Rural hospitals have a new option to get millions of dollars in additional funding from Medicare if they agree to drop all inpatient care — but so far Colorado health care facilities aren’t jumping to take the money.

Under the federal program, rural emergency hospitals must keep an emergency room staffed around the clock, but can’t offer inpatient beds. In exchange, they get extra payments, estimated to average around $3 million a year, to support outpatient and emergency care.

It’s a drastic trade-off, but one that, in Colorado, would require regulatory and legislative action before any hospitals could take advantage of the new funding.

The idea behind the program is that areas of the country that can’t financially support a full-service hospital might be able to sustain emergency services with extra support.

In the earlier stages of the pandemic, however, Colorado came close to filling every bed in its borders, raising questions about whether the state could handle a future emergency if some hospitals stop handling inpatients.

A study in the Journal of the American Medical Association projected 1,569 hospitals could be eligible nationwide, though substantially fewer may choose to participate.

The program is only open to critical access hospitals, which are generally rural facilities with 25 or fewer inpatient beds that are at least 35 miles from another hospital and generally have patient stays of four days or less. (There are some exceptions, because states could designate critical access hospitals before 2006.)

The majority of the 32 critical access hospitals in Colorado didn’t respond to inquiries from The Denver Post about whether they were considering a switch. Nine hospitals said they weren’t: Aspen Valley Hospital, Grand River Hospital District, Gunnison Valley Health, Heart of the Rockies Regional Medical Center, Lincoln Health, Memorial Regional Health, San Luis Valley Health, Southeast Colorado Hospital District and UCHealth Pikes Peak Regional Hospital.

No hospitals confirmed they were considering dropping inpatient care. Two others responded, but declined to comment at this time.

Dave Engel, CEO of Southeast Colorado Hospital District in Springfield, said converting doesn’t make sense for them, both because of lost revenue and because people would perceive their hospital as failing and go elsewhere for services they still could have gotten locally.

He said he doesn’t know of any hospitals on the Eastern Plains that want to give up inpatient care, and that most people would rather stay close to home.

“It would be unsustainable,” he said.

Donna Wehe, director of communications at San Luis Valley Health, said their two hospital campuses have found a model that works for them, so a shift isn’t necessary. It could turn out to be right for other rural facilities, though, she said.

“We really support the idea of this, because it gives rural emergent care more choices,” she said.

Before any Colorado hospitals join, the state would have to create a new type of license for rural emergency hospitals, said Megan Axelrod, director of regulatory policy and federal affairs at the Colorado Hospital Association.

The hospital association plans to survey its members to determine how many are interested in the new model, and what would need to change to make it successful.

“We’re at very, very early stages,” she said.

The legislature also would have to pass a bill granting rural emergency hospitals a share of the federal funds the state gets to match the provider fee collected from hospitals, Axelrod said. Currently, that money is distributed based on how many inpatients are covered by Medicaid, which obviously wouldn’t work for a hospital that only offers outpatient and emergency services, she said.

Ideally, the legislature won’t just pass the regulatory fixes necessary for rural emergency hospitals, but will take the opportunity to study what else the state could do to support them, Axelrod said.

“Rural hospitals, and all of our hospitals, have been struggling with unique circumstances over the last few years,” she said.

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