23 percent 
living at or below the Federal poverty level.\12\ \13\ Mississippi 
ranks the worst in the country for overall health, obesity, heart 
disease, diabetes, infant mortality and preventable 
hospitalizations.\14\ We rank fifty-first in the Nation for deaths 
before the age of 75 years resulting from conditions that could have 
been prevented with timely quality healthcare.\15\
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    \12\ U.S. Census, 2010.
    \13\ Rural Assistance Center, 2013.
    \14\ Kaiser State Health Facts, 2009.
    \15\ Commonwealth Fund State Scorecard, 2014.
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    Of Mississippi's ninety-nine hospitals, seventy-two hospitals are 
located in rural areas and suffer from the lack of resources and 
corresponding access to care common in rural areas. The State's 
expenditure on healthcare exceeds the national average with 32 percent 
of the budget being spent on healthcare. Almost half of payments to 
healthcare providers in Mississippi were from Medicare and Medicaid.
UMMC Center for Telehealth
    The University of Mississippi Medical Center in Jackson is home to 
Mississippi's only academic medical center, only Children's hospital, 
only transplant program and only Level One trauma center. We have the 
State's only allopathic medical school, dental school and pharmacy 
school, and we are the major player in clinical and translational 
research. While these programs and services are more readily accessed 
by those living in the Jackson area, we know that, in order to make 
progress toward improved health statewide, we have to bring our 
healthcare experts to patients in the communities where they live.
    The UMMC Center for Telehealth got its start over 10 years ago with 
the TelEmergency program. Today, UMMC connects 15 emergency departments 
in rural hospitals with our Level One trauma center at UMMC. Through 
this system, UMMC's emergency medical team consults with rural 
providers using a real-time, video and audio connection, interacts with 
the patient and gives guidance to the provider regarding treatment 
options. Our TelEmergency program has resulted in a 25 percent 
reduction in rural emergency room staffing costs, a 20 percent 
reduction in unnecessary transfers and has produced patient outcomes in 
rural hospitals that are on par with that of our academic medical 
center.
    Twelve years later, using a similar audio/video platform, the UMMC 
Center for Telehealth is providing over 35 medical specialties in 165 
sites around the State, including community hospitals and clinics, 
mental health facilities, FQHCs, schools and colleges, mobile health 
vans, corporations, prisons and patients' homes. The UMMC Center for 
Telehealth connects to sites in 52 of the State's 82 counties and 
serves an average of 8,000 patients per month.
    Our statewide telehealth network was built with funds from State, 
Federal and private grants. Since 2003, we have received over $9.7 
million from Federal sources to purchase devices, conduct workforce 
training and enable the technology that we use to serve patients daily. 
This funding allowed us to test new delivery systems, new areas of 
practice and new service locations in order to craft an effective and 
impactful model worthy of replicating. The grant funding allowed us to 
prove concepts and build statewide coalitions while working on policy 
changes necessary to sustain the program outside of the grant funding. 
Today, I am pleased to report that our system is completely self-
sustaining. Without early, critical support from FDA, HRSA, FCC and 
others, however, our network would have been very slow to deploy, if 
ever, taking the longest to reach those with the most need. I encourage 
the committee to continue to provide incubator funding for telehealth, 
including workforce training opportunities, and to facilitate 
coordination among Federal partners to best leverage limited Federal 
funds.
    As we worked to expand telemedicine services, we ran into several 
laws and regulations that complicated its delivery. The first obstacle 
we encountered was the financial disincentive to practice telemedicine. 
Prior to 2013, insurance companies in Mississippi did not reimburse for 
telehealth consults in a way that made it an attractive alternative to 
a clinic visit. We argued that Mississippi would ultimately save money 
by reimbursing for telehealth and undertook a series of pilots to prove 
it. We were successful.
    In 2013, Governor Phil Bryant signed legislation mandating both 
public and private health insurance companies reimburse for telehealth 
services at the same rates as in-person services. The following year, 
the Governor signed legislation mandating equal reimbursement coverage 
for store-and-forward and remote patient monitoring services. Thanks to 
the Governor's leadership in clearing the barriers to reimbursement 
parity, Mississippi is now recognized as a leader in telehealth. 
Mississippi has received a grade of ``A'' for telehealth parity 
reimbursement policies by the American Telemedicine Association.
    These changes at the State level were the catalyst for the rapid 
growth of our State's telehealth system. Given the cost reductions that 
we have seen in Mississippi through mandated parity, I can only imagine 
the exponential impact of offering similar Federal parity for 
telehealth. While increased reimbursement may cost the government more 
in the short term, years of data from our State and numerous others 
prove that the costs savings, achieved through better chronic disease 
management, fewer ER visits and aggressive preventative care, far 
outweigh these expenditures. I would encourage this Committee and CMS 
to implement telehealth testing, research and demonstration projects, 
including through CMMI, with the ultimate goal of expanding 
reimbursement where health status is improved and cost savings are 
greatest.
    Testing telehealth to demonstrate effectiveness of care and cost 
efficiencies is especially important as CMS currently restricts 
reimbursement for telehealth to patients who receive treatment in a 
Rural Health Professional Shortage Area or in a county that is not 
considered part of a Metropolitan Statistical Area. Within the 
Department of Health and Human Services alone, there are numerous 
definitions of what ``rural'' means, leading to confusion. Many urban 
areas also are medically underserved and would benefit greatly from 
access to telehealth. Therefore, I would request that CMS consider 
removing geographic restrictions for telehealth reimbursement.
    Another obstacle we encountered was connectivity. Due to the 
largely rural nature of our State, we could not take for granted that 
support for telehealth services would be available at the level we 
required, or frankly, at all. In order to achieve the connectivity 
required, we partnered with telecommunications companies from around 
the State to maximize existing resources and leverage the strength of 
incumbent utilities in the areas where they serve. Thanks to support 
from the Universal Service Fund and our partners across the State, we 
are able to bring much needed, life changing healthcare to rural 
Mississippi. Nothing tells this story better than the success of our 
Diabetes Telehealth Network pilot.
    In 2012, diabetic medical expenses in Mississippi totaled $2.74 
billion, according to the American Diabetes Association. Because 
Mississippi leads the Nation in chronic disease, we wanted to begin 
disease management where it is the worst. Ruleville, Mississippi, is 
ground zero for diabetes. Sunflower County, where Ruleville is located, 
has one of the highest percentages of diabetics per capita of any 
county in the country. This means repeated visits to the ER, 
amputations and early death for too many members of this community.
    Last fall, the UMMC Center for Telehealth partnered with the 
Governor, Intel-GE Care Innovation, C Spire and the North Sunflower 
Medical Center to develop a research pilot with the ambitious goal of 
managing 200 uncontrolled diabetics through aggressive in home 
monitoring and intervention. The centerpiece of the partnership is a 
population based healthcare model that leverages telehealth technology 
delivered over state-of-the-art fixed and mobile broadband connections. 
Its goal is to improve the health of participants while reducing the 
total cost of care. Once a patient meets criteria to be admitted to the 
pilot, he or she is sent home with a tablet that monitors glucose 
readings daily, provides educational health information and transmits 
vital health data to specialists monitoring them in real time. For the 
first time, these patients have access to a team of professionals 
dedicated to their care--ophthalmologists, endocrinologists, 
pharmacists, nutritionists, diabetic educators and nurses. Many of our 
patients have never used a computer and some cannot read beyond a sixth 
grade level. Despite these challenges, our patients are thriving.
    Of the 93 patients currently enrolled in the pilot, all report that 
their disease is under control for the first time and that they have 
lost weight and are feeling better. While our goal was for 75 percent 
of patients to reduce their hemoglobin A1C levels by 1 percent in the 
first year, study results show that after only 6 months, the average 
reduction in A1C levels among participants is almost 2 percent. In 
addition, with the exception of one patient who needed to be 
hospitalized at the time of enrollment, none of our participants have 
gone to the ER or been admitted to the hospital for their diabetes.
    This program highlights the value of daily, in-home monitoring for 
improving health outcomes and reducing costs, particularly for patients 
with chronic diseases. We appreciate CMS's recent work to open new code 
sections for chronic care management, and request that CMS consider 
expanding Medicare reimbursement for remote patient monitoring.
The Future of Telehealth
    As we look to the future, I urge the Committee to consider these 
issues:
  --The need to test reimbursement parity at the Federal level, 
        particularly for remote patient applications.--State 
        legislation mandating payment equality was the driver for 
        increased deployment of telehealth technology to underserved 
        areas. What this robust marketplace proves is that 
        reimbursement parity increases access to care in rural 
        communities, improves health outcomes in these regions and 
        saves money. The only way to know if successes at the State 
        level can be replicated at the Federal level is to test it. Now 
        is the time for CMS to pilot reimbursement parity models for 
        these technologies, especially in-home monitoring where impact 
        is greatest.
  --The need for continued and coordinated Federal support for 
        telehealth infrastructure development, workforce training and 
        demonstration projects.--The infrastructure of our telehealth 
        network has been built primarily with grant funding aimed at 
        providing healthcare to rural communities. But for this 
        funding, the equipment and technology necessary for telehealth 
        would not have been possible. While our network has become 
        self-sustaining, it will not be complete until we reach all 
        four corners of the State. The need for Federal funding 
        remains, and efforts to coordinate opportunities across 
        agencies should be encouraged.
  --The need to remove geographic barriers for reimbursement.--As 
        powerful as telehealth is in tackling the challenges of rural 
        health, it can be just as effective in urban areas that lack 
        access to care. Furthermore, the definition of ``rural'' is 
        inconsistent across Federal agencies, thereby limiting the 
        utilization of telehealth. We request that geographic 
        restrictions for CMS reimbursement be removed.
  --The need for continued support of USF.--Today, in rural 
        Mississippi, there is connectivity thanks to the success of the 
        Universal Service Fund's High-Cost program. A reduction in 
        funding will not only impact current operations, but will 
        significantly impede our efforts to grow remote patient 
        monitoring and hinder connections between patients and medical 
        professionals.
  --The mission of the UMMC Center for Telehealth is to increase access 
        to healthcare, improve outcomes and reduce costs.--Rural 
        communities that have limited medical services can now take 
        advantage of healthcare services delivered to their community 
        virtually. Providing our State with improved emergency medical 
        services and specialty healthcare through telemedicine 
        technology, UMMC Center for Telehealth is eliminating barriers 
        to quality healthcare for Mississippians.
    I thank the subcommittee for the opportunity to testify today and 
look forward to answering any questions you may have.

