Melissa Harris-Perry: You're listening to The Takeaway. I'm Melissa Harris-Perry.

For well over a decade, rural hospitals have been in crisis. While they've been struggling for years, the COVID-19 pandemic pushed them to the brink. Pandemic Era Federal Aid stopped some rapid closures in rural hospitals, but much of that aid expired at the end of last year. The Center for Healthcare Quality and Payment Reform estimates that nearly 600 rural hospitals, about 30% of all of them, are at risk of closing in the near future.

For more on this, I'm joined now by Harold Miller, president and CEO of the Center for Healthcare Quality and Payment Reform. Harold, welcome to The Takeaway.

Harold Miller: Thanks for inviting me, Melissa.

Melissa Harris-Perry: All right. What constitutes a rural hospital?

Harold Miller: Well, a rural hospital is located in a rural community. There are almost 2,000 rural hospitals around the country, but about half of them are very small. Some of them have annual revenues of under $30 million, and it's because they're located in very small communities, often agricultural communities, where there aren't many people. Lots of land, but not many people, but those people need healthcare in a hospital, and the hospitals serve those communities.

Melissa Harris-Perry: What kinds of services do they provide? Is it the same thing that you'd expect to find in a large metropolitan hospital?

Harold Miller: They provide the basic services that you would want to have in a rural community. An emergency department, some inpatient care laboratory, X-rays. Most small rural hospitals actually have primary care clinics to deliver primary care, because otherwise, there wouldn't even be any physicians in those communities. They don't do complicated surgeries and procedures like urban hospitals do, but they do the basic things that people need whenever they are injured or ill.

Melissa Harris-Perry: Now, help us to understand what the nature of this crisis has been over the course of the past decade.

Harold Miller: Well, most of these rural hospitals are losing money delivering services to patients. There's two reasons for that. One is, it costs more to deliver service in a rural area, simply because there are fewer patients. You still have to have a physician in the emergency department 24 hours a day, whether there is one patient an hour, two patients an hour, or three patients an hour, but the cost of a visit is higher if there are fewer patients.

The second problem is that health plans, health insurance plans, don't pay the hospitals enough to cover those costs. In many cases, they pay the small rural hospitals less than they pay the bigger hospitals. Those hospitals are literally losing money delivering the services that their communities need. Many of them can't sustain those losses, and they go out of business.

Melissa Harris-Perry: When we look at the COVID pandemic, did that hurt these rural hospitals, or did the assistance that came in from the federal government during that time ultimately helped to shore them up a bit?

Harold Miller: Well, there were two problems. Initially, people weren't going to get healthcare services, so they were losing more money, because they weren't delivering services. Then they, in many cases, got overwhelmed by large numbers of cases and had to incur extra costs to be able to deliver those services without getting adequate payment for it. You're absolutely right. The thing that helped them was that there were billions of dollars spread around the country by the federal government.

Those grants helped to cover the losses that the hospitals experienced during the pandemic, but the grants are going away now. The payments from Medicare are actually going down now, after the pandemic. Many of these hospitals are still experiencing much higher costs than they were before the pandemic, because of supply chain shortages, inflation, and the difficulty of attracting healthcare workers. They have higher costs and lower payment, and no grants to be able to cover the deficits.

Many of them are now facing closure even probably sooner than they would have otherwise.

Melissa Harris-Perry: Stick with us for just one moment. We're going to take a pause here, but we're going to stay on this conversation about the crisis of rural hospitals in just a moment. It's The Takeaway.

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You're back with The Takeaway, and I'm Melissa Harris-Perry. We've been talking about the crisis at rural hospitals. Still with me is Harold Miller, president and CEO of the Center for Healthcare Quality and Payment Reform. Harold, walk us through the new Rural Emergency Hospital, or REH plan, and talk to us about whether or not this might be a solution here.

Harold Miller: The Rural Emergency Hospital program was enacted by Congress a little over a year ago, and the regulations were put in place, so it's officially starting in 2023. What it does is it says that the federal government will give a small rural hospital $3.2 million a year as a grant, but only if the rural hospital stops delivering inpatient services. In other words, a patient could come to the emergency department, but if they needed to stay overnight in the hospital, they would have to be transferred to another hospital somewhere else.

