By Dave Ranney
KHI News Service
Sept. 9, 2010
ULYSSES — The hospital here wants to take part in a Medicare initiative designed to test the merits of letting rural hospitals switch to a system of cost-based reimbursement.
The Centers for Medicare and Medicaid Services last week announced its intent to add up to 20 hospitals to its Rural Community Hospital Demonstration program. Ten hospitals already are in the program.
Most rural hospitals are critical access facilities, a federal designation that allows them to bill Medicare for 101 percent of their outpatient, inpatient, laboratory, physical therapy, and post-acute care costs.
Grant County Hospital is not a critical access facility.
“A mistake was made based on incorrect information or an incorrect understanding,” Frable said. “The (hospital) board did not go for critical access designation when it had the opportunity to do so – prior to January 2009.”
If the hospital is one of the 20 added to the demonstration program, Medicare reimbursements for its inpatient services would be figured using a cost-plus formula.
Currently, Medicare pays the hospital a predetermined rate that may or may not cover the hospital’s actual costs.
If Grant County Hospital had been part of the demonstration project last year, Frable said, it would have collected an additional $869,000 from Medicare.
Approximately 60 percent of the hospital’s patients, he said, are on Medicare.
“The biggest problem for the rural hospitals is that for (the current) payment system to work, you have to have a certain number of patients to come out ahead,” Frable said. “We don’t have the volume we need to make it work.”
The Ulysses hospital was the first in Kansas to express interest when queried about the program by the Kansas Hospital Association.
Editor’s Note: Cost Plus makes sense. In the Ulysses Hospital example, had Cost Plus been in place last year, their revenue would have increased by almost $1 million.