    Senator Blunt. Thank you, Dr. Henderson.
    Ms. Petersen.
STATEMENT OF JULIE PETERSEN, CHIEF EXECUTIVE OFFICER, 
            PMH MEDICAL CENTER
    Ms. Petersen. Chairman Blunt, Ranking Member Murray, and 
members of the subcommittee, thank you for the invitation to 
testify today. My name is Julie Petersen, and I'm the 
administrator of PMH Medical Center, a critical access hospital 
located in Prosser, Washington, a community of about 6,000 
people.
    PMH is organized as a public hospital district, and we 
serve about 68,000 rural residents in two counties and five 
small towns. The mission of rural health care providers like 
PMH is to ensure access to high-quality, affordable care for 
populations that are challenged disproportionately by distance, 
poverty, age, chronic conditions, and cultural barriers.
    Many of our patients do not have reliable transportation, 
paid sick leave, and the other resources that allow them to 
travel to receive care outside of their communities. In short, 
rural communities are older, sicker, have poor health status, 
and face significant economic challenges.
    It's never been easy to provide access to high-quality care 
in these communities, and it's more difficult today than ever 
before.
    As is the case with most rural communities and hospitals, 
PMH is more than just a hospital. We are the backbone of the 
community health system. What you may think of as traditional 
hospital activity makes up just slightly more than a quarter of 
our business today.
    In my written testimony, I included an extensive list of 
the nonhospital services that we provide, everything from 
primary care to our 911 EMS service. We are a fully integrated 
delivery system dedicated to meeting the health needs of our 
community in a coordinated way.
    But the current reimbursement system does not recognize 
that reality. Reimbursement is siloed, and there are as many 
ways that we get paid as there are services we provide. This 
makes sustaining a coordinated health system for our community 
very difficult.
    For example, I need to be moving forward to create medical 
homes for my residents. I need to be integrating behavioral 
health and medical health in my rural health clinics. But there 
are so many reimbursement variables that I cannot assure my 
board that we can sustain these programs. The current 
fragmented financial system destabilizes rural health.
    Another challenge we face is that many people in our area 
remain uninsured. That's despite the fact that our State had a 
very successful Medicaid expansion program. We provide coverage 
to 535,000 additional Washingtonians through expanded Medicaid, 
and the health insurance exchange enrolled another 170,000 
Washingtonians. These efforts need to continue.
    Rural communities also face greater shortages of healthcare 
professionals than their urban counterparts. As a CEO, 
physician recruitment is a constant activity for me. I have an 
aging work force, and our doctors are still required in many 
cases to participate in call, which is not the case in urban 
areas. So they work very, very long hours, and they see far 
more complex cases in the clinic setting.
    HRSA programs like the National Health Service Corps and 
the nurse training initiatives enable many communities like 
mine to attract the providers that they need.
    These challenges, our unique population, the fragmented 
financial system, and work force shortages make it very 
difficult for rural healthcare facilities to survive. We need 
flexibility.
    In Washington, as Senator Murray pointed out, we've 
identified about 10 very small critical access hospitals that 
might be facing imminent closure. That awareness has led the 
association, the Department of Health, the State Office of 
Rural Health, and others to begin seeking new delivery system 
models.
    Our goal in Washington is to develop and test one of these 
new models within the next 12 to 18 months. That is a very 
ambitious timeline, but it is justified in view of the plight 
of some of these smallest facilities.
    One invaluable tool in this effort is the CMMI grant that 
provides $65 million to the State for the Healthier Washington 
Initiative. We also have two rural hospital collaboratives that 
are funded in part through HRSA grants that are working with 
critical access hospitals and rural clinics to pioneer rural 
network development and outreach.
    The Federal Office of Rural Health Policy and the 
Washington Office of Rural Health have been generous partners 
in these efforts. We will need continued help from these 
offices and from CMS if we are to succeed.
    Finally, I'd like to take a moment to brag a little bit 
about the leadership shown by all of our Washington hospitals 
in advancing quality of care and patient safety. The 
centerpiece of this effort was an $18 million grant that funded 
our hospital association's participation in the hospital 
engagement network. This quality and safety improvement work, 
this $18 million grant, has generated $235 million in 
healthcare savings through reduced readmissions, fewer 
hospital-acquired conditions, and healthier babies.
    That's just one example of how our rural hospitals are 
preparing for a future where measuring quality, efficiency, and 
service will be essential. We are ready to demonstrate our 
value to partner hospitals, health plans, and to our patients.
    Rural providers are dedicated to ensuring that the people 
who live in rural communities have access to the highest 
quality, affordable medical care. I'm optimistic that we can 
achieve this goal. The programs that we're discussing at this 
hearing today are valuable tools on that journey. Thank you.
    [The statement follows:]
                  Prepared Statement of Julie Petersen
    Chairman Blunt, ranking member Murray, and members of the 
Subcommittee, thank you for the opportunity to testify today on rural 
healthcare issues.
    I am Julie Petersen, CEO of PMH Medical Center in Prosser, 
Washington, a community of about 6,000 people in the south central part 
of the State.
    PMH is a 25-bed critical access hospital (CAH) with an average 
daily census of approximately 15 acute, swing and obstetric patients. 
In addition to providing inpatient and outpatient hospital services, we 
also employ or contract with 27 physicians and providers in our clinics 
and hospital.
    PMH has a rural health clinic that provides primary care, OB/GYN, 
medical pain management and limited dental services. We also provide 
both inpatient and outpatient general, orthopedic, podiatric, 
gynecological and ear, nose and throat surgical services through our 
provider-based surgical clinic. PMH provides Level IV trauma and Level 
III stroke team service.
    In addition, PMH provides 24 hours a day, 7 days a week emergency 
ambulance services to a large, multi-county region using two advance 
life support ambulances operating out of two stations. We also work 
closely with our local public health department, community health 
centers, and other local providers.
    PMH operates as a public hospital district governed by a seven-
member elected board. Our district serves roughly 68,000 rural 
residents in Benton and Yakima Counties. In addition to the services we 
provide in Prosser, we operate satellite facilities throughout the 
sparsely-populated parts of our district.
The Good News
    There is a lot of excellent healthcare work being done in the State 
of Washington, much of it with the support of the Federal Government.
    Washington State hospitals have been recognized as national leaders 
in increasing the quality and safety of care in our hospitals. We 
believe that rural hospitals can and should provide the same high 
quality care that our larger hospitals provide. Our State's rural 
hospitals are fully invested in the quality improvement work being 
advanced collaboratively. We also believe this work must be measured 
and reported.
    Over the last several years, the Washington State Hospital 
Association (WSHA) has received $18 million in Federal funds to 
participate in the Hospital Engagement Network/Partnership for Patients 
initiative established by the Centers for Medicare & Medicaid Services 
(CMS).
    This initiative is a public-private partnership working to improve 
the quality, safety, and affordability of healthcare for all Americans. 
The program focuses on making hospital care safer, more reliable, and 
less costly. In Washington, we have used the funding to come together 
and share best practices, hire national experts to teach us, report and 
analyze data to motivate performance, and educate patients.
    The return on investment for this program has been enormous: $235 
million in reduced healthcare spending.
    For example, the State's hospital readmission rate fell 
dramatically, by almost 12,000, saving more than $110 million. About 
$10 million was saved by quickly reducing early elective baby 
deliveries, which can result in harmful and expensive complications.
    The program also helped us prevent 23,000 potentially harmful 
events to patients, including:
  --An 89 percent reduction in ventilator-associated pneumonia,
  --A 60 percent reduction in pressure ulcers,
  --A 38 percent reduction in severe sepsis and septic shock mortality 
        resulting in 175 lives saved,
  --17 percent reduction--42 fewer--in Clostridium difficile 
        infections, and
  --A 13 percent reduction in catheter-associated blood stream 
        infections.
    We greatly appreciate Congress's investment in the Partnership for 
Patients program and encourage you to keep investing in it. We believe 
you will continue to see similar return on investment.
    In addition to these statewide accomplishments, PMH was awarded a 
$1.5 million grant from the Center for Medicare & Medicaid Innovation 
(CMMI) for 3 years. This program utilizes a case manager and the 
paramedics and EMTs that staff our 911 service to visit patients who 
have recently been discharged from the hospital, fragile emergency 
department patients, and to perform follow-up after surgery.
    This team works with primary care physicians, home health agencies 
and family to confirm follow-up appointments, review medications and 
ensure discharge instructions are being followed. We have seen a 
reduction in readmissions to the hospital as a result of the program.
    Recently, Washington State was also awarded a $65 million CMMI 
grant to transform healthcare. Called Healthier Washington, the 
initiative invests in forming connections and active collaboration with 
Washington's communities, partners and providers to achieve better 
health, better care, and lower costs.
    The initiative's areas of focus include:
  --Community empowerment and accountability,
  --Redesign of clinical practice,
  --Payment redesign, including developing a new payment model for 
        rural care providers, and
  --Analytics, interoperability and measurement.
    The initiative seeks to improve the care of patients while reducing 
costs. For example, the initiative will test clinical care models 
integrating physical and behavioral health for the State's primary care 
and rural health delivery system.
Challenges Facing Critical Access Hospitals
    But while we have much to be proud of, we face serious challenges, 
as well.
    While Washington State has some large population centers such as 
Spokane and Seattle, a vast amount of our State's land is used for 
agriculture. In fact, 31 of Washington's 39 counties are considered 
rural.
    PMH is typical of the healthcare organizations that serve rural 
areas. These organizations represent, in many cases, the entire 
healthcare delivery system--providing access to a broad spectrum of 
healthcare services from primary care to hospice, home health and 
emergency ambulance services. Their continued viability is critical to 
the health, welfare and economic viability of these communities.
    This has always been a difficult challenge--but, in recent years, 
it has become even more so.
Characteristics of Rural Populations
    Rural communities often have large uninsured and low-income 
populations. In Yakima County, 25 percent of the population was 
uninsured in 2012, compared to about 17 percent statewide. Thirty-four 
percent of the adults in the county were uninsured.
    One reason for the higher uninsured rate is that, compared to urban 
counties, there are fewer large employers in rural areas who provide 
medical benefits. In addition, many of the uninsured were agricultural 
workers who work in seasonal jobs.
    This population still gets sick, still has babies and still suffers 
accidents. But, because they did not have insurance, they often did not 
have a primary care provider and put off routine primary care. That 
means that when they do need medical attention, they use PMH's 
emergency room--the most expensive venue for care.
    And, because these patients have not been able to pay their medical 
bills, the cost of their care is passed on to privately-insured 
individuals in the form of higher insurance premiums.
    Rural communities also have greater concentrations of older 
residents. It is not uncommon in rural hospitals for 80 percent of a 
hospital's patients to be covered by Medicare and/or Medicaid.
    Medicare and Medicaid enrollees are often sicker, can suffer from a 
number of chronic conditions, and, compared to a healthy 30 year old 
population, require more expensive medical procedures. This puts extra 
demands on the delivery system.
    In general, the health status of people in rural areas is not 
nearly as good as in urban areas. For example, according to Washington 
State Department of Health data, mortality rates are higher in rural 
areas. Rates for three of the top causes of death--stroke, 
unintentional injury and self-harm--are higher and increasing rapidly 
in rural communities. The number of adults who are overweight or obese 
is also consistently higher in rural areas.
    This is especially true in parts of our market area. For example, 
in Yakima County, diabetes, obesity, and infant and child mortality all 
exceed the State average. The premature death rate is 26 percent higher 
than statewide; sexually-transmitted infections are 46 percent higher; 
and the teen birth rate is twice the State average.
    These circumstances present special challenges to providers and can 
dramatically increase the need for medical services.
Workforce Shortages
    In addition, we face workforce shortages in rural areas. Physician 
recruitment is a full-time job for me and my colleagues. And once we've 
recruited physicians, keeping them here is even more important. 
Physicians in rural areas are still routinely required to participate 
in on-call rotations. That is no longer the case in many urban and 
suburban settings and can greatly affect a physician's work-life 
balance.
    Our providers--especially those in anesthesia, surgery, the 
emergency department and primary care--actually work longer hours, 
including a 24-hour call. They also often work in multiple locations. 
In primary care, physicians see far more complex patients than their 
urban counterparts.
    Rural hospitals and health clinics also face constant struggles to 
retain nurses and the other health professionals we need to keep our 
doors open.
    Making matters worse, we have an aging workforce, so keeping the 
workforce pipeline open and running smoothly is critically important to 
us. That's especially true for specialty nurses like those who are 
trained for emergency services and labor and delivery.
    Rural health systems, like mine, compete in a national labor 
market, which means we pay top dollar for primary care doctors, nurses 
and other health professionals.
    Wages and salaries for the healthcare professionals and other 
workers at PMH account for more than 68 percent of our organization's 
costs. So, paying national labor rates contributes significantly to the 
overall cost of care in our community.
Costs of Delivering Services
    The cost of prescription drugs, technology and health information 
technology, like electronic health records, also drives up the cost of 
medical treatment in Prosser and other rural communities.
    PMH participates in the 340B drug discount program, as do 29 of 
Washington's 39 CAHs. This program, which was expanded in the 
Affordable Care Act to include CAHs, enables us to provide affordable 
prescription drugs to patients who otherwise would not be able to 
obtain them.
Financing Health Care
    Finally, reimbursement models often don't suit sparsely-populated 
communities like mine. Similar to most CAHs, PMH is an integrated 
health system. As I noted before, we provide a broad spectrum of 
services to our community.
    Unfortunately, Medicare reimbursement policies fail to recognize 
this reality. Separate and distinct policies govern reimbursement for 
hospital, physician, skilled nursing, home health, hospice and other 
services. While CAHs are paid 101 percent of their allowable costs for 
hospital services--actually 99 percent after sequestration--payments 
for these other non-hospital services are not nearly high enough to pay 
for the true cost of care.
    Because of the wide variety of services we provide, we are 
reimbursed in a myriad of different ways--from fee-for-service to 
encounter rates, per-diem rates (or daily rates) and percentages of 
payment based on the cost of providing care.
    We also face conflicting incentives and regulations. For example, 
keeping a patient for more than two midnights but not more than 96 
hours and not knowing at the time of admission whether the patient will 
stay longer than 48 hours but fewer than 96 hours complicates care 
planning even more.
    The two midnight and 96 hour rules are both recent CMS 
clarifications and changes in policies that impact our reimbursement.
    With advances in technology and treatment techniques, inpatient 
hospital revenue as a percentage of total revenue for healthcare 
organizations continues to shrink. This is especially important at PMH 
where inpatient hospital services account for only 27 percent of the 
organization's revenues. As the demands for healthcare change and more 
services are performed outside of the hospital, payment models should 
recognize this shift.
    In addition, increasingly complex regulatory requirements have 
added considerable costs to our administrative structure. Too often, we 
are expected to comply with rules that may make sense in large urban 
areas but do not fit the models of care in our rural communities.
    In this environment, it is increasingly difficult for rural health 
systems to remain financially viable and to continue to provide the 
services their communities need.
Increasing Health Care Coverage
    As I mentioned above, the large uninsured populations in parts of 
our State--including Benton and Yakima counties--has been a major 
concern for us. That's why hospitals strongly supported efforts to 
expand Medicaid eligibility and to operate a State-run health insurance 
exchange.
    The availability of coverage through the State's health insurance 
exchange and through the expansion of Medicaid has led to a dramatic 
reduction in the number of uninsured Washingtonians. Statewide, the 
percentage of residents without some sort of insurance has fallen from 
about 17 percent to 11 percent according to a recent Gallup poll.
    Medicaid expansion has resulted in about 7 percent of the State's 
population enrolling in the program. That's nearly 535,000 residents 
who now have health coverage and includes more than 5,000 residents of 
Benton County--about 3 percent of the county's population.
    By April 18, 2015, the Health Benefits Exchange had enrolled 
170,000 people in individual insurance plans with almost four of five 
people who bought coverage through the Exchange receiving some subsidy 
to help pay the cost of monthly insurance premiums.
    In Benton County, 3,285 people enrolled in plans though the 
Exchange, about 2 percent of the population, and 2,660 of them received 
subsidies. In Yakima County, 4,160 people were enrolled in Exchange 
plans, and 3,630 of them received subsidies.
    For the two open enrollment periods for plan years 2014 and 2015, 
the Exchange had a robust outreach and enrollment program. During the 
open enrollment period for 2015, the Exchange supported 1,400 
navigators.
    In addition, hospitals across the State supported outreach and 
enrollment efforts employing 240 in-person assisters. In Benton County, 
I want to applaud the work done by our navigators. They not only 
enrolled people, but educated them about how to use health insurance 
and why it is important to have a primary care physician.
    Medicaid expansion and the development of the insurance exchange 
has had a dramatic impact on PMH. For example, in just 1 year, our 
clinic visits increased by 27 percent. Our hospital is busier than it 
has ever been. The simple math of cost-based reimbursement is 
decreasing our cost per beneficiary.
    In the first quarter of 2015--compared to the same period a year 
ago--our adjusted patient days are up 40 percent while our cost per 
patient day is down 27 percent.
    Uncompensated care is another indicator of the impact of coverage 
expansion. In 2013, as a percentage of revenue, uncompensated care--
care for low-income patients that was provided at no cost or with 
financial assistance--was 7.1 percent. By 2014, it had shrunk to 4.5 
percent.
    We are seeing new patients who are using their health insurance 
coverage to see primary care providers--often for the first time. 
Access to preventive care, routine examinations, and diagnosing chronic 
conditions are possible for thousands of Washingtonians now because of 
insurance subsidies and expansion of Medicaid coverage.
    Our goal now is to get them into an organized system of care that 
helps them avoid illness in the first place, and, when they do get 
sick, treats them early. Achieving all these goals is vastly easier 
when people have insurance.
    We are also working to develop medical home models around the State 
to ensure care is coordinated and healthcare resources are used wisely. 
And hospitals like mine are collaborating on a wide variety of other 
projects ranging from group purchasing of supplies to sharing physician 
and clinic facilities.
    In the long run, I am confident this new access to primary care 
will create a healthier, more productive population and help people 
avoid costly hospitalization and other medical procedures.
    Finally, it is important to acknowledge that there is a cost for 
coverage expansion. The Affordable Care Act (ACA) reduced Medicare and 
Medicaid payments to hospitals across the U.S. to help pay that cost. 
Washington hospitals' share of that reduction was roughly $4 billion 
over 10 years.
Workforce Development
    The State of Washington has made major investments in programs to 
train physicians and other providers, and we offer a number of high 
quality programs. However, shortages of many types of healthcare 
providers--and especially physicians--remain acute in rural Washington.
    In my view, workforce development is a partnership between the 
public sector--the State of Washington and the Federal Government--and 
providers. In our State, this partnership has worked well, in large 
part, because a number of Federal programs--mainly operated through the 
Health Services and Resources Administration (HRSA)--provide us with 
tools that help us address our workforce needs.
    For example, for years, the National Health Service Corps (NHSC) 
has been a critically important source for physicians in rural and 
underserved areas. A significant number of these physicians--two thirds 
after 1 year--have stayed in the State after completing their tour, 
according to a 2012 study.
    Right now, there are 248 NHSC participants in 143 sites in 
Washington. The program provides some $5.8 million in fiscal year 2014 
in loan forgiveness and scholarships to bring these physicians to 
underserved areas of our State.
    The ACA extended funding for this program and the recently-enacted 
Medicare Access and CHIP Reauthorization Act of 2015 extended these 
funds further.
    Our State also benefits from the Teaching Health Centers program 
authorized in the ACA, receiving $6.3 million over the 2014--2015 
period. This program trains residents--about 28 per year--in community 
health centers and other non-hospital settings.
    An overwhelming majority of residents practice permanently near 
where they did their residency, so investing in these programs is 
especially important.
    HRSA has also provided nearly $6.4 million in funds to train nurses 
and allied health professionals.
    These Federal workforce training programs complement the 
investments made by hospitals and the State of Washington. I strongly 
encourage the subcommittee to continue these invaluable investments.
The Future of Rural Health
    The third bucket of challenges facing rural health focuses on long-
term issues facing all of us in rural America. HRSA funds several 
programs important to the work of the Critical Access Hospitals (CAH) 
in our State.
    The Rural Hospital Flexibility Grant Program, established in 1997 
when the CAH designation was created, has provided invaluable resources 
to small rural and frontier communities as they strive to preserve 
access to medical care.
    The State of Washington receives a little less than $600,000 a year 
from this program, which it is using to help CAHs improve the quality 
of the care they provide, better manage chronic diseases, improve 
emergency response to heart attacks and strokes, and strengthen their 
overall performance.
    The Small Hospital Improvement Program has helped rural hospitals 
prepare for implementation of ICD-10 and implement quality improvement 
reporting.
    These funds play a significant role in the operation of a CAH. They 
help ensure high quality care, but they also enable these cash-poor 
facilities to respond to the regulatory and administrative requirements 
they face.
    I also want to highlight the collaborative work in the State of 
Washington that is funded by the Federal Office of Rural Health Policy 
for rural health network planning, development and outreach.
    The first grant awardee is the Critical Access Hospital Network 
comprised of 12 CAHs and 20 rural health clinics. This network will 
receive $876,000 over 3 years to integrate primary care and behavioral 
health, and to improve chronic care delivery using health information 
technology. It will also work to develop a shared health information 
technology infrastructure link to a common dataset to reduce chronic 
disease.
    For example, all primary care clinics are working on reduction of 
hypertension by measuring the percentage of patients able to manage 
their blood pressure and targeting quality improvements.
    The second grant awardee, in which PMH is a participant, is the 
Washington Rural Health Collaborative made up of 13 public hospital 
district CAHs and 18 rural health clinics. The collaborative received 
$864,000 over 3 years to develop and implement a system to benchmark 
quality and financial indicators and to position the 13 CAHs for 
participation in accountable care organizations and value-based 
purchasing.
    As an independent hospital, it is challenging to be ready to 
participate in new clinical and payment models. Collaboration is one 
key to successfully developing these new models. The Collaborative and 
the Network are two examples of effective collaboration.
    Also important to highlight is the role that the State Office of 
Rural Health plays in facilitating these rural collaborative efforts. 
The office provides the infrastructure that helps local rural 
communities implement new models for CAHs.
    The office also provides the communication and technical assistance 
link between the Federal Government and local communities. State Office 
of Rural Health funds are matched three times by the State, creating a 
unique Federal/State/local investment and partnership.
New Models for Rural Health Care
    Additional work is also underway in our State to develop a new 
model for the most vulnerable CAHs. The Washington State Hospital 
Association (WSHA), a private nonprofit trade association of 99 
hospitals, has identified 10 to 12 CAHs that could close their doors in 
the near future unless they receive payment flexibility and relief.
    WSHA, the Washington State Department of Health, the Washington 
State Health Care Authority and several groups of providers are 
actively seeking to identify the appropriate model for ensuring that 
residents of these most vulnerable rural areas continue to have access 
to affordable healthcare services.
    The Centers for Medicare and Medicaid Innovation has made an 
invaluable contribution to this effort--a $65 million award to 
transform healthcare delivery in the State of Washington. A small 
portion of these dollars will be used to develop a new payment method 
for these vulnerable CAHs.
    The CAH model preserved access to hospital and clinic services in 
many rural and frontier communities, but it is not working in all 
situations. Changing utilization patterns--the shift from inpatient to 
outpatient and post-acute care--and low volumes of patients, especially 
commercially insured, have put financial strain on some CAHs.
    A new payment model would not only change how we pay for 
healthcare, but should also adapt the current delivery system to better 
meet the unique needs of these communities. Thanks to the State of 
Washington's recent CMMI grant, we hope to develop such a model that 
can be tested starting in the next 12 to 18 months.
    For a new model to succeed, we cannot be bound by the strictures of 
the past, but must look for new ways to create the flexible regulatory 
environment needed to design new options for rural healthcare. I 
strongly encourage the Federal Office of Rural Health Policy and CMS to 
work together to help us develop these new and innovative models.
Conclusion
    As a CAH administrator, I'm very proud of the quality of the care 
we provide in Washington's small hospitals. We are working hard--in 
part with Federal funding--to improve quality and patient safety even 
more. That means identifying quality indicators that reflect the care 
we actually provide and developing a value-based system that reflects 
the services available in our facilities.
    The Federal Office of Rural Health Policy and the Washington Office 
of Rural Health have been invaluable partners in this journey. Federal 
funding has made a material difference in our ability to provide high 
quality care to people in our communities.
    As a person who has worked almost her entire career in rural 
healthcare, I am dedicated to ensuring that the people who live in 
rural communities have access to the highest quality, affordable 
medical treatment.
    I am optimistic that we will be able to achieve this goal. The 
programs we have discussed at this hearing go a long way toward getting 
us there, but much more remains to be done. I look forward to working 
with policymakers as we move forward.
    Thank you for your attention and for this opportunity to speak to 
you today.

