1. National Rural Health Association March for Rural Hospitals July 30, 2012 Medicare Dependent Hospitals Eric Zimmerman McDermott Will & Emery ezimmerman@mwe.com 202.756.8148

2. 2 What is a Medicare-dependent Small Rural Hospital? Rural 100 or fewer beds Not classified as a sole community hospital At least 60 percent of its inpatient days or discharges attributable to inpatients receiving Medicare Part A benefit

3. 3 History Established 1990 Lapsed 1995-96 Re-established 1997 Expires October 1, 2012

4. 4 MDHs by State AL -8MN -3 AR -5MS -12 CA -1MO -8 CO -1NE -2 CT -1NH -1 DE -1NY -8 FL -3NC -11 GA -6OH -5 IL -13OK -9 IN -3PA -11 IA -6SC -1 KS -5TN -24 KY -11TX -18 LA -10VT -2 ME -4VA -8 MA -1WV -4 MI -3WI -4 213 MDHs in 34 states

5. 5 MDHs serve a disproportionate share of Medicare patients *This analysis does not include Medicare Advantage days. The downward trend in the average percent of Medicare days across MDH, other rural, and urban hospitals over time may be attributed to increases in the number of beneficiaries in Medicare Advantage. MDH

6. 6 MDHs serve a disproportionate share of Medicare patients MDH

7. 7 MedPAC Margin analyses * MedPAC (2011). Report to Congress: Medicare Payment Policy. ** Rural margins excluding critical access hospitals Overall Medicare Margins AllUrbanRural** 2005-3.1% -2.8% 2006-4.7% -4.5% 2007-6.0% -5.3% 2008-7.1%-7.3%-6.3% 2009-5.2% -4.9%

8. 8 Not all rural hospitals fare equally Despite protections, including hospital-specific and transitional outpatient payments, MDHs do not perform meaningfully better than other rural hospitals, and some cohorts continue to lag * Rural margins excluding critical access hospitals New base year (2002) for determining hospital specific payments was added for MDHs

9. 9 Benefits Reimbursement is greater of payment under the IPPS or a cost-based payment  IPPS payment plus 75% of the difference between IPPS and hospital-specific rate  Based on costs in 1982, 1987 or 2002, whichever year is higher No DSH cap Transitional Outpatient Payments, OPPS

10. 10 Without HSP and DSH advantage, MDH margins would suffer With HSP/DSH Without HSP/DSH 2005-3.4%-5.5% 2006-3.0%-6.1% 2007-3.4%-9.8% 2008-5.0%-12.4% 2009-4.0%-11.2%

11. 11 Loss of TOPs would impact MDHs adversely With TOPs Without TOPs 2005-3.4%-4.3% 2006-3.0%-3.8% 2007-3.4%-4.6% 2008-5.0%-6.3% 2009-4.0%-5.2% Medicare TOPs

12. 12 The Medicare Dependent Hospital program is a critical safety net for small, rural providers MDH With TOPs, HSP/DSH Without TOPs Without HSP/DSH Without TOPs, HSP/DSH 2005 -3.4%-4.3%-5.5% -6.5% 2006 -3.0%-3.8%-6.1% -7.1% 2007 -3.4%-4.6%-9.8% -11.2% 2008 -5.0%-6.3%-12.4% -13.9% 2009 -4.0%-5.2%-11.2% -12.6%

13. 13 MDHs have to achieve margins of 6-10% on non-Medicare patients to break even Medicare Margin Imputed Non- Medicare Margin 2005-3.4%7.3% 2006-3.0%5.6% 2007-3.4%6.1% 2008-5.0%8.6% 2009-4.0%6.6% MDH

14. 14 Without HSP/DSH payments, MDHs have to achieve margins of 12-21% on non-Medicare patients to break even Medicare Margin, without HSP/DSH Imputed Non- Medicare Margin, without HSP/DSH 2005-5.5%11.9% 2006-6.1%11.6% 2007-9.8%17.6% 2008-12.5%21.4% 2009-11.2%18.5%

15. 15 Tell Congress MDHs are vital to the Medicare program and the communities they serve  MDHs serve a disproportionate number of Medicare beneficiaries  MDHs rely on Medicare payments; they are unable to offset payments from other payors MDHs need special assistance  MDHs have consistently low Medicare margins. In 2009, MDHs were operating at a negative 4 percent margin. Without HSP, DSH and TOPS, MDH margins would have fallen to negative 12.6 percent Extend the MDH program  Expires September 30, 2012  Co-Sponsor S. 2620 and H.R. 5943