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VOL. 43 | NO. 43 | Friday, October 25, 2019

Block grant’s effect on rural hospitals uncertain

Telemedicine, outpatient surgery shake up traditional roles of facilities

By Kathy Carlson

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How Tennessee’s rural hospitals would fare if the state gets the green light on block-granting some $7.9 billion in federal TennCare matching funds might depend less on the block grant and more on larger trends affecting hospitals – including growth in outpatient surgery and telemedicine.

Rural hospitals generally receive much of their revenue from government health care programs, and the state contends a block grant would give it greater flexibility to transform rural health care.

The exact effects of a block grant, if approved, on Tennessee’s rural hospitals might not be known for several years. What happens will matter not only to rural residents and TennCare enrollees but also to the rest of the state. Medical emergencies can happen anywhere and prompt medical attention can spell the difference between life and death.

The state must submit its block grant request to the federal Centers for Medicare and Medicaid Services by Nov. 20, TennCare spokeswoman Sarah Tanksley says. A draft was released last month and public hearings took place this month.

“CMS will take as much time as it wishes to evaluate and consider this request, as is the case for all such waiver amendment requests,” she says. “Given the innovation and complexity of this request we anticipate a lengthy series of conversations and negotiations with CMS.”

The 25-page formal request includes little detail on expenditures or programs but speaks in broad terms about improving health care outcomes through greater flexibility for the state to tailor programs to TennCare enrollees’ needs.

It also allows the state to keep half of any block-grant money that it hasn’t spent at the end of a fiscal year. The state says in the draft request it has saved the federal government billions of dollars over the years since TennCare began in 1994.

Under the request as written, the state could spend these dollars – which it calls savings – without first spending state dollars. Block grant funds could be spent on items outside traditional TennCare services, if the state believed they would improve enrollees’ health.

The term “savings” is not savings in the traditional sense, says Mandy Pellegrin, policy director of the Sycamore Institute, a nonpartisan policy study center for Tennessee. Rather, it’s savings relative to a federal projection of spending that Tennessee has generally been under.

The state says in its block grant request that it has saved the federal government billions of dollars over the life of TennCare.

But at the first public hearing on the request, U.S. Rep. Jim Cooper, a Democrat who represents Nashville, said that by not expanding TennCare coverage as authorized in the Affordable Care Act, the state has walked away from $1 billion in additional federal funds for the program. The state is one of 14 that have not expanded Medicaid.

What’s more, a 2018 study by the U.S. Government Accountability Office of rural hospital closings found that rural hospitals in states that had expanded Medicaid eligibility and enrollment experienced fewer closures. Thirteen Tennessee hospitals have closed since 2010, a North Carolina Rural Health Research Program finds.

Republican Gov. Bill Lee hasn’t embraced Medicaid expansion. Two major health care priorities for Lee have been improving rural health care and revamping TennCare funding through a block grant.

Lee’s first executive order focused on services to the most economically challenged rural counties. The state is largely rural, with about 4 million of 6.7 million Tennessee residents living in rural areas, both economically strapped and prosperous, an estimate from the Tennessee Department of Health finds.

TennCare is the state’s version of the federal Medicaid program for low-income persons. TennCare is administered through the state Department of Finance and Administration and serves about 1.4 million Tennesseans – 1 in 5 residents – including half of the state’s children. It pays for half of the state’s births.

“Rural access to health care is a priority for this administration and, should the block grant proposal receive approval from the federal government, innovative approaches to rural health care delivery will be a priority,” Tanksley said.

“While we expect details will be part of our negotiations with CMS, priorities will include expansion of telehealth as a tool to increase access to care; we have been working on expanding telehealth’s role in TennCare in a way that makes sense and would look to continue and accelerate that work as part of the block grant.

“We also are looking at reimbursement for rural providers, both from regulatory and value-based perspectives, as ways to support increased access to health care. Innovation is one of the three pillars of Tennessee’s block grant proposal, and we look forward to not only continuing our innovation but accelerating and expanding it,” Tanksley said.

Financing and flexibility are the other two pillars of the state’s block grant proposal, and they support innovation. Financing must evolve to “ensure a more equitable partnership” between the state and federal government, the draft block grant proposal states. Flexibility requires that any new risks undertaken by the state are offset by increased flexibilities to help offset the risks in running the program. Both financing and flexibilities must “provide a framework for meaningful innovation.”

“It’s really difficult to predict how (Tennessee’s block grant proposal) will affect enrollees and providers,” Pellegrin says.

The financial side of the block grant proposal is heavily weighted in Tennessee’s favor and is unlikely to put financial strains on the state in the short term, she says. In fact, she adds, the state would initially receive more federal dollars than it currently gets if the federal government agrees to the state’s proposal as written.

Rural transformation will mean something different for each community, Pellegrin says.

Overall, transformation will aim to address issues that make it difficult and costly to provide health care services in sparsely populated areas. These issues include declining population in rural areas, unemployment and poverty, conditions that make it hard for hospitals to attract physicians and other providers. Remaining rural residents tend to be older and less healthy, Pellegrin and others say.

“If you’ve got (a medical condition) and you have to go one or two hours away for a procedure or specialty care, it’s much more difficult to get treatment,” says Joseph A. Florence, M.D., professor and director of rural programs at East Tennessee State University’s Quillen College of Medicine in Johnson City.

Health care itself is changing, Florence says, and the general trend is away from what he calls a solo model, in which a patient receives health care services from a physician who knows him or her and their family and “can be all things to all people.”

“We’re relying much more on a team approach,” he says. Health care is no longer solely a doctor’s care, he continues, but includes social services, allied services and community services. “I think the planning process for developing these teams for the future is a very positive thing.”

Another general health care trend is toward fewer hospital stays, as changing health technology has made outpatient procedures more common. With fewer hospital stays, hospitals’ revenues decline and make it harder for them to cover fixed costs.

Technology can help rural hospitals and providers better care for patients; Florence of ETSU points to telemedicine programs that are being successfully used in the sparsely populated Dakotas. There also are telemedicine programs that allow non-physicians in rural emergency rooms to consult with physician specialists to help them care for patients, he says.

Rural communities need to identify the specialties they require and develop plans to coordinate care among different providers, Florence says. He describes a spoke-and-wheel model of health services in which tiny rural communities can be connected, so people know where to go for specialized services. The goal is to provide some base level of health care service in the rural community and link it to what is available outside that community.

Florence describes rural towns with a community health center that includes an emergency room. Medical specialists come to the community health center perhaps once or twice a month, he says, and some telehealth services are available.

“You may not be able to deliver a baby, but you can do all the prenatal care in the center,” he says. It might not be possible for a patient to have an operation there, but the patient can receive pre-operative and post-operative care, plus physical therapy, at the community health center.

Ideally, he says, as much care as possible would be provided within a rural community. That keeps health care dollars within that community, rather than shifting them to urban areas.

“Every time you close a hospital the economic loss in the community is great,” Florence says. “Keeping health care in the community helps keep communities viable.”

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