    Senator Blunt. Thank you, Ms. Petersen.
    Mr. Stover.
STATEMENT OF GEORGE STOVER, CHIEF EXECUTIVE OFFICER, 
            RICE COUNTY HOSPITAL DISTRICT #1
    Mr. Stover. Mr. Chairman and members of the committee, 
thank you for the opportunity to speak to you today. My name is 
George Stover, and I serve as the Chief Executive Officer of 
Hospital District #1 of Rice County in Lyons, Kansas. Lyons is 
a community in north central Kansas that has a population of 
3,800. Our community hospital, which first opened in 1959, is a 
25-bed critical access hospital that employees approximately 
150 individuals.
    Rural community hospitals have a long and distinguished 
commitment of providing care for all who seek it, 24/7, 365.
    More than 36 percent of all Kansans live in rural areas, 
and depend on a local hospital serving their community. Rural 
hospitals face a unique set of challenges because of their 
remote geographic location, small size, scarce work force, 
physician shortages, higher percentage of Medicare and Medicaid 
patients, and constrained financial resources that limit access 
to capital. These challenges alone would make it difficult for 
many rural hospitals to survive.
    However, one disturbing challenge that is becoming ever 
increasingly more prevalent is the added regulatory burdens 
that are being placed upon healthcare providers. More 
specifically, I would like to briefly touch upon the challenges 
related to the Medicare policy on direct supervision of 
outpatient therapeutic services and the 96-hour physician 
certification requirement.
    In 2009, the Center for Medicare and Medicaid Services 
issued a new policy for direct supervision of outpatient 
therapeutic services that hospitals and physicians recognized 
as burdensome and unnecessary policy change. In essence, the 
new policy requires that a supervising physician be physically 
present in the department at all times when Medicare 
beneficiaries receive outpatient therapeutic services. As a 
result, many hospitals have found themselves at increased risk 
for unwarranted enforcement actions.
    While the congressional action last year to delay 
enforcement was applauded by rural hospitals like mine, the 
protections afforded it under the legislation expired at the 
end of 2014. Rural hospitals are again at risk for exposure 
unless Congress takes action.
    The 96-hour physician certification requirement relates to 
the Medicare conditions of participation on the length of stay 
for critical access hospitals. The current Medicare condition 
of participation requires critical access hospitals to provide 
acute in-patient care for a period that does not exceed, on an 
annual average basis, 96 hours per patient.
    In contrast, the Medicare condition of payment for critical 
access hospitals requires a physician to certify that a 
beneficiary may reasonably be expected to be discharged within 
96 hours after admission to the critical access hospital.
    As a rural hospital administrator, the discrepancies 
between the conditions of participation and the conditions of 
payment have caused confusion and challenges.
    Equally troubling, the President's fiscal year 2016 budget 
proposal calls for critical access hospitals' reimbursement to 
be reduced from 101 to 100 percent of allowable costs. This 
reduction, which would be on top of the 2 percent reduction 
associated with sequestration, would effectively eliminate any 
opportunity for a positive financial margin.
    Further, the recent consideration by Congress on the trade 
promotion authority bill that extends sequestration cuts on 
Medicare providers potentially exacerbates our financial 
challenges. Toward that end, a recent analysis within our State 
showed that 69 percent of rural Kansas community hospitals had 
a negative Medicare margin. The average rural Medicare margin 
was a negative 9.3 percent.
    As a result of this trend and the fact that many rural 
hospitals serve a higher percentage of Medicare beneficiaries, 
many rural community hospitals in Kansas must seek some form of 
direct tax support from their local communities.
    In summary, it is critically important that our rural 
communities across the Nation are able to access quality 
healthcare services. Therefore, steps should be taken to 
minimize the regulatory burdens that are placed upon rural 
health care providers.
    I strongly encourage this subcommittee to support solutions 
that address the aforementioned issues. Thank you again for the 
opportunity to appear before you, and I would be happy to stand 
for any questions. Thank you.
    [The statement follows:]
                  Prepared Statement of George Stover
    Mr. Chairman and Members of the Committee: thank you for the 
opportunity to speak to you today. My name is George Stover and I serve 
as the chief executive officer for the Hospital District #1 of Rice 
County in Lyons, Kansas. Lyons is a community in North Central Kansas 
that has a population of nearly 3,800. Our community hospital, which 
first opened in 1959, is a 25 bed critical access hospital that employs 
approximately 150 individuals.
    Rural community hospitals have a long and distinguished commitment 
of providing care for all who seek it, 24/7/365. More than 36 percent 
of all Kansans live in rural areas and depend on the local hospital 
serving their community. Rural hospitals face a unique set of 
challenges because of their remote geographic location, small size, 
scarce workforce, physician shortages, higher percentage of Medicare 
and Medicaid patients, and constrained financial resources with limited 
access to capital. These challenges alone would make it difficult for 
many rural hospitals to survive. However, one disturbing challenge that 
is becoming ever-increasingly more prevalent is the added regulatory 
burdens that are being placed on healthcare providers. More 
specifically, I would like to briefly touch upon the challenges related 
to the Medicare policy on direct supervision of outpatient therapeutic 
services and the 96-hour physician certification requirement.
    In 2009, the Centers for Medicare and Medicaid Services issued a 
new policy for ``direct supervision'' of outpatient therapeutic 
services that hospitals and physicians recognized as a burdensome and 
unnecessary policy change. In essence, the new policy requires that a 
supervising physician be physically present in the department at all 
times when Medicare beneficiaries receive outpatient therapeutic 
services. As a result, many hospitals have found themselves at 
increased risk for unwarranted enforcement actions. While the 
Congressional action last year to delay enforcement was applauded by 
rural hospitals like mine, the protections afforded under the 
legislation expired at the end of 2014. Rural hospitals are again at 
risk for exposure unless Congress takes further action.
    The 96-hour physician certification requirement relates to the 
Medicare condition of participation on the length of stay for critical 
access hospitals. The current Medicare condition of participation 
requires critical access hospitals to provide acute inpatient care for 
a period that does not exceed, on an annual average basis, 96 hours per 
patient. In contrast, the Medicare condition of payment for critical 
access hospitals requires a physician to certify that a beneficiary may 
reasonably be expected to be discharged within 96 hours after admission 
to the critical access hospital. As a rural hospital administrator, the 
discrepancies between the conditions of participation and conditions of 
payment has caused confusion and challenges.
    Equally troubling, the President's fiscal year 2016 budget proposal 
calls for critical access hospitals' reimbursement to be reduced from 
101 to 100 percent of allowable costs. This reduction, which would be 
on top of the 2 percent reduction associated with sequestration, would 
effectively eliminate any opportunity for a positive financial margin. 
Further, the recent consideration by Congress on the Trade Promotion 
Authority bill that extends sequestration cuts on Medicare providers 
potentially exacerbates our financial challenges. Towards that end, a 
recent analysis within our State showed that 69 percent of rural Kansas 
community hospitals had negative Medicare margins. The average rural 
Medicare margin was -9.3 percent. As a result of this trend, and the 
fact that many rural hospitals serve a higher percentage of Medicare 
beneficiaries, many rural community hospitals in Kansas must seek some 
form of direct tax support from their local communities.
    In summary, it is critically important that our rural communities 
across the Nation are able to access quality healthcare services. 
Therefore, steps should be taken to minimize the regulatory burdens 
that are placed on our rural healthcare providers. I strongly encourage 
this subcommittee to support solutions that address the aforementioned 
issues. Thank you again for the opportunity to appear before you. I 
would be happy to stand for any questions.

