Marshall County Hospital, which in 2012 had more than 26,000 outpatient visitors, could see a cut in Medicare and Medicaid reimbursement prompted by a re-evaluation of the critical access hospital (CAH) program earlier this year.

The CAH program, created in the 90s, was intended to financially stabilize small, rural medical institutions by providing them with higher Medicare reimbursement rates – up to 101 percent.

Under the original statute a hospital had to have 25 or fewer beds and be at least 35 miles away from another facility to qualify, but a loophole allowed small hospitals to claim CAH if they were considered “necessary providers.”

The Office of Inspector General of the Department of Health and Human Services reviewed the CAH program and said it has become too costly. The department found the program costs the government up to a billion dollars more per year than was originally intended in the 90s. The report recommends hospitals that do not meet the distance requirement be re-evaluated to see if they qualify for the program.

The OIG looked at all 1,329 hospitals in the CAH program and found 849 of them didn’t meet the original requirements – a problem that is costing too much money according to the OIG.

David Fuqua, CEO of Marshall County Hospital, said he doesn’t think Congress will review the program anytime soon, but if the CAH program was changed it could be financially devastating to the rural health community.

“This report came out in August and kind of blindsided everybody, but since they haven’t passed out a budget nothing ever came of it,” Fuqua said. “The real gist of it is a reimbursement methodology – how we get paid.”

At the time the program started it was only Medicare that provided reimbursement, but Medicaid reimburses certain states too and Kentucky is one of them.

“Probably 68 percent of our volume is Medicare and Medicaid,” he said. “If you eliminated that we would go back to PPS – Perspective Payment System – and the problem with that is that bigger hospitals can make that money back up on volume, but because we are a smaller facility it would impose a huge burden on us and we would have to re-evaluate what services we could afford.”

If the CAH program is evaluated and they enforce the original 35-mile distance requirements, the MCH will not qualify for it – the county hospital is about 22 miles from the nearest medical facility.

“If they put the limit at 10 or 15 miles we’re not going to worry about it,” he said. “But at this point too there is so much else going on with ACA and the exchanges I don’t think we’re going to see anything out of this for the time being. But we’re all aware and we’re all fearful, because if they did change the distance requirements it would be difficult. If you change the way of reimbursement it makes a world of difference and hospitals would be losing too much money.”

Fuqua said Marshall County Hospital has an $11 million economic impact county wide, which would be cut significantly if the hospital falls out of the requirements.

“The CAH program doesn’t make us money, but it keeps us from falling in a big black financial hole,” he said. “In light of the cuts they’ve already implemented we’re already having difficulties so this would be a big pill to swallow for us.”

The Kentucky Hospital Association has come out strongly for continued federal support of small, rural hospitals recently, objecting to a proposal that the “critical access hospital” designation be based entirely on distance from other hospitals.

Marshall County Hospital is one of 29 such hospitals in Kentucky which get slightly higher Medicare and Medicaid reimbursements in return for limiting their size and services.