This may be going to be helpful to a very small number of hospitals that really don't have many inpatients and can't afford to deliver that service, but for most hospitals, it's actually a real problem. There's no other way that they would be able to get that much money to be able to help them cover their costs, but their communities need those inpatient services. It's hard to imagine what would have happened during the pandemic if all of these small rural hospitals had already closed their inpatient units through a program like this, and there was no place for people to go.

Even today, although the pandemic is slowing, many urban hospitals don't have beds available for patients. There is nowhere to transfer a patient from a rural community if the local hospital doesn't have inpatient care. This program was created, unfortunately, because of a myth that the cost of delivering inpatient care in rural areas is what was causing the rural hospitals to lose money. That's not really true. Rural hospitals lose money on most of the services they deliver, and they have bigger losses on their emergency departments and primary care clinics.

Simply paying them more to eliminate their inpatient services doesn't really solve the fundamental problems they've been having, and it worsens the quality of care in the community.

Melissa Harris-Perry: What does it mean for people in the community? We've talked about this a lot from the perspective of hospitals, but help me to understand what this means if I live in a rural community, maybe an agricultural community, and my child needs to be hospitalized, or my elderly parent, if there's no inpatient services.

Harold Miller: Imagine if you get pneumonia, you are sick, you can't go home safely if you live alone, or if you need to have antibiotics administered in the hospital, the hospital would no longer be allowed to do that. Today, they are. If you come to the emergency department and you're diagnosed with pneumonia, you can stay in the hospital a couple of days until you're well enough to go home, but under this program, you wouldn't be able to do that anymore.

The hospital would have to transport you in, some fashion, to another hospital, which could be a half an hour, or an hour away. That might have to be by ambulance, if there's an ambulance available, or through helicopter transport, which is incredibly expensive, and those urban hospitals that you would have to be transferred to might not have a bed either. It could be very bad in terms of patient outcomes, if there's literally no place for the patient to receive care whenever they're sick.

Melissa Harris-Perry: Tell me that there are some other kinds of solutions, some other kind of solution stream. I heard you saying that this was proposed in part because of a misunderstanding about the nature of the financial crisis. Are there proposed solutions that do better understand the crisis?

Harold Miller: Well, there's one very simple approach, which is simply to have health insurance plans pay these hospitals an adequate amount for the services that they deliver, whatever that service happens to be, that the patient needs. If the patient needs an emergency department visit, they should be paid adequately for that. One of the other myths about small rural hospitals is that their patients are only Medicare and Medicaid patients. In fact, about half of the patients going to rural hospitals, just like urban hospitals, have private insurance.

That includes things like Medicare Advantage plans. In many cases, those plans pay much less to the hospital than it costs to deliver care. If those health plans would simply pay adequately, the rural hospitals would be able to survive. I think we need a better and different payment system beyond that. The problem with any kind of fee-for-service system is that if the hospital and the doctors in the community keep the patients healthier, fewer people will need healthcare hospital care, and the hospital will then lose money again.

Hospitals need to receive what I refer to as a standby capacity payment, an adequate payment from a health plan every year, for everyone living in the community, to be able to sustain an emergency department and other services, regardless of how many people happen to need those services at that particular time. The immediate solution is simply to pay them adequately for the services that they're delivering today rather, than force them to go out of business.

Melissa Harris-Perry: What is the challenge for that happening? Is it simply that it increases costs for these insurance plans, and therefore reduces profits, or is there any other structural barrier?

Harold Miller: Well, that is the primary problem, is that it requires paying more. If a health insurance plan thinks that they can get the service by paying less, then they will, because that increases their profits. That is a short-term answer because what will happen is, if the rural hospital closes, and people then have to go to more expensive, urban hospitals, and if the people in the community don't get the preventive care or prompt treatment that they need, they will actually then need more services and more expensive services.

It's penny-wise and pound-foolish in that regard, but that's really the challenge, being able to get those big health plans to do that. These small hospitals don't have the negotiating leverage, or even enough staff, to be able to go and fight with all of these health plans, to be able to get adequate payment.

Melissa Harris-Perry: Harold Miller is the president and CEO of the Center for Healthcare Quality and Payment Reform. Harold, thanks so much for joining us today.

Harold Miller: Thanks for the invitation. I appreciate you are looking into this important issue.

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