    Senator Blunt. Thank you, Mr. Stover.
    I think I'll go last this time. So the order would be 
Senator Murray, Senator Cochran, and Senator Moran.
    Senator Murray.
    Senator Murray. Thank you very much, Mr. Chairman.
    Thank you very much to all of our panelists. I really 
appreciate all of you participating today.
    Ms. Petersen, I'm really excited to hear about the delivery 
system reform work underway in Washington State, and I'm really 
proud that our hospitals have been recognized as national 
leaders in increasing the quality and safety of care. I'm 
particularly excited about the recent grant from the Center for 
Medicare and Medicaid Innovation that you mentioned in your 
testimony to support the Healthier Washington Initiative 
efforts to improve care statewide that will reduce costs and 
stabilize some of our rural hospitals.
    What have you found to be the most significant barriers to 
integrating care in the first year of this effort?
    Ms. Petersen. At this point--and you're right, it is very 
exciting what is going on in the State of Washington--I would 
go back to that fragmented reimbursement system. Not only are 
the incentives different based on what line of service you're 
providing, but as my colleague mentioned about the RACs and the 
amount of time it takes to reimburse some of these systems, 
it's years out before we know what our true financial condition 
really is.
    So I would call out that fragmented reimbursement system, 
but we also need current, really relevant data to move forward 
with when we talk about value-based purchasing and population 
health.
    So I would say stability in reimbursement is one of the 
barriers, and the other is just a true, reliable database for 
rural residents.
    Senator Murray. Okay. And talk to us about some of the 
specific reforms that we can expect to be seen implemented in 
the first year of this.
    Ms. Petersen. Well, what I would expect to see is this 
continued movement toward value-based purchasing and defining 
quality. And, again, I think Washington State has done an 
excellent job of doing that. Led by the Washington State 
Hospital Association, all of the hospitals in Washington are 
participating in reporting their quality data. So the rurals 
are right in there.
    I would expect that that's going to continue to happen. 
What I would like to see is more focus on what is relevant in 
rural communities. When we report into Hospital Compare, too 
frequently that grid of data has gaps for our rural facilities, 
because we're not measuring those things that are occurring and 
really contributing toward quality outcomes and reduced costs 
in rural hospitals.
    Senator Murray. Such as?
    Ms. Petersen. Our hospital-acquired conditions, our ability 
to reduce readmissions from our emergency department and our 
in-patients. One of the grants that you mentioned, the 
Community Paramedic Program, is actually hosted by my hospital, 
and it has been a tremendous success, taking our EMS resources 
out into the community to see people after they've been 
discharged, making sure that they're following their discharge 
instructions, getting their prescriptions filled, and that they 
have made that primary care follow-up. So those are some of the 
things I'd like.
    Senator Murray. We've had a chance to talk that, but it's 
fascinating to me that just that human touch on somebody, 
making sure they take their medication or that they follow what 
was told to them when they left the hospital reduces costs in 
the long run.
    Ms. Petersen. It does. And they're in their own home where 
they can think through their questions. We also get a look at 
the home and the environment they've been discharged into to 
make sure it's safe and appropriate. It's a great program.
    Senator Murray. I'm really looking forward to more on that.
    One last question. What more can CMS do to help rural 
communities make greater use of telemedicine?
    Ms. Petersen. Well, telemedicine in the context we usually 
talk about is a direct link between the patient and a provider 
in a remote location, or a patient talking to someone at an 
academic medical center.
    In our facility, we also use telemedicine to support our 
local providers. So they can have that consult discussion with 
somebody at the University of Washington or someone at Swedish.
    CMS right now, I think Mr. Cavanaugh answered some 
questions about the metropolitan statistical area restrictions 
that we have. That's a very antiquated assumption, that if you 
increase telemedicine, you're going to increase costs.
    In fact, you're going to take that very, very scarce work 
force that we have in rural America and you're going to be able 
to extend it. It will be more efficient. And you'll create 
access in our communities.
    Senator Murray. Okay. Very good. Thank you very much for 
being here and your testimony. I appreciate it.
    Thank you, Mr. Chairman.
    Senator Blunt. Thank you.
    Senator Cochran.
    Senator Cochran. Thank you, Mr. Chairman.
    Dr. Henderson, you mentioned in your testimony that the 
reimbursement parity issue was an important factor in the 
growth of services that are rendered through telehealth 
services. The diabetes pilot project you described are really 
remarkable and obviously highlight the potential for 
significant cost savings if they could be expanded into 
communities across the country.
    What do you see as the programs that could be expanded? Are 
we talking about the diabetes pilot project? Is that a 
possibility to serve more communities?
    Dr. Henderson. Yes. We can expand the diabetes program to 
other geographic regions, but we can also expand it to other 
chronic diseases. That program in particular is a remote 
patient monitoring program where we are helping day to day with 
patients in their home manage their disease and keep them 
healthy, and using the resources that are in that community 
more efficiently.
    But from the telehealth perspective, it really is about 
connecting and coordinating all the care teams. It is not just 
a physician service. It is a nursing one. It is interpreters. 
It is case managers. It is patient navigators. Once you have 
this infrastructure and connectivity, you can connect any of 
those resources to bring what would only be in an academic 
medical center to a rural community.
    Senator Cochran. Thank you for your leadership. We think we 
benefit from these experiences that you described for us today, 
and I hope we can help achieve those goals of expansion and 
improved access for less cost.
    Dr. Henderson. Thank you.
    Senator Blunt. Senator Moran.
    Senator Moran. Mr. Chairman, again, thank you very much for 
conducting this hearing. And I appreciate our witnesses. Thank 
you for what you do in your communities to make certain that 
citizen patients are well cared for.
    Let me start with the Kansan. Mr. Stover, welcome to our 
Nation's capital. Thank you for coming from Kansas to testify.
    I want to go back to what I was trying to raise with the 
previous panel about actual cost base reimbursement. Can you 
give us an idea, even though presumably you receive 101 percent 
of cost, what percentage of your actual costs are covered by 
that reimbursement? You might start by telling us what 
percentage of your patients are Medicare and Medicaid? What is 
your payer mix? Is there public or taxpayer support for 
hospital? How do you make this work, even though presumably the 
image is that you're getting 101 percent of your cost?
    Mr. Stover. Thank you, Senator Moran.
    Within Hospital District #1 in Rice County, our Medicare 
volume is about 63 percent, Medicaid volume of about 10 
percent. We are a taxing entity. We are able to appropriate tax 
funds from our district, which is about $900,000.
    What is interesting with that number, in our fiscal year 
ending in 2014, we ended up having to write off nearly $800,000 
to Medicare bad debt, so that essentially washes itself out.
    When it comes to the cost base, you're absolutely right. 
Our reimbursement of 101 percent does not equate to our total 
cost of providing that healthcare within our facility. I don't 
know that number off the top of my head exactly, but I would 
say it's probably around the 75 to 80 percent margin, which 
covers our costs.
    So we have to look toward our local tax base to make up 
that difference or otherwise start looking at reduction of 
services, which we do not want to do.
    Senator Moran. It used to be that hospitals would tell me 
that that mix, that 70-some percent Medicare-Medicaid, I 
suppose you do everything you can to cost-shift that to those 
who have private insurance, but are those opportunities as 
available now? Is it better to have a Medicare patient, a 
private pay patient, a Medicaid patient, as far as revenue? How 
do you compensate for less than actual reimbursement of costs? 
Where do you make up that money other than taxes? Can you do it 
with private pay?
    Mr. Stover. We work toward our uninsured, our private pay 
in their struggles. But, no, it doesn't come toward----
    Senator Moran. Let me ask the question this way, Mr. 
Stover. Are you pleased when a Blue Cross and Blue Shield-
covered patient walks in your door? Does that mean this is a 
better deal than if it was Medicaid or Medicare?
    Mr. Stover. We look forward to the Blue Cross Blue Shield 
patient coming to our facility.
    Senator Moran. And the problem is that the percentage of 
those who come in the door is a small percentage?
    Mr. Stover. A very small percentage, yes, sir.
    Senator Moran. You mentioned uninsured and having to write 
off costs, and I'm not trying to portray this as partisan or 
the way this issue is looked at around here too often, but 
under the Affordable Care Act, a theory was that there would be 
more people insured. Has that proven to be true, in light of 
what you just said about hoping that the private insurance-
covered patient walks in the door?
    Mr. Stover. We have seen a small increase of those 
individuals that were once uninsured; we are finding them to be 
enrolled in Medicaid. In our State-based MCO program that we 
have, we have seen a small increase in the marketplace of those 
that once did not have insurance but otherwise found it on the 
marketplace.
    But when you look at the overall, that is a very small 
percentage of those individuals. They still find themselves 
uninsured.
    Senator Moran. Some hospital administrators have told me 
that even with additional insureds, that the co-payments and 
deductibles are higher. And, therefore, the bad debt expense 
has increased even with those who have insurance.
    I think the way I described this is, somebody who had a 
$100 co-payment could come up with $100, but if it's a $5,000 
deductible, they can't do that, so you end up writing off more 
even though there might, as you say, be a slight increase in 
insured?
    Mr. Stover. That is correct. We're finding that even though 
the co-pays in the past have been lower, we're finding that the 
co-pays now, those individuals are now on a payment plan. In 
turn, sometimes we are having to write those off.
    Senator Moran. Let me ask a broader question. Perhaps it's 
Dr. Henderson, but Ms. Petersen talked about telemedicine as 
well. I would just like to have the summary of the costs 
associated with telemedicine and how they are paid for. As I 
was listening to your testimony, I jotted down three things I 
think that the hospital would have to pay for, the equipment, 
I'm interested if you could just--I'm sure you've noted this in 
your testimony but I would like to get this in a short summary, 
so that I can understand it.
    You have to figure out how to pay for the equipment. You 
have to figure out how to connect, and how that is paid for. 
And then finally, how does the provider get reimbursed for 
providing the service?
    My question there is, when the University of Kansas Medical 
Center in Kansas City provides telehealth to the Rice County 
District #1 hospital, is there a reimbursement to the physician 
who is present in Kansas City at the major hospital? And is 
there any reimbursement that then comes to the hospital that's 
providing the service at the other end?
    I don't know who is the person to answer that question.
    Dr. Henderson. Your points are absolutely correct. There 
has to be purchase of equipment. There has to be connectivity. 
And you need to pay for the clinical or medical services that 
are delivered. So that's accurate.
    How we're doing it in our State is that our center for 
telehealth is providing all of the equipment. So thanks to some 
of these Federal funding dollars, I'm able to deploy that, so 
that is not an up-front capital cost to them.
    Senator Moran. I know you're talking about Mississippi, but 
would that be true generally across the country, that there are 
grants available for the equipment?
    Dr. Henderson. The majority of all of these programs have 
started off of grant money.
    Senator Moran. Thank you.
    Dr. Henderson. In our State, we're able to pay the provider 
who delivers the service, so the telehealth physician or nurse 
practitioner, they are paid, their professional fee, through 
reimbursement----
    Senator Moran. Here you're talking about the provider out 
in the rural setting?
    Dr. Henderson. I'm talking about the other side.
    Senator Moran. All right.
    Dr. Henderson. So where the patient is, there can be a 
facility fee billed, and that can be reimbursed as well. And 
that helps offset their cost for facilitating that interaction.
    Typically, it's not a provider to provider, because both 
providers cannot be paid for the same service. If you have a 
generalist with a specialist and they both do an exam, then 
they both can bill.
    Senator Moran. So you have a general practice physician at 
Rice County District #1 and specialist at the K.U. Medical 
Center, both of them can bill?
    Dr. Henderson. If they are doing different services, yes.
    Senator Moran. So there is no disincentive to a provider to 
make this happen?
    Dr. Henderson. As long as you're in a State that allows for 
parity reimbursement.
    Senator Moran. All right, I'll have to figure that out.
    Finally, let me ask you to clarify for me, when we talk 
about that reimbursement, does it matter who is providing the 
insurance, Medicaid versus Medicare versus private insurance? 
Is your answer the same in all three settings?
    Dr. Henderson. It's not. It depends on your State and what 
the legislation allows for. Then Medicare has geographical 
restrictions as well that we've heard.
    But in our State, all public and private payers in 
Mississippi, Medicaid included, have a parity reimbursement for 
telehealth, same as in person.
    Senator Moran. Chairman Blunt, do you want me to stop or 
ask one more?
    Senator Blunt. You can ask one more.
    Senator Moran. To Missouri, maybe this will make Senator 
Blunt happy, Mr. Wolters, how does this work in Missouri, as 
far as Medicare versus Medicaid versus private pay for 
telehealth? Or, Mr. Stover, how does it work in our State?
    Mr. Wolters. I can answer that for Missouri. We have 
invested heavily in telehealth in Bolivar using grant funds for 
the equipment.
    The problem with Medicare, the geographic restrictions are 
such that we have a network of 12 rural health clinics that we 
operate. They are rural, for the purposes of being rural health 
clinics under the Medicare health program. Four of those 
clinics are considered urban for telehealth purposes. So if the 
patient is in that rural health clinic in an urban rural health 
clinic, then they are not covered by Medicare and cannot access 
telehealth services.
    We also have six long-term care facilities that we operate. 
Two of those six are in urban locations. So there are times 
when the patient may have an event going on at the long-term 
care facility, and we would like to have a doctor see that 
patient, but if it is in an urban facility, they cannot use 
telehealth under the Medicare program.
    So essentially would have to transport the patient by 
ambulance over to the ER to access care that probably could've 
been provided by telehealth except for the fact that Medicare 
defines that as an urban facility.
    Senator Moran. From a reimbursement of cost to the Medicare 
trust fund, that doesn't make any sense, right?
    Mr. Wolters. No, sir.
    Senator Moran. Right.
    Mr. Chairman, thank you.
    Senator Blunt. You used all of your time and all of my 
time.
    It was astounding.
    Senator Moran. It was Missouri and Kansas cooperating.
    Senator Blunt. Exactly.
    Mr. Stover, you mentioned you had a health tax that 
provided about $900,000 a year, but you lost $800,000 in 
Medicare bad debt? Is that what you said, Medicare bad debt?
    Mr. Stover. Yes, sir.
    Senator Blunt. Everybody on the panel understands that, but 
I don't. How would you have Medicare bad debt?
    Mr. Stover. Well, it is the bad debt that we recognize on 
our Medicare cost report.
    Senator Blunt. Okay, it's not bad debt that the Medicare 
system owes you.
    Mr. Stover. That's correct.
    Senator Blunt. In your reporting to Medicare, you're 
reporting that you have $800,000 of bad debt.
    Mr. Stover. That's correct.
    Senator Blunt. All right. I see. That's helpful to me to 
understand that.
    Mr. Wolters, I saw that there's an AP story out today and a 
KWMU story out today on a Harvard study that indicates of the 
195 hospital closures nationwide, that they really had very 
little impact on patients unless you were in rural settings. 
That headline says in rural Missouri, but reading the article, 
it is clear that it is a Missouri story, but it means rural 
settings anywhere.
    You had close to CMS in Bolivar, the hospital at Osceola 
closed. Do you want to talk about what you did, what your 
system did there to try to alleviate some of that loss of 
service?
    Mr. Wolters. Thank you, Senator.
    The hospital in Osceola, about 35 miles north of Bolivar, 
closed November 1. Of course, that represented a loss to that 
community, no more inpatient beds, no more emergency room, and 
the loss of quite a few healthcare jobs.
    We did step forward. We have taken over the operation of 
their ambulance service. We've taken over the operation of 
their rural health clinic. In fact, we converted that rural 
health clinic into a walk-in clinic that is open 7 days a week, 
12 hours a day, so they can provide access to the patients in 
the area.
    We've also taken over the operation of the retail pharmacy 
that they had. That's the only pharmacy in town. And we have 
added rehabilitation services for physical and occupational and 
speech therapy services in that community.
    So we have tried to provide outpatient care and provide the 
ambulance care to transport them to whatever hospital is 
appropriate when a patient has the need for emergency care. So 
we have tried to help alleviate the loss to that community.
    Again, that is certainly a severe loss to Osceola.
    Senator Blunt. Yes, it is. I think their payer mix, looking 
at that hospital, it's almost exactly the same payer mix 
described, Mr. Stover, and maybe, Ms. Petersen, about the same 
payer mix you have.
    Ms. Petersen. My system is about 65 percent Medicare, 
Medicaid.
    Senator Blunt. And then how much uninsured?
    Ms. Petersen. About 7 percent, at this point.
    Senator Blunt. So you have Medicare and Medicaid at 65 
percent, 7 percent uninsured, and the rest of your patients 
have some kind of coverage?
    Ms. Petersen. Some sort of commercial coverage, correct.
    Senator Blunt. On RAC audits, did you mention, Mr. Wolters, 
you had 500 claims currently?
    Mr. Wolters. They are still sitting at the ALJ level in the 
backlog at the hearings center for the ALJs. We have had about 
1,000 denials overall over the past 4 or 5 years. We have 
appealed about 85 percent of those denials. Of those that have 
been heard, at any level of appeal, we have been successful 
about 90 percent of the time in overturning the denial. But the 
vast majority of the appeals are still sitting at the ALJ level 
and probably will be for another couple years.
    Senator Blunt. And has CMS suspended RAC audits because 
there is no appeal process right now? Or are you continuing to 
have those audits?
    Mr. Wolters. At this point, CMS is reworking the contracts 
for the RACs, so they essentially suspended activity while they 
are renewing the contracts. CMS has said they are going to make 
some changes in the RAC program. It appears to us that the 
changes may not go far enough in terms of trying to correct 
what is wrong with the RAC program, the overly aggressive 
incentives of recovery auditors to deny claims and take their 
percentage fees, regardless of the fact that most of those get 
overturned. There's really no penalty to the RAC auditor at 
this point.
    So they can deny as many as they want. Sometimes they pay 
the money back and sometimes they keep it, but they keep it for 
several years while the appeal is in process.
    Senator Blunt. So of the 500 claims and $3.5 million, you 
had to return that money?
    Mr. Wolters. Right. The money is gone right now. We are 
just waiting for it to hopefully come back somewhere down the 
road.
    Senator Blunt. And if your past history was right, the odds 
are somewhere in the neighborhood of 90 percent that you will 
get that money back. But of course, you don't know when you 
will get it back, and the use of the money is gone, and you 
can't plan to get it back?
    Mr. Wolters. Yes, sir. That is correct.
    Senator Blunt. Ms. Petersen, what is your RAC audit 
history? Or your views on how that system is working?
    Ms. Petersen. Well, I couldn't agree more that the 
incentives don't align with a legitimate, helpful audit 
process. Coding and determining whether someone is an 
observation patient or an inpatient is very complex. We do 
welcome the ability to review those and go through a legitimate 
audit process.
    The problem is that these are essentially bounty paid 
claims, so they get 9 percent to 12 percent, or whatever the 
percentage is, of any claims that they overturn or that they 
deny. They also have the ability to look at the entire record 
and second-guess the physician who saw the patient at 2 o'clock 
in the morning in the ER. So they are looking at a closed 
record of a 4-day length of stay, that if the ER physician had 
the information that they had from the patient at that time. I 
think the other thing is that there is a very, very long window 
that they can go back and deny those claims and review those 
claims. That also needs to be shortened up.
    Senator Blunt. Mr. Stover.
    Mr. Stover. Within our facility, being a critical access 
hospital, we are maybe the outlier in that we have not had any 
particular RAC issues, as such. We have had minor ones, but we 
have not been--I guess, we are just the outlier.
    But within Kansas, we have a number of my colleagues and 
facilities out there that are faced with the continuance of 
having to fight for or prove through their appeal process.
    Senator Blunt. Is this process different for critical 
access hospitals?
    Mr. Stover. I am not aware. Individually, I'm not aware.
    Senator Blunt. So you happen to be a critical access 
hospital, but you don't know that's why your experience is 
different?
    Mr. Stover. That would be correct. I don't know if our 
expenses are different.
    Senator Blunt. I'm using the Moran standard, so I get 
another 3 minutes here.
    Mr. Wolters. I would say one of the big areas that recovery 
auditors are looking at is the decision to admit or not to 
admit a patient. So one difference with a critical access 
hospital is inpatient or outpatient, it is still cost 
reimbursed. There is less of an impact on Medicare 
reimbursement there for a critical access hospital because they 
get paid for the care, whether it is called inpatient or 
outpatient.
    For a PPS hospital like CMH or Lake Regional, we get paid a 
higher payment for an inpatient admission than for an 
observation patient, so there's a significant difference in the 
level of payment.
    Senator Blunt. One other major item to audit is whether you 
should have put that person in the hospital or not?
    Mr. Wolters. Exactly. They are not questioning the care we 
provide. They acknowledge the patient needed to be there. They 
are just saying it should not have been an inpatient. It 
should've been an observation patient. And that dramatically 
changes the level of reimbursement we get for that patient.
    So that is what they're doing. That is why most of the 
activity is on the PPS side, although they are looking at 
critical access claims in certain areas.
    Senator Blunt. I've also been told, on the hospital wage 
index, that rural hospitals can constantly fall more and more 
behind compared to counterparts in other places.
    Would you think that would be an accurate statement, Mr. 
Wolters?
    Mr. Wolters. Yes, it is, because the data that CMS used to 
determine the wage index is usually several years old, so what 
happens is that that wage data goes down, you're paid less, 
and, therefore, you have less to spend on salaries.
    It becomes kind of a cycle where you end up paying less to 
your staff. You don't give the pay increases that maybe an 
urban hospital would give. So you constantly gradually fall 
behind urban areas. So that does become a problem in rural 
areas.
    Senator Blunt. Similar are observations on wage index, from 
Ms. Petersen or Mr. Stover?
    Ms. Petersen. The wage index, relative to critical access 
hospital reimbursement, is not as significant as in a PPS 
setting. However, the idea that physicians and specially 
trained nurses and phlebotomists and technicians can be 
recruited to rural areas for less than they would earn in the 
urban areas is simply not true. We compete on a national level 
for these very, very scarce resources.
    Senator Blunt. The same observation, Mr. Stover?
    Mr. Stover. Yes, Mr. Chairman. I would agree with my 
colleague, Ms. Petersen.
    Senator Blunt. Dr. Henderson, my last question would be, on 
telemedicine, do you have behavioral health also?
    Dr. Henderson. We do, yes.
    Senator Blunt. Are you being reimbursed for behavioral 
health in the same way you would be for all other health items?
    Dr. Henderson. We are.
    Senator Blunt. Your goal is to recapture all costs?
    Dr. Henderson. Correct. And to integrate behavioral health 
into medical clinics as well.
    Senator Blunt. Do you have any studies yet that would 
indicate how much better people do with their other health 
problems if you're dealing with their behavioral health 
problems at the same time?
    Dr. Henderson. It's interesting. In our diabetes program, a 
component of our program is around medical adherence and 
lifestyle and behavior changes, which needs a strong mental 
health component as well for behavior change. So we're 
incorporating into that. We're not through with that study yet 
to be able to publish it.
    But we're offering now mental health services even on 
college campuses and in schools, so it is one that will 
continue to grow. And it is probably one of our biggest demands 
right now.
    Senator Blunt. My personal belief that, certainly, 
societally, if you deal with mental health like it's every 
other health issue, whatever you spend comes back many, many 
times. But my personal belief is, even in the healthcare 
context, that you deal with every other health issue in a more 
effective way if you deal with behavioral health like it's a 
health issue rather than you've got lesser reimbursement, less 
of a commitment, whatever. I hope we can get there. I'm glad 
that you're getting there on your telemedicine program.
    Any questions, Senator Murray?
    Senator Cochran.
    Senator Cochran. No, thanks, Mr. Chairman.
    Senator Blunt. Senator Moran.
    Senator Moran. You went a minute longer than I did.
    Senator Blunt. Would you like a minute?
    Senator Moran. No, Mr. Chairman. Thank you, though.
    Senator Blunt. Let's properly close out here.

