Medicare and rural hospitals • Sugar workers still on strike in Red River Valley • Food business consolidation accelerates
We’ve said it before here, but it’s worth saying again: Congress is considering cuts in Medicare that will hurt rural hospitals.
Don McBeath of the Texas Organization of Rural and Community Hospitals explains in this piece written for the Austin American-Statesman. We quote McBeath at length:
In the late 1980s, hoping to save money, Congress changed how hospitals are paid by Medicare. They shifted the payment system from the cost of services in individual hospitals to a more standardized and averaged payment methodology known as the prospective payment system.
The problem with this urban, high volume hospital model was that it did not take into account the unique operating dynamics of rural hospitals. Rural hospitals are different. They often have a narrower financial margin than urban hospitals. Few rural hospitals provide more profitable advanced services and medical procedures to offset losses in other areas such as emergency care.
It is not unusual for the operating cost in a rural hospital to be slightly higher on a per-patient basis because of low patient volume, swings in patient numbers, and medical staff recruitment difficulties which can drive up payroll costs. The emergency room must be there 24 hours a day, seven days a week, even with periods of nothing.
The new payment system hit the rural hospitals hard. Almost 500 rural hospitals across the country were boarded up in late 1980s and early 1990s. More than 70 were in Texas.
Reacting to the damage, Congress created a number of “fixes” or patches in the payment system to address the rural hospital issue. Congress decided it was worth spending a little more to make sure rural hospitals were open. Programs like the Critical Access Hospital and Sole Community Hospital designations were born, giving many small, low volume hospitals a bump in Medicare payments.
Over time as more rural hospital problems developed, even more rural provisions were forged. It is important to note these provisions were enacted long before the country had such a debt problem, and none can honestly be linked to creating the debt nightmare.
Moving the clock to the current time, Congress now finds itself searching for cuts. The situation is dangerous for rural areas because most members of Congress were not around when many of the rural hospital provisions were created, which is helping drive talk of eliminating some of the provisions. Texas rural hospitals could collectively lose $75 to $100 million annually if these provisions expire or payments to rural hospitals are reduced by even small percentages. Some of the hospitals could close, while others might hang on for a few years with reserve funds or higher local taxes.
Every citizen in every rural community in Texas should immediately call their congressman and tell them that their rural hospital is critical to the community, it must stay open, and no cuts should be made that harm the hospital.
Sugar Worker Strike Goes On — Sugar workers in North Dakota remained locked out after rejecting a contract for a fourth time. They have been out of work for the last 16 months.
The company said the offer would have raised pay by 17 percent over five years, including a $2,000 signing bonus. About 55 percent of the workers voted against the contract offer.
Food Business Consolidation — ConAgra bought Ralcorp for $5 billion this past week, creating one of the world’s biggest food companies, with about $18 billion in sales. Get used to the trend, writes the St. Louis Post-Dispatch’s Georgina Gustin:
In a turbulent food marketplace that has struggled in recent years, companies are trying to out-big each other — or, at least, redefine what they are, by splitting, spinning off and window-shopping for each other’s discards.
“There’s been a lot of repositioning,” said Paul Mariana, director of investment banking for Chicago-based Variant Capital Advisors. “These packaged food companies are trying to figure out what they ought to be.”
Part of the dynamic has food companies getting large enough to deal successfully with large food buyers, such as Walmart.
What End of Farm Bill Means — Steph Larsen reports on a small business that made it because it received a loan through the Rural Microenterpreneur Assistance Program. Unfortunately, that program was in the old Farm Bill, which has expired.