Economics and Rural Healthcare Tim Putnam, DHA, FACHE CEO Margaret Mary Community Hospital, Batesville, Indiana

Economic Impact of Indiana’s Community Hospitals Rushville 230 Direct Jobs 370 Jobs total $20 Million in payroll (Direct and Indirect) $7 Million in other/non-payroll spending Total Annual Economic Impact from the Hospital (all direct and indirect impact) $33,192,217

Impact on Rural Communities Community Total JobsImpact of Jobs Salem334 $25 Million Winchester316 $22 Million Linton354 $23 Million Winamac278 $18 Million Tell City387 $24 Million Greencastle405 $29 Million Wabash449 $33 Million Angola486 $31 Million Rochester556 $34 Million Crawfordsville541 $47 Million

Larger Communities CommunityJobsJob Impact New Castle800 $58 Million Washington509 $41 Million Logansport815 $58 Million Franklin926 $68 Million Madison1,294 $103Million Marion1,314 $101 Million Jasper1,770 $123 Million Vincennes2,194 $149 Million Valparaiso2,301 $154 Million Richmond2,746 $168 Million

Healthcare Economics Cost Shifting Issues ◦ Medicare Patients (4 – 20%) loss  40 – 50% of Patients ◦ Medicaid 35+% loss,  8%-15% of Patients ◦ Charity and Bad Debt 100% loss,  5 – 10% of Patients ◦ Remainder are Commercially Insured

Small Community Hospital with $10 million in Operating Expenses CostRevenue Charity/Bad Debt (8% of Patients) $ 800,0000 Medicaid (15%) $ 1,500,000 $ 900,000 Medicare (55%) $ 5,500,000 $ 5,225,000 Commercial (22%) $ 2,200,000 $ 3,520,000 Total $ 10,000,000 $ 9,645,000 Loss $ (355,000)

Rural Specific Economics Programs like Cardiac Surgery and Angioplasty are profitable (rarely performed in small community hospitals) Generally older patient population with a greater percentage of Medicare (per capita income is $7,417 lower than urban) Urban hospitals are paid at a higher rate by Medicare due to “Market Basket Adjustment” Must care for whole population (No institution to care for uninsured and Medicaid)

Rural Healthcare Rural residents: ◦ Use tobacco, alcohol more frequently ◦ Have higher rates of Hypertension and Cardiovascular Disease ◦ Have higher rates of Suicide ◦ Higher death rates due to Trauma ◦ More frequently on Medicare and Medicaid

Physician Shortage % of Population is rural 10 % of Physicians practice in rural areas Less than 7% of Physicians completing residency training practice in a rural area Physicians are trained primarily in Academic Medical Centers Inadequate programs to incentivize physicians to work in rural areas

Community Hospital Closures 1980s & 1990s ◦ 35 to 40 Hospitals closed each year ◦ Closure left a void that is virtually impossible to fill

Critical Access Hospitals (CAH) Balanced Budget Acts 1997 and 1999 CAH program has over 1,300 hospitals to date Since 1999 very few of these rural hospitals have closed Exceptions are Oakland City and Huntingburg Paid based on cost for Medicare

Accountable Care Act Will Accountable Care Organizations inhibit collaboration and care coordination between institutions? Expansion of Medicaid Impact of Health Insurance Exchanges

Future of Rural Healthcare 17+% of GNP Healthcare is too expensive Urban Centers have the political clout and financial strength CAH Program and other Rural provisions in jeopardy Federally Qualified Health Center (FQHC) Rural Health Clinics