                     ADDITIONAL COMMITTEE QUESTIONS

    We'll leave the record open for a week for questions to be 
submitted.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]
                Questions Submitted by Senator Roy Blunt
                               telehealth
    Question. What are some of the barriers that telehealth programs 
have in expanding services and what is HRSA doing to alleviate these 
issues?
    Answer. Data from the Federal Communications Commission (FCC) shows 
that some rural areas continue to lag behind urban population centers 
in access to affordable broadband, which can impede rural economic 
development and create challenges for rural communities seeking to 
leverage telehealth technology and implement electronic health records. 
While both the FCC and the USDA's Rural Utilities Service offer 
programs designed to increase access to broadband in rural areas, the 
FCC's Healthcare Connect Fund is specifically designed as a means to 
increase efficiency of care and build regional and statewide networks 
of providers engaged in telemedicine and health information exchange. 
FORHP works with the relevant agencies to make rural healthcare 
providers aware of these programs and how to use them.
    In addition, the Federal Office of Rural Health Policy funds the 
Licensure Portability Grant Program, a competitive grant program that 
provides support for State professional licensing boards to carry out 
programs under which licensing boards of various States cooperate to 
develop and implement policies to reduce statutory and regulatory 
barriers to telemedicine across multi-jurisdictional areas. There are 
two grantees for this program: the Federation of State Medical Boards 
(FSMB) and Association of State and Provincial Psychology Boards 
(ASPPB).
    Through FSMB, there are currently 22 medical boards that are using 
the Uniform Application, and 3 other medical boards are actively 
engaged to develop a State-specific addendum. Since its inception in 
2006, 40,400 physicians have successfully submitted their application 
for licensure utilizing the Uniform Application, with more than 19,000 
since 2012.
    Through the ASPPB, more than 230 psychologists have submitted their 
applications via the Psychology Licensure Universal System, which began 
in 2012.
    FSMB has proposed an Interstate Medical Licensure Compact, which 
would create a new pathway to expedite the licensing of physicians 
seeking to practice medicine in multiple States. The Compact would make 
it easier for physicians to obtain licenses to practice in multiple 
States and would strengthen public protection because it would help 
States share investigative and disciplinary information that they 
cannot share now.
    HRSA additionally funds 12 regional Telehealth Resource Centers 
that deliver expert advice and guidance on using health technology and 
broadband to bridge geographic barriers. Two additional National 
TeleHealth Resource Centers provide policy, payment, and broad 
licensure research and technology assessments for health programs to 
consult with nationally.
    Question. Many States are wrestling with what constitutes a 
``patient-provider relationship'' when telehealth medicine is involved 
and these rules vary greatly from State-to-State. What is HRSA doing to 
help patients, providers, and States balance the convenience and access 
of telehealth options with the importance of engaging patients in a 
dialogue about their health with a physician who can manage their 
ongoing needs?
    Answer. Telehealth is an important tool that can enhance healthcare 
delivery. HRSA's Telehealth Network Grant program has supported 
projects that emphasize providing these services within a larger 
coordinated system of care. While we recognize the importance of the 
patient-provider relationship, the issue is not regulated at the 
Federal level nor is it specified in our grant programs as it is most 
often regulated at the State level.
    FSMB has proposed an Interstate Medical Licensure Compact, which 
would create a new pathway to expedite the licensing of physicians 
seeking to practice medicine in multiple States. The Compact would make 
it easier for physicians to obtain licenses to practice in multiple 
States and would strengthen public protection because it would help 
States share investigative and disciplinary information that they 
cannot share now.
    Question. The Office of Rural Health administers several grant 
programs to provide funding for projects that demonstrate telehealth 
networks and improve healthcare services for medically underserved 
populations. How can HRSA adequately expand this program to ensure 
patients in underserved communities receive access to specialty care?
    Answer. The authorization for the Telehealth Network Grant program 
requires HRSA to focus funding on projects that serve patients in rural 
and underserved areas. In fiscal year 2015, HRSA will fund a new 
Telehealth Research Center to better understand key telehealth policy 
issues, which may include issues with specialty care, and also assess 
those telehealth applications for their clinical impact on the patients 
served. The purpose of this Research Center is to increase the amount 
of publically available, high quality, impartial, clinically-informed 
and policy relevant telehealth related research. This effort builds on 
a program HRSA began in fiscal year 2014 to support telehealth networks 
that can expand the evidence base for how telehealth services can 
enhance healthcare outcomes. HRSA will also soon release a Funding 
Opportunity Announcement for a telehealth program that focuses on 
children living in high poverty rural areas. The purpose of the Rural 
Child Poverty Telehealth Network Grant Program is to demonstrate how 
telehealth networks can expand access to, coordinate and improve the 
quality of healthcare services for children living in impoverished 
rural areas and in particular how such networks can be enhanced through 
the integration of social and human service organizations. HRSA will 
award up to three pilot grants for a total annual investment of 
$975,000 in fiscal year 2015 and $2.9 million over 3 years. 
Furthermore, the Federal Office of Rural Health Policy supports 
Telehealth Resource Centers, which are centers of telehealth excellence 
that provide technical assistance to rural communities, healthcare 
organizations, healthcare networks, and healthcare providers in the 
implementation of cost effective telehealth programs to serve rural and 
medically underserved areas and populations. The Heartland Telehealth 
Resource Center serves communities in Missouri, Kansas and Oklahoma.
    Question. One of the biggest challenges to access of telehealth is 
CMS' level of reimbursement. What is CMS doing currently on this issue?
    Answer. CMS pays for telehealth as directed by the statute. Section 
1834(m)(2)(A) set the payment amount for physician or practitioner 
services furnished via telehealth equal to the payment amount for a 
face-to-face service. Section 1834(m)(2)(B) set the facility fee for 
the originating site, i.e., the site where the beneficiary is located, 
at $20 for the period October 1, 2001-December 31, 2002, updated by the 
Medicare Economic Index (MEI) in subsequent years. For CY 2015, the 
facility fee is $24.83.
                     office of rural health policy
    Question. The Department requested a $4.1 billion increase; however 
the Office of Rural Health account was reduced. Nearly 20 percent of 
Americans live in rural communities. Why is the Administration not 
prioritizing funding for the Office of Rural Health?
    Answer. Rural health is an Administration priority in challenging 
financial times requiring difficult budgetary decisions. The Budget 
requests $128 million for the Federal Office of Rural Health Policy. 
The President's Budget includes a $25 million request to support the 
Rural Hospital Flexibility Grant (Flex) program, which works with 
Critical Access Hospitals (CAH), which are the smallest rural hospitals 
in the country and also tend to be geographically isolated. The Flex 
program supports quality improvement and performance improvement 
activities for CAHs. The Administration's request also fully funds the 
Rural Health Outreach program, which provides direct funding to rural 
communities for projects that improve access to and the coordination of 
care in rural communities. The Budget does not request funding for the 
Small Hospital Improvement Program, which provides small grants to 
hospitals with 50 beds or less, as it has become largely duplicative of 
other programs and resources, such as the Medicare Rural Hospital 
Flexibility and Rural Health Outreach grant programs. It also does not 
fund the Rural Access to Emergency Devices (AED) program. For rural 
communities seeking support for the placement of AEDs and training 
rural residents in their use this activity can be funded through the 
Rural Health Outreach program.
    HRSA support for rural health programs is much broader than the 
Federal Office of Rural Health Policy programs. HRSA supports nearly 
1,300 health centers operating approximately 9,000 health center 
service sites across the country, and approximately 50 percent of them 
serve rural communities. Moreover, about 44 percent of the National 
Health Service Corps field strength works in rural communities. In 
fiscal year 2014, HRSA programs, in total, provided approximately $1.3 
billion in grant funding to rural communities.\1\
---------------------------------------------------------------------------
    \1\ According to data pulled from the Tracking Accountability in 
Government Grants System (TAGGS) on February 24, 2015, HHS awarded 
7,394 rural awards totaling $1,275,660,814 in fiscal year 2014.
---------------------------------------------------------------------------
                    critical access hospitals (cahs)
    Question. How did the CMS come up with the 10-mile limit in the 
President's budget request?
    Answer. Limiting Critical Access Hospital designation to hospitals 
located within ten miles of the nearest hospital will ensure that only 
hospitals whose communities depend upon them for emergency and basic 
inpatient care will be designated as Critical Access Hospitals and 
receive reasonable cost-based reimbursement.
    Question. Congress provided Critical Access Hospitals 101 percent 
of reasonable costs because other payment systems were designed for 
larger facilities, not small, low volume rural hospitals. How does CMS 
expect Critical Access Hospitals to survive on CMS' prospective payment 
system?
    Answer. CMS conducted an analysis on the impact of this proposal on 
access to services in rural communities. Our analysis estimated that a 
maximum of 47 CAHs, out of a total of 1,339 certified CAHs, might be 
affected by this proposal. Moreover, facilities losing their CAH 
designation would not necessarily close. Instead, it is anticipated 
that many of these CAHs would continue to participate in Medicare as 
hospitals paid under the applicable prospective payment system, and 
would continue to provide hospital services to their communities 
without reliance on CAH designation. Hospitals that transitioned from 
their CAH status would be eligible for the Hospital Value-based 
Purchasing Program, which provides financial incentives for high 
quality of care and improvement in quality.
    In the event that some of the potentially affected CAHs were to 
close, CMS analysis found that there likely is sufficient capacity in 
nearby facilities to provide the services any closed CAH had previously 
provided. CMS conducted an analysis of recent Medicare and cost report 
data for the potentially affected CAHs, as well as for the hospitals 
located within 10 miles of these CAHs. Overall, the data suggests that 
there would be no significant issues related to access to inpatient 
acute care services or skilled nursing services for the communities 
currently being served by the potentially affected CAHs should the CAH 
cease to provide services rather than convert its Medicare agreement to 
participate as a hospital.
    Question. What is CMS currently doing to help ensure rural 
hospitals can remain open and provide quality healthcare to rural 
communities?
    Answer. CMS administers a number of programs that seek to expand 
access to services in rural areas. Medicare's telehealth benefit allows 
beneficiaries to receive certain services from physicians located 
outside their community. Rural Health Clinics, help to provide access 
to primary care services in rural areas while Critical Access Hospitals 
provide access to inpatient and outpatient hospital care where care 
would otherwise be unavailable.
    Last year, CMS finalized a rule that included reforms to Medicare 
regulations identified as unnecessary, obsolete, or excessively 
burdensome on hospitals and other healthcare providers, which will save 
nearly $660 million annually, and $3.2 billion over 5 years. This rule 
specifically outlined ways to reduce burdens on rural healthcare 
providers. For example, a key provision reduces the burden on very 
small Critical Access Hospitals, as well as Rural Health Clinics and 
federally Qualified Health Centers, by eliminating the requirement that 
a physician be held to a prescriptive schedule for being onsite. This 
provision seeks to address the geographic barriers and remoteness of 
many rural facilities, and recognizes telehealth improvements and 
expansions that allow physicians to provide many types of care at lower 
costs, while maintaining high-quality care.
    There are other programs in HHS that are also available to help 
rural hospitals within the Federal Office of Rural Health Policy. The 
Medicare Rural Hospital Flexibility Grant program provides $25 million 
to support quality improvement and performance improvement activities 
in Critical Access Hospitals. This program's targeted technical 
assistance can help improve financial operations for these hospitals. 
Enhancing quality in CAHs can also help retain local patients and 
enhance patient volume. Rural hospitals can also apply for funding 
through the Rural Health Outreach grants to expand services, address 
workforce challenges and focus on chronic disease management and 
quality improvement. HRSA also supports the Rural Hospital Transition 
Technical Assistance contract which works with small rural hospitals in 
persistent poverty counties to assess operational performance and 
assist with adapting to a changing healthcare environment.
                            cms regulations
    Question. How does CMS take into account the impact of regulations 
on rural healthcare providers when proposing new regulations?
    Answer. CMS analyzes the impact of regulations on all 
stakeholders--including rural health providers--before they are 
released. Given their importance to rural communities, CMS has recently 
taken specific steps to work with stakeholders to reduce regulatory 
burden on rural health providers. Last year, CMS finalized a rule that 
included reforms to Medicare regulations identified as unnecessary, 
obsolete, or excessively burdensome on hospitals and other healthcare 
providers, which will save nearly $660 million annually, and $3.2 
billion over 5 years. This rule specifically outlined ways to reduce 
burdens on rural healthcare providers. For example, a key provision 
reduces the burden on very small Critical Access Hospitals, as well as 
Rural Health Clinics and federally Qualified Health Centers, by 
eliminating the requirement that a physician be held to a prescriptive 
schedule for being onsite. This provision seeks to address the 
geographic barriers and remoteness of many rural facilities, and 
recognizes telehealth improvements and expansions that allow physicians 
to provide many types of care at lower costs, while maintaining high-
quality care.
    CMS also operates the Rural Health Open Door Forum (ODF), which 
provides an opportunity for stakeholder input on any issue that affects 
healthcare in rural settings. We cover topics such as Rural Health 
Clinic, Critical Access Hospital, and federally Qualified Health Center 
issues, among others. For example, CMS recently had a call devoted 
exclusively to Veterans Affairs issues and had an expert from VA to 
assist rural providers with billing for services provided to veterans. 
Topics that frequently arise in this forum often deal with payment 
policies, claims processing and billing for services, cost report 
clarifications, classifications for & qualifications of rural provider 
types, and the many special provisions of law designed specifically to 
improve rural healthcare. Timely announcements and clarifications 
regarding important rulemaking, quality program initiatives, and other 
related areas are also included in the Forums.
    Question. How does CMS work with HRSA's Office of Rural Health in 
ensuring impacts to rural providers are considered?
    Answer. CMS has rural health coordinators at each of our Regional 
Offices, who meet monthly with participation from CMS central office 
staff and the Health Resources and Services Administration (HRSA) to 
discuss emerging issues. In addition, staff from the Federal Office of 
Rural Health Policy (FORHP) take part in the review of all proposed 
regulations with a specific charge to analyze the impact on small rural 
hospitals and other providers. CMS and FORHP staff also meet regularly 
through the year to discuss the impact of current regulations and seek 
opportunities to reduce the regulatory and administrative burden on 
small, rural providers.
                        rural medical workforce
    Question. CMS' Graduate Medical Education program could be a 
significant mechanism to reshape and modernize the healthcare workforce 
depending on current need, but this has not happened. CMS' current 
program focuses heavily on teaching hospitals and medical specialties. 
This reduces the opportunity for small rural hospitals to participate 
in the program and reduces the pool of primary care doctors. How can 
CMS allow for some flexibility under the Graduate Medical Education 
program and help rural hospitals attract and retain potential doctors?
    Answer. CMS is committed to bolstering the Nation's health 
workforce and to improve the delivery of healthcare across the country. 
The President's fiscal year 2016 budget proposes a four part $14.2 
billion investment beginning in fiscal year 2016. The proposals 
include:

  --Providing Targeted Support for Graduate Medical Education.--The 
        Budget proposes to establish a HRSA-administered competitive 
        grant program to support medical residency positions that 
        advance key health workforce goals. A total of $5.25 billion in 
        mandatory funding, to be transferred from the General Fund, is 
        requested for this program for fiscal years 2016--2025. This 
        program will support an estimated 13,000 three-year medical 
        residencies between fiscal years 2016 and 2025. In addition to 
        traditional teaching hospitals, these grants will support 
        children's teaching hospitals and teaching health centers. 
        Grants will be awarded consistent with major HHS workforce 
        goals. These goals include:
    --Training more physicians in primary care and understaffed 
            specialties;
    --Encouraging physicians to practice in rural/underserved areas; 
            and
    --Encouraging training in key competencies necessary for delivery 
            system reform, such as team-based care and electronic 
            health records.
  --Investing in the National Health Service Corps.--The Budget new 
        investments in the National Health Service Corps. The National 
        Health Service Corps is one of HHS' most effective programs in 
        addressing the mal-distribution of primary care providers. An 
        increase in the Corps field strength will allow HHS to send 
        these providers to high need areas across the country.

    Question. Currently, CMS does not provide indirect costs for 
residents' training at hospitals such as Critical Access Hospitals, 
Sole Community Hospitals, or Medicare Dependent Hospitals. This 
discourages participation in the Graduate Medical Education program at 
rural facilities. Please explain the thought process behind this 
decision.
    Answer. The law, at Section 1886(d)(5)(B) of the Act, provides an 
additional Indirect Medical Education (IME) payment to hospitals paid 
under section 1886(d) that have residents in an approved graduate 
medical education (GME) program for a Medicare discharge to reflect the 
higher patient care costs of teaching hospitals relative to non-
teaching hospitals. A rural hospital may choose to be designated as a 
CAH, SCH, or an MDH, as applicable, in turn for Medicare payments that 
are more favorable than under the traditional IPPS. These hospitals are 
paid for the indirect costs of medical education, but in a manner 
somewhat different from traditional IPPS hospitals. Should these rural 
hospitals determine that it would be more financially beneficial for 
them to receive IME payments in the same manner as regular IPPS 
hospitals, they may choose not to be designated as a CAH, SCH, or MDH.
    Sole Community Hospitals (SCHs) are paid based on their hospital-
specific rate from specified base years, or the IPPS Federal rate, 
whichever yields the greatest aggregate payment for the hospital's cost 
reporting period. An MDH receives the higher of the Federal rate or the 
Federal rate payment plus 75 percent of the amount by which the Federal 
rate payment is exceeded by its hospital-specific rate payments.
    SCHs and MDHs, unlike regular IPPS hospitals, have the opportunity 
to receive the ``higher-of'' two aggregate payments--one that is either 
based, in whole for SCHs or in part for MDHs, on their HSRs, or one 
that is based on the Federal rate. An MDH that is a teaching hospital 
does, in fact, receive IME Part A add-on payments since payment to an 
MDH, whether in whole or in part, is always based on the Federal rate.
    An SCH that is paid based on its HSR does not receive a separate 
IPPS add-on for Part A IME because, generally, the HSR already reflects 
the additional costs that a teaching hospital incurs for its Medicare 
Part A patients. However, it should be noted that MDHs and SCHs may 
receive IME add-on payments for each Medicare Part C patient discharge, 
regardless of whether they are paid on the HSR or Federal rate.
    Under the law, Critical Access Hospitals are not IPPS hospitals and 
are not paid under 1886(d) which would preclude any IPPS IME add-on 
payments. However, since CAHs are paid based on 101 percent of cost, 
any higher indirect costs they incur for graduate medical education 
training would already be captured in their reasonable cost payments.
                        community health centers
    Question. Now that Congress has appropriated mandatory funding for 
2 more years to avoid the last fiscal cliff, how will HRSA manage the 
program to ensure we are not in the same situation in 2017?
    Answer. In recent years the Health Center Program has relied on 
both mandatory and discretionary funding. The Administration looks 
forward to working with the Congress on this important issue to ensure 
the Health Center Program can continue the provision of comprehensive 
primary healthcare services to the vulnerable populations across the 
country into the future.
    Question. What is HRSA doing to address workforce shortages in 
rural areas and Community Health Centers?
    Answer. HRSA has a number of efforts underway to address workforce 
challenges in rural areas. On the training side, HRSA's Bureau of 
Health Workforce supports programs that train physicians, nurses, 
physician assistants, psychologists, dentists and other key healthcare 
professionals to work in underserved areas. In 2014, approximately 
180,000 students, residents, fellows and faculty from rural areas were 
supported by HRSA training grants. Across these training programs, HRSA 
emphasizes the importance for students to get exposure to rural 
training sites, and in fiscal year 2014, HRSA training programs 
included more than 11,000 training sites in rural communities.
    The Federal Office of Rural Health Policy supports Rural Training 
Tracks (RTTs) for family medicine residency programs. There are 
currently 34 RTT family medicine residency programs. Through our 
continued support of the Rural Recruitment and Retention Network, we 
partnered with the States to place more than 1,700 clinicians in rural 
communities across the country in 2014.
    In fiscal year 2015, HRSA has awarded 164 New Access Point grants, 
of which 74, totaling $45.6 million, will create new health center 
sites in rural communities. Further, approximately 50 percent of 
National Health Service Corps clinicians serve in health centers around 
the country, and nearly half of all current Corps providers work in 
rural communities.
    Question. How effective is the National Health Service Corps in 
placing clinicians in rural facilities and how many of those actually 
continue to serve in rural settings once their term of commitment ends?
    Answer. The National Health Service Corps (NHSC) has demonstrated a 
high degree of effectiveness in placing clinicians in rural facilities. 
As of September 30, 2014, more than 9,200 primary care medical, dental, 
and mental and behavioral health practitioners provide services 
nationwide at NHSC-approved sites in rural, urban, and frontier areas. 
Nearly half (44 percent) of those NHSC clinicians serve rural sites.
    NHSC continues to monitor the retention rates of NHSC scholars and 
loan repayors in service to the underserved beyond the fulfillment of 
their service commitment. NHSC defines retained clinicians as those who 
provide care in a designated health professional shortage area (HPSA) 
after their service obligation ends. The fiscal year 2014 Participant 
Satisfaction Survey found that 86 percent of NHSC providers, who 
completed their NHSC service commitment in the past 2 years, have 
continued to work in a HPSA. The short-term retention rate of 86 
percent demonstrates a 1 percent increase from the fiscal year 2013 
rate of 85 percent.
    Further, among NHSC clinicians who completed their service 
commitments in rural settings, according to the fiscal year 2014 NHSC 
Participant Satisfaction Survey, 95 percent of these respondents have 
continued to work in HPSAs in rural areas.
                               wage index
    Question. When determining prospective payments to hospitals, CMS 
adjusts reimbursements amounts to account for differences in areas. 
Urban hospitals must be reimbursed for wages paid to doctors and staff 
at least as much as rural hospitals. This issue was further complicated 
by a provision of the Affordable Care Act that requires the Medicare 
reimbursements to come from a national pool of money, instead of the 
previous State allocation. While typically rural hospitals have lower 
wages than urban hospitals--hospitals in Massachusetts and California 
that are designated as rural hospitals due to their remote location, 
have particularly high reimbursement rates due to the high cost of 
living. However, this has led to other hospitals in those States 
receiving extremely high reimbursements at the cost to other hospitals 
in States like Missouri. Missouri, for example, has lost over $80 
million in reimbursements. How much in Medicare reimbursements have 
been lost in other rural States such as Alabama, Kansas, and North 
Carolina since this provision was enacted?
    Answer. Beginning with the fiscal year 2011 wage index, the 
Affordable Care Act (Public Law 111-148) required CMS to apply a 
national rural floor budget neutrality factor instead of a State 
specific factor to the wage index of every hospital paid under the 
IPPS. Below we provide our general estimate of reductions in Medicare 
expenditures due to national rural floor budget neutrality for fiscal 
year 2012-2016 for the requested States as a result of this statutory 
requirement.

------------------------------------------------------------------------
                                                           Estimated
                                                         Reduction in
                                                       Expenditures Due
                                                       to National Rural
                        State                            Floor Budget
                                                       Neutrality (2012-
                                                         2016 *) ($ in
                                                           millions)
------------------------------------------------------------------------
Alabama.............................................               (39)
Arkansas............................................               (24)
Missouri............................................               (52)
North Carolina......................................               (75)
------------------------------------------------------------------------
* Fiscal year 2011 data is not readily available.

    Question. What constitutes a rural hospital for purposes of the 
rural floor reimbursement?
    Answer. CMS calculates each State's rural floor wage index value by 
choosing the highest value from the following groups' wage data: (1) 
hospitals located in a State's geographically rural areas, or (2) 
hospitals that are geographically rural, but reclassified to an urban 
area within the State, or (3) hospitals that are geographically urban, 
but reclassified to an area that is rural within the State.
    Question. Is CMS pursuing any rule-making actions to fix this 
problem?
    Answer. Because the ACA requires that rural floor budget neutrality 
be calculated at the national level, CMS does not have the authority to 
calculate budget neutrality in a different manner.
                                 ______
                                 
               Questions Submitted by Senator Jerry Moran
    Question. A significant regulatory burden I hear about when 
visiting hospitals in Kansas are problems with Medicare RAC audits. 
Hospital administrators tell me they support the idea of efforts to 
eliminate fraud, and even honest mistakes that occur with the complex 
billing that comes along with Medicare. However, that isn't what they 
are seeing get caught up in the RAC process. They tell me about 
extensive document requests that take not only administrators' time, 
but also the time of doctors (which are in short supply in rural 
America due to medical workforce shortages). So, these doctors are 
reviewing paperwork or on the phone with auditors instead of seeing 
patients. They talk of claims that are caught up in years' long backlog 
and show me evidence that once an Administrative Law Judge reviews 
their claims, they prevail in the vast majority of cases. But for those 
years before an ALJ looks at their case, these hospitals don't get paid 
for services they have already provided, expenses they have already 
undertaken.
  --How can HHS reduce and rectify problems identified with the RAC 
        program?
  --What can HHS do to reduce the burden on these providers that have a 
        demonstrated record of honest billing while efficiently 
        catching the bad actors the program was designed to go after?
    Answer. The President's fiscal year 2016 budget request includes a 
proposal to allow prior authorization for Medicare fee-for-service 
items. Currently, CMS has authority to require prior authorization for 
certain Durable Medical Equipment Prosthetics Orthotics and Supplies 
(DMEPOS) items. This proposal would extend that authority to all 
Medicare fee-for-service items, particularly those that are at the 
highest risk for improper payment. By allowing prior authorization on 
additional items, CMS can ensure that the correct payment goes to the 
right provider or supplier for the appropriate item, and prevent the 
need for targeted claims audits on those payments. Items that are 
reviewed through Prior Authorization would be excluded from Recovery 
Auditor reviews.
    CMS has announced a number of future changes to the Recovery Audit 
Program in response to industry feedback. In the process of procuring 
new contracts, these changes will result in a more effective and 
efficient program, including improved accuracy, less provider burden, 
and more program transparency. A comprehensive list of the Recovery 
Auditor program improvements can be found at: http://www.cms.gov/
Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-
Compliance-Programs/Recovery-Audit-Program/Downloads/RAC-Program-
Improvements.pdf.
    Question. The North Carolina Rural Health Research indicates that 
47 rural hospitals have closed, or ceased providing inpatient services, 
since 2010. What is HRSA doing to track rural hospital closures, 
determine the reasons for these closures, and evaluate the impact these 
closures have on access to care in rural communities?
    Answer. HRSA, through the Federal Office of Rural Health Policy 
(FORHP), has been tracking rural hospital risk and closure (or 
suspension of operations) for the past several years. From January 2010 
through May 2015, 51 rural hospitals closed inpatient services. Thirty-
three percent of those hospitals (17 of 51) were Critical Access 
Hospitals. To date, our analysis shows that it appears there are a 
variety of factors at work and there is no single common issue behind 
the closures. In communities where a hospital has closed, the response 
and remaining healthcare access varies widely. According to initial 
results, half of cases result in no healthcare services at that site 
following the hospital closure while in other communities, some type of 
healthcare continues. Remaining services after a closure vary and 
include outpatient care, primary care clinics, urgent care, skilled 
nursing, or physical therapy.
    In collaboration with FORHP, the North Carolina Rural Health 
Research Program is conducting a study of closed hospitals and 
community impact. The first research brief from the study, ``A 
Comparison of Closed Rural Hospitals and Perceived Impact'' is 
available at https://www.ruralhealthresearch.org/alerts/67, and the 
ongoing hospital data collection for the project is at http://
www.shepscenter.unc.edu/programs-projects/rural-health/rural-hospital-
closures/.
    Question. I would like to ask about an issue I have raised in 
previous HHS hearings over the past few years--the importance of 
Critical Access Hospitals and the proposed cuts to these hospitals 
contained in the President's 2016 budget request. Again, there are two 
specific changes proposed by the President's budget, reducing cost 
based reimbursement from 101 percent to 100 percent and changing the 
rules to eliminate CAH designations for those hospitals within 10 miles 
of another hospital.
    I am sure you are aware that rural hospitals across the country are 
struggling to remain open and financially viable. Since 2010, 50 
hospitals have closed and 283 are on the brink of closure. Currently, 
nearly 38 percent of Critical Access Hospitals are operating at a loss. 
A study by Health Affairs shows that if these changes are implemented 
that percentage will double to more than 75 percent. At the same time, 
Critical Access Hospitals account for only 5 percent of Medicare 
inpatient and outpatient payments. So, these policy changes would 
result in relatively nominal budgetary savings, but come at a huge cost 
to rural patients and their communities.
  --Given the serious challenges these polices would create for many 
        rural hospitals, is the Administration concerned about how they 
        would affect access to healthcare for Americans living in rural 
        communities?
    Answer. The proposals in the President's Budget proposal are 
carefully targeted to generate savings for the Medicare program without 
any significant adverse impact on rural access to care.
    Limiting Critical Access Hospital designation to hospitals located 
within ten miles of the nearest hospital will ensure that only 
hospitals whose communities depend upon them for emergency and basic 
inpatient care will be designated as Critical Access Hospitals and 
receive reasonable cost-based reimbursement. CMS conducted an analysis 
on the impact of this proposal on access to services in rural 
communities.\2\ Our analysis estimated that a maximum of 47 CAHs, out 
of a total of 1,339 certified CAHs, might be affected by this proposal. 
Moreover, facilities losing their CAH designation would not necessarily 
close. Instead, it is anticipated that many of these CAHs would 
continue to participate in Medicare as hospitals paid under the 
applicable prospective payment system, and would continue to provide 
hospital services to their communities without reliance on CAH 
designation. Hospitals that transitioned from their CAH status would be 
eligible for the Hospital Value-based Purchasing Program, which 
provides financial incentives for high quality of care and improvement 
in quality.
---------------------------------------------------------------------------
    \2\ Centers for Medicare and Medicare Services, Report on Critical 
Access Hospitals, March 26, 2015.
---------------------------------------------------------------------------
    In the event that some of the potentially affected CAHs were to 
close, CMS analysis found that there likely is sufficient capacity in 
nearby facilities to provide the services any closed CAH had previously 
provided. CMS conducted an analysis of recent Medicare and cost report 
data for the potentially affected CAHs, as well as for the hospitals 
located within 10 miles of these CAHs. Overall, the data suggests that 
there would be no significant issues related to access to inpatient 
acute care services or skilled nursing services for the communities 
currently being served by the potentially affected CAHs should the CAH 
cease to provide services rather than convert its Medicare agreement to 
participate as a hospital. Additionally, HHS will continue to monitor 
rural communities to ensure that access to medical care is preserved.
    The President's fiscal year 2016 Budget also proposes changing 
reimbursement of CAHs to pay them for their actual costs of providing 
care. This change would generate savings to the Medicare program while 
protecting access to care by reimbursing hospitals for 100 percent of 
their costs.
  --Rural hospitals across the country, including those in Kansas, are 
        facing an ever-increasing amount of Federal regulatory 
        challenges--including meeting the direct supervision 
        requirements for outpatient therapeutic services and keeping 
        pace with their urban counterparts in meeting all of the 
        requirements of the Medicare and Medicaid Electronic Health 
        Care Record Incentive Programs. At the same time, the President 
        has repeatedly called for cuts to Critical Access Hospitals in 
        his budget requests, which are often one of the only sources of 
        healthcare services in a community. Do you think your 
        Department is doing all it can to make sure rural communities 
        maintain access to necessary healthcare services that are vital 
        to their survival and success?
    Answer. As you know, being from a small town in West Virginia, 
rural health is an important priority for me. I am personally committed 
to and focused on supporting the health of rural communities.
    CMS has a number of efforts to improve access to services for rural 
Medicare beneficiaries. CMS has rural health coordinators at each of 
our Regional Offices, who meet monthly with participation from CMS 
central office staff and the Health Resources and Services 
Administration (HRSA) to discuss emerging issues. Through the Rural 
Health Open Door Forum, CMS engages with stakeholders to provide 
current information on CMS programs, answer questions, and learn about 
emerging rural health issues. Through Medicare's telehealth benefit, 
Rural Health Clinics, and Critical Access Hospitals, CMS is making sure 
that rural beneficiaries have access to physician and hospital services 
that may not otherwise be available in their communities. Moving 
forward, the Center for Medicare and Medicaid Innovation is testing new 
payment and delivery models such as Accountable Care Organizations 
(ACOs) with a focus on how to explore and support efforts to make 
further strides in improving the quality of care in rural areas.
    The Administration's broad investment in rural health includes the 
$128 million request in the fiscal year 2016 President's Budget for 
HRSA's Federal Office of Rural Health Policy to maintain support for 
key programs and resources to assist rural communities. HRSA also 
supports nearly 1,300 health centers operating approximately 9,000 
health center service sites across the country, and approximately 50 
percent of them serve rural communities. A key focus of the Department 
is to increase access for rural Americans to a healthcare provider 
through health professional training programs. In fiscal year 2014, 
HRSA provided rural health exposure to students through 11,389 training 
sites in rural communities. In addition, HRSA's primary care, oral 
health, geriatrics, public health and behavioral health training grants 
supported 180,401 students from rural areas. The National Health 
Service Corps supports loan repayment and scholarships for primary care 
providers, with almost half of the participants serving in rural areas. 
As of September 30, 2014, 3,529 National Health Service Corps members, 
or 44 percent of the National Health Service Corps field strength, were 
working in rural communities and 75 NHSC clinicians were working at 
CAHs. Half of the nearly 5,000 active NHSC-approved sites are located 
in rural communities.
    Rural communities have also benefited from the collaborative work 
of the White House Rural Council, which was created in July 2011. The 
Council is focused on enhancing the ability of Federal programs to 
serve rural communities through collaboration and coordination. For 
instance, through the work on the Council, HRSA expanded eligibility 
for the National Health Service Corps Program to CAHs in 2012. This 
resulted in 229 CAHs being designated as service sites for National 
Health Service Corps clinicians. Another result of the Council's effort 
is the leveraging of USDA loan programs to support health information 
technology in small rural hospitals. The Council also worked with CMS 
and HRSA to include a number of rural provisions in a Regulatory Burden 
Reduction regulation that take into account the unique practice 
environment for clinicians in rural areas; this regulation was 
finalized May 2014. Beyond encouraging collaborations among Federal 
agencies, the Council initiated a public-private partnership with 
approximately 50 private foundations and trusts that focus on improving 
rural healthcare.
  --There is a clear push to move away from fee-for-service medicine 
        and towards quality and value in healthcare. This transition 
        requires hospitals to make up front investments in health 
        equipment and technology. As we know, many Critical Access 
        Hospitals operate on little to no margins, with limited 
        resources to make capital investments. The cost based 
        reimbursements these hospitals receive are essential to their 
        operations budgets. How are these Critical Access Hospitals 
        supposed to make these investments to facilitate future quality 
        improvements when the Administration's proposals would mean 
        more than three-fourths of these facilities would be operating 
        at a loss?
    Answer. Since their creation, CAHs have provided needed hospital 
services to millions of Medicare beneficiaries. CMS is committed to 
preserving the CAH program and believes in ensuring that CAHs provide 
quality care to isolated communities without another nearby source of 
acute inpatient and emergency care. Last year, CMS finalized a rule 
that included reforms to Medicare regulations identified as 
unnecessary, obsolete, or excessively burdensome on hospitals and other 
healthcare providers, which will save nearly $660 million annually, and 
$3.2 billion over 5 years. This rule specifically outlined ways to 
reduce burdens on rural healthcare providers. For example, a key 
provision reduces the burden on very small Critical Access Hospitals, 
as well as Rural Health Clinics and federally Qualified Health Centers, 
by eliminating the requirement that a physician be held to a 
prescriptive schedule for being onsite. This provision seeks to address 
the geographic barriers and remoteness of many rural facilities, and 
recognizes telehealth improvements and expansions that allow physicians 
to provide many types of care at lower costs, while maintaining high-
quality care.
    CMS appreciates the unique challenges that rural providers may 
confront as they move more towards quality and value. The Innovation 
Center is uniquely positioned to test and evaluate efforts to identify 
and address challenges to access and quality of care for rural 
communities. The Innovation Center is testing two models designed to 
support Accountable Care Organizations (ACOs) in rural areas. The 
Advance Payment ACO Model is meant to help entities such as smaller 
practices and rural providers with less access to capital participate 
in the Medicare Shared Savings Program. The ACO Investment Model is a 
new model of pre-paid shared savings that builds on the experience with 
the Advance Payment Model to encourage new ACOs to form in rural and 
underserved areas and also plans to support existing ACOs that meet 
these criteria.
    Question. The Affordable Care Act includes a provision that 
requires a Medicare beneficiary to have a face-to-face encounter with a 
physician who certifies the need for that beneficiary's Medicare home 
health services. I understand that this provision aims to make sure 
Medicare beneficiaries are accurately being referred to the proper care 
setting, while also reducing the potential for waste, fraud and abuse.
    However, implementation of this face-to-face requirement has raised 
many concerns. The rules around what information physicians must 
document have been unclear and auditors who review the information have 
applied inconsistent and often conflicting standards on what is deemed 
``satisfactory.'' This has resulted in an unprecedented level of home 
health claim denials and a significant backlog of appeals. As this 
experience is extrapolated across the sector, I understand that we 
would expect the number of pending appeals to be in the thousands.
    In a high percentage of cases, face-to-face claim denials are 
overturned on appeal. In the meantime, continued unpaid claims--for 
care that is otherwise medically necessary--are making it hard for 
smaller home healthcare providers, particularly those in rural and 
underserved areas, to meet payroll and keep their doors open.
  --Does CMS have a plan to establish more consistent and uniform 
        audits rules regarding home health claims?
    Answer. CMS simplified the face-to-face encounter documentation 
requirements by eliminating the specific face-to-face narrative 
requirement, in order to reduce administrative burden, and provide home 
health agencies with additional flexibility. CMS will use documentation 
from the certifying physician's medical records, and/or the hospital or 
post-acute facility's medical records, for beneficiaries as the basis 
for certification of home health eligibility. This simplification was 
finalized after public comment in the Calendar Year 2015 Home Health 
Prospective Payment System final rule (79 FR 66031). The use of the 
template is voluntary and CMS believes the use of clinical templates 
may reduce burden on the physicians and practitioners who order home 
health services.
  --In the meantime, how do you expect to reduce the home health 
        backlog that has resulted from the problems associated with 
        implementation of the face-to-face policy?
    Answer. CMS plans to conduct outreach and education with 
physicians, Home Health Agencies, hospitals, post-acute facility 
discharge planners, and non-physician practitioners via Open Door Forum 
calls to discuss the draft clinical templates.
                                 ______
                                 
               Question Submitted by Senator Thad Cochran
    Question. Mr. Cavanaugh, within the Health Care Innovation Awards 
program, the CMS Innovation Center has awarded funding to four projects 
that include Mississippi in their plans; however, of the more than $1 
billion invested to date, there has not been a single grant awarded to 
support a program established by a Mississippi-based entity or 
applicant. Given what we have heard about the great advances in 
telehealth in Mississippi--much of which is certainly innovative and a 
test bed for new healthcare delivery models--why has CMS not directed 
funds towards any programs in my State? What could Mississippi do to 
strengthen applications for future funds to have a better opportunity 
for success?
    Answer. The CMS Innovation Center has funded a wide range of 
programs in Mississippi that are working towards our delivery system 
goals of better care, smarter spending, and healthier people. These 
include the Strong Start for Mothers and Newborns Initiative (eight 
sites); \3\ the Bundled Payments for Care Improvement Initiative (33 
organizations); \4\ the Advance Payment Accountable Care Organization 
(ACO) Model (one organization); and the Community-based Care 
Transitions Program (one organization) as well as work funded through 
the Health Care Innovation Awards.\5\ Information about the Mississippi 
based participants in these programs is listed below.
---------------------------------------------------------------------------
    \3\ http://innovation.cms.gov/initiatives/strong-start/.
    \4\ http://innovation.cms.gov/initiatives/bundled-payments/.
    \5\ http://innovation.cms.gov/initiatives/.Health-Care-Innovation-
Awards/.
---------------------------------------------------------------------------
    The Health Care Innovation Awards model currently funds four 
projects with sites in Mississippi. The CMS Innovation Center received 
a large number of strong applications that were reviewed and ranked by 
independent panels, external to the Innovation Center. Applicants 
interested in understanding how review panels viewed the strengths and 
opportunities of their proposal may contact the CMS Innovation Center 
for additional information. Innovation Center staff will provide, upon 
request, summaries of reviewer comments to assist in developing 
successful future applications. Additionally, the Innovation Center 
assists applicants in developing successful proposals by conducting 
webinars and other forums to communicate program objectives and to 
respond to applicant questions.
    In addition to HCIA, providers and stakeholders in Mississippi are 
participating in innovative efforts to make healthcare better across 
the State by participating in other Innovation Center models.
                                 ______
                                 
             Questions Submitted by Senator Lamar Alexander
    Question. The Health Resources and Services Administration (HRSA) 
is the Federal agency responsible for studying and addressing shortages 
in the supply of healthcare workers, which is critical to ensuring 
patients have access to quality healthcare.
    How does HRSA use the data from healthcare provider projection 
reports to guide its healthcare workforce programs, especially the 
grant programs that are available to multiple types of providers?
    Answer. The National Center for Health Workforce Analysis (NCHWA) 
collects and analyzes health workforce data and information in order to 
provide national and State policy makers, researchers, and the public 
with information on health workforce supply and demand. HRSA utilizes 
the information provided in NCHWA projection reports to assess changes 
in the national workforce which help guide the strategic direction of 
our programs. NCHWA also monitors workforce trends and makes that 
information available when assessing program performance data. 
Workforce projection reports are used to inform budget requests, 
formulation, program planning, and performance management, as 
appropriate.
    HRSA's data show that demand for primary care services is projected 
to increase through 2020, due largely to aging and population growth 
and, to a much lesser extent, the expanded insurance coverage 
implemented under the Affordable Care Act. The demand for primary care 
physicians is expected to grow more rapidly than the physician supply, 
resulting in a projected shortage of approximately 20,400 full-time 
equivalent (FTE) physicians. The supply of nurse practitioners and 
physicians assistants, however, is projected to grow rapidly and could 
mitigate the projected shortage of physicians if these health 
professionals continue to be effectively integrated into the primary 
care delivery system.
    The providers that are most needed in rural and underserved 
communities are primary care providers (physicians, nurse practitioners 
and physician assistants), mental and behavioral health providers, and 
oral health providers.
    This data informed the Department's proposal for a four-part, $14.2 
billion investment included in the fiscal year 2016 Budget to bolster 
the Nation's health workforce and to improve the delivery of care 
across the country. Two components of this initiative would fall within 
HRSA's purview--the establishment of the Targeted Support for Graduate 
Medical Education and the expansion of the National Health Service 
Corps. The Targeted Support for Graduate Medical Education program 
would be a competitive grant program that supports medical residency 
positions that advance key health workforce goals. A total of $5.25 
billion in mandatory funding is requested for this program for fiscal 
years 2016--2025 to support an estimated 13,000 3-year medical 
residencies. The program would focus on training more physicians in 
primary care and understaffed specialties and encouraging physicians to 
practice in rural/underserved areas. While the Budget called for 
increased funding of NHSC, the extension of funding through the 
Medicare Access and CHIP Reauthorization of 2015 will allow NHSC to 
maintain a field strength of over 8,000. Through NHSC, HHS sends 
providers to high need areas across the country.
    Question. HRSA's National Center for Health Workforce Analysis 
released a report in 2014 that found there are proportionally more 
EMTs, Paramedics, Licensed Practical Nurses, and healthcare aides in 
rural communities than in urban areas.
    Are these providers being fully utilized in rural communities and 
what innovative models are being tested to utilize these providers to 
increase access to healthcare services and improve health outcomes in 
rural areas, while maintaining high standards for quality of care?
    Answer. The National Center for Health Workforce Analysis 2014 
report found there are proportionally more EMTs, Paramedics, Licensed 
Practical Nurses, and home healthcare aides in rural communities than 
in urban areas. Although utilization was not assessed in this report, 
distribution across and within urban and rural areas, along with State 
scope of practice requirements, may affect utilization patterns. For 
example, EMTs and Paramedics located in more rural area may deliver 
additional services than those who are located in urban areas or in 
closer proximity to hospitals and medical centers. The Federal Office 
of Rural Health Policy has funded a 3-year demonstration project in the 
State of Montana to examine the use of community health workers in 
frontier communities. These non-clinical healthcare workers collaborate 
with providers in Critical Access Hospitals to improve care 
coordination for people who live in areas with limited healthcare 
services and to offer continuity and support mechanisms for these 
individuals in order to manage chronic health conditions that often 
lead to avoidable hospitalizations and readmissions. A formal 
evaluation of this project will be completed in the fall of 2015.
                                 ______
                                 
           Question Submitted by Senator Shelley Moore Capito
    Question. West Virginia has 20 critical access hospitals that each 
play a vital role in providing emergency healthcare services in their 
local communities. These hospitals are also important to the local 
economy of the communities they serve. Many of these hospitals could 
not survive as prospective payment system (PPS) facilities.
    The 2013 HHS Inspector General's recommendation calling for a 
reassessment of hospitals' eligibility for critical access status 
caused a tremendous amount of concern among these smaller rural 
hospitals in my State. The Administration's budget proposal does not 
adopt the IG's recommendation--and I appreciate that--but you do seek 
to eliminate critical access status for hospitals within 10 miles of 
another hospital. You estimated in your testimony that would impact a 
maximum of 47 hospitals. Do you view that budget provision as the end 
of your effort to reexamine eligibility for critical access hospitals 
or do you expect to recommend additional changes in the future? Can you 
commit that the Administration does not intend to seek legal authority 
to implement the IG recommendation?
    Answer. The proposals in the President's Budget proposal are 
carefully targeted to generate savings for the Medicare program without 
any significant adverse impact on rural access to care. Limiting 
Critical Access Hospital designation to hospitals located within ten 
miles of the nearest hospital will ensure that only hospitals whose 
communities depend upon them for emergency and basic inpatient care 
will be designated as Critical Access Hospitals and receive reasonable 
cost-based reimbursement.
                                 ______
                                 
              Questions Submitted by Senator Patty Murray
    Question. Community health centers are essential to increasing 
access to primary care for America's most vulnerable and rural 
populations. Last week, HHS announced that it will award $100 million 
to create 160 new health centers that are projected to increase access 
for 650,000 patients. This includes funding for two new rural clinics 
in Port Angeles and Okanogan in my State of Washington (WA). It builds 
on the 550 new health centers we have helped fund since the Affordable 
Care Act went into effect. How many of these new centers are in rural 
communities? When awarding new health center grants, how does HRSA work 
to ensure it is measuring and increasing access to care in rural areas? 
What percentage of the new clinics created since 2009 utilize 
telemedicine, and what is the Department doing to increase that figure?
    Answer. Per section 330 of the Public Health Service Act, HRSA is 
required to award grants such that no more than 60 percent and no fewer 
than 40 percent of total grants awarded serve people from rural areas. 
In order to ensure this distribution, HRSA may award grants to 
applications out of rank order. Seventy-four (45 percent) of the 164 
new access point awardees announced in May 2015 serve rural 
communities, and these rural health center sites are expected to 
increase access to an additional 235,000 patients.
    HRSA's Bureau of Primary Health Care (BPHC) encourages health 
centers to provide all health center services in ways that maximize 
access and best meet the needs of their service area and target 
population, which may include telemedicine; however, BPHCBPHC does not 
collect data on the number of new access point sites that provide 
services through telemedicine. Several rural community health centers 
are connected to telehealth networks funded by the Federal Office of 
Rural Health Policy's Office for Advancement of Telehealth.
    Question. Washington State has significantly expanded coverage and 
reduced costs through the creation of a State-based health insurance 
exchange and the expansion of Medicaid. These changes have had positive 
effects for both urban and rural communities throughout the State. 
Recent data shows that percentage of WA uninsured residents have 
dropped by 7 percent since the implementation of the ACA, and that 
Medicaid expansion saved the State over $100 million last year. Please 
describe the impact of the Affordable Care Act on our Nation's rural 
healthcare system? Please describe the national trends in uncompensated 
care and patient loads, and what the impact has been in rural America? 
We know that over 30 rural hospitals have closed since 2013. Please 
describe some of the factors that are driving these closures?
    Answer. The Affordable Care Act (ACA) is making health coverage 
affordable and accessible for millions of Americans. For the nearly 50 
million Americans living in rural areas, the law addresses inequities 
in the availability of healthcare services; increases access to 
quality, affordable health coverage; invests in prevention and 
wellness; and gives individuals and families more control over their 
healthcare. Uninsured individuals living in rural areas are able to use 
the Marketplaces, a government agency or a non-profit organization in 
each participating State, to compare qualified health plan insurance 
options based on price, benefits, quality, and other factors with a 
clear picture of premiums and cost-sharing amounts to help them choose 
the qualified health insurance plan that best fits their needs. Each 
insurance plan offered through the Marketplaces covers essential health 
benefits, including prescription drugs, inpatient and emergency 
services, pediatric care, and behavioral health treatment.
    The ACA has resulted in a decrease in the uninsured rates in both 
rural and urban areas. According to a recent Urban Institute Study, the 
share of uninsured adults in rural areas has decreased one-third to 
14.4 percent from the first ACA open enrollment period to March 2015. 
There was a 36.6 percent decrease to nearly 11 percent in rate of 
uninsured in urban areas.
    From January 2010 through May 2015, 51 rural hospitals closed 
inpatient services. To date, our analysis shows that it appears there 
are a variety of factors at work and there is no single common issue 
behind the closures. We will continue to monitor this.
                                 ______
                                 
              Questions Submitted by Senator Brian Schatz
    Question. Mr. Cavanaugh, 2 weeks ago in this subcommittee we had a 
hearing on the fiscal year 2016 HHS budget. In that hearing, Secretary 
Burwell and I discussed where HHS can facilitate expanded use of 
telehealth within current statutory authority. She mentioned the 
Innovation Center and ACOs as areas where CMS could do more for 
telehealth.
    My understanding is that the CMS Innovation Center can waive 
Medicare restrictions on telehealth for various initiatives and 
experiments. In the Next Generation ACO program, CMS waived the 
statutory 1834(m) restrictions on geographic location and where the 
patient can be located during telehealth visits. However, CMS did not 
lift certain restrictions, including use of store-and-forward 
technologies and ability for occupational and speech therapists to use 
telehealth for their services.
    Can you please address how the Innovation Center might help to 
further expand telehealth services? Are there other opportunities in 
the Innovation Center or other CMS areas where telehealth could be 
expanded within your statutory authority?
    Answer. The telehealth waiver in the Next Generation ACO Model 
addressed the originating site requirement, which was the barrier most 
often cited by commenters in response to CMS' Request for Information 
on this payment policy. CMS remains open to exploring waivers of 
additional elements of payment for telehealth services in later years 
of the Next Generation Model and/or in other Innovation Center models.
    Question. Mr. Cavanaugh, you discussed statutory provisions on 
telehealth that, in my opinion, limit access to care. For example, 
requiring a patient to be at a designated originating site--versus at 
home, or elsewhere--and not allowing for store-and-forward technologies 
in most States, are barriers to telehealth expansion.
    If we take legislative action on telehealth, what provisions would 
you like to see included to allow telehealth to expand for Medicare 
beneficiaries?
    Answer. We share your interest in using telehealth to expand access 
to specialized services that may not otherwise be available at 
facilities in some rural areas. Medicare payment for telehealth 
services is prescribed in section 1834(m) of the Social Security Act. 
According to the statute, Medicare pays for telehealth services that 
are furnished via a telecommunications system, by a physician or 
practitioner, to an eligible telehealth individual, where the physician 
or practitioner providing the service is not at the same location as 
the beneficiary. A variety of practitioners are authorized as 
telehealth practitioners, including physicians, physician assistants, 
and nurse practitioners. Currently, 75 codes are covered as telehealth 
services under Medicare. The statute permits the Secretary to pay for 
other telehealth services which are considered through the annual 
physician fee schedule rulemaking process.
    In addition to Medicare payment for telehealth services as 
prescribed by statute, telehealth is a component of various initiatives 
currently being tested by the Centers for Medicare and Medicaid 
Innovation. These demonstrations could inform future Medicare policy 
changes and we would be happy to discuss them with you further. For 
example, under the Health Care Innovation Awards initiative 
HealthLinkNow, Inc. is pairing aspects of telemedicine and 
telephyschiatry, with virtual care navigators and behavioral health 
specialists, to serve patients with a variety of chronic mental and 
behavioral health conditions in frontier and rural communities in 
Wyoming, Montana and Washington State. Also, organizations 
participating in the Bundled Payments for Care Improvement Initiative 
are eligible to waive some of the geographic restrictions so that they 
can bill for telemedicine services and receive Medicare fee-for-service 
payments. The Innovation Center's work may help us better understand 
the potential value of telehealth for improving the quality of care and 
reducing expenditures.
    Question. Mr. Morris, thank you for your words on expanding 
telehealth usage. Hawaii has an active Pacific Basin Telehealth 
Resource Center funded by HRSA, which is an important asset for our 
State. I am also interested in HRSA's use of telehealth to improve 
access to and coordination of mental health services in rural areas. I 
have supported a HRSA program to increase the behavioral health 
workforce through the president's Now is the Time Initiative with 
SAMHSA.
    Would these increased funds be utilized, at least in part, to 
expand tele-mental health use?
    Answer. Yes. HRSA and SAMHSA are collaborating on the Behavioral 
Health Workforce Education and Training (BHWET) grant program in 
support of the Now is the Time Initiative. This grant program was 
funded in fiscal year 2012 for 3 years through SAMSHA's Prevention and 
Public Health Fund. This program aims to expand the behavioral health 
workforce serving children, adolescents, and transitional-age youth at 
risk for developing or who have developed a recognized behavioral 
health disorder. BHWET grantees support education and training to 
increase the numbers of adequately prepared behavioral health 
professionals and paraprofessionals working with at-risk children, 
youth and their families, and may include tele-mental health. For 
example, Southwest Virginia Community College, Cedar Bluff, VA 
leverages relationships with community partners and support programs to 
ensure the academic success of program participants, to facilitate 
internships with a focus on at-risk and transitional youth, and to 
enhance job placements. One of their key partnerships that utilizes 
tele-health services is Cumberland Mountain Community Services (CMCS), 
a State funded counseling center with satellite offices in each of the 
four county services regions. CMCS offers individual, family and group 
counseling services with specialized services for substance abuse 
counseling, domestic violence, and behavioral disorders. The center 
also serves as a tele-health site for the diagnosis and treatment of 
behavioral health disorders. CMCS also serves as a mental health 
services provider for the county court systems and the probation and 
parole offices in the service region.

                         CONCLUSION OF HEARING

    Senator Blunt. We thank our panel for coming, and we are 
going to adjourn until 10 a.m. on Thursday, May 16th.
    Thank you all for being here.
    Thank you, all.
    [Whereupon, at 11:50 a.m., Thursday, May 7, the hearing was 
concluded, and the subcommittee was recessed, to reconvene 
subject to the call of the Chair.]