Don't Break a Leg in Texas

By John Langone

For a century the inhabitants of tiny St. Ignatius, Mont. (pop. 1,000), had a hardscrabble little hospital to tend their more serious wounds and ailments. Then five years ago, the 18-bed Mission Valley Hospital ran into trouble. Spiraling medical costs and difficulty attracting doctors were partly to blame. But the real crunch was that, with new limits on reimbursements, Medicare no longer paid what it cost to treat the hospital's mostly elderly patients.

With 40% of its total billings coming from Medicare, Mission Valley, with annual revenues of more than $1 million, began losing between $29,000 and ; $50,000 a year. Faced with anticipated losses this year of $250,000, the board of trustees had no choice but to close down. Says former administrator James Oliverson: "The days of the John Wayne hospital, that rugged little place out on the plains, are over."

Around the country, St. Ignatius' plight has become a familiar one. For rural hospitals, dwindling federal money is often far more damaging than it is for more visible inner-city counterparts. Of the more than 300 U.S. hospitals that have been forced to close since 1983, about half have been in rural areas. The American Hospital Association estimates that nearly 70% of those still in business are financially ailing. Though Washington recently announced new Medicare reimbursement policies that will boost payments for patients who incur exceptionally high costs, the Senate Special Committee on Aging reported last month that the crisis in rural health care may grow even worse. The committee concluded that as many as 600 of the nation's 2,700 rural hospitals are in danger of shutting down.

Texas, where small rural hospitals account for nearly half the state's 530 nonfederal health-care facilities, has been especially hard hit. Sixty-three hospitals have had to close in the past five years, 34 of them in rural areas. Now 49 of Texas' 254 counties are without a hospital; at least 13 do not even have a doctor. Referring to the loss of the recently shuttered Bastrop hospital, outside Austin, board member Susan Cartelli groans, "Now Friday- night football games at the high school can be a nightmare."

The culprit behind the country closings is the same one that has put some urban hospitals out of business: the 1983 congressional decision to switch Medicare to the so-called Diagnosis Related Groups system, which eliminated the old fee-for-service plan. Under the current rules, the Government pays set rates for designated services, no matter what the circumstances of a case. Although the Government has raised Medicare compensation 11% between 1984 and this year, payments to hospitals have not kept pace with the costs of care for elderly patients, which have risen 22% in the same period. Medicaid, the federal program that covers the poor, is no safety net either. "It's a prescription for disaster," says Kenneth Robbins, president of the Illinois Hospital Association.

While rural and urban hospitals are both caught up in the competition for federal funds, country hospitals in Texas receive 20% to 50% less than city ; hospitals for the same services; in Montana, the difference is 30%. Though reimbursement is being increased for some hospitals near cities, rural- hospital payment rates average 14% below urban rates. Reasons: the average cost of a Medicare case is usually lower for rural hospitals, and city hospitals ostensibly have higher operating expenses.

"A rural facility can lose a year's profit on a single case," says Jim Ahrens, president of the Montana Hospital Association. "For a small hospital, that's a lot of money."

As more and more rural hospitals close, patients must travel as far as 100 miles to find care. Says Jim Bob Brame, a family physician in rural Eldorado, Texas: "You have to drive that far with your chest pain -- and not have anyone to start your I.V." Faced with such appalling conditions, some rural communities have refused to knuckle under. When the only hospital in Hamilton, Texas (pop. 3,100), closed, townspeople raised some $300,000, including $225,000 from private donors, and bought $79,000 worth of medical equipment for just $8,900 at a local auction. They now have a 15-bed hospital with three doctors and two visiting surgeons. Says former acting administrator Jack Davidson: "We saw what it was like not to have a hospital."

Montana is experimenting with another approach called "medical-assistance facilities," which provide acute-care inpatient services. Staffed mainly by physician's assistants and nurse practitioners, the units have much lower overhead than full-service hospitals and are exempt from Medicare-dictated personnel requirements. The state hopes to open five such facilities in the next few months. But, helpful as they are, such measures are not enough. Until rural health care becomes a national priority of legislators and policymakers, the plight of country hospitals is likely to get even worse.

With reporting by Scott Brown/Los Angeles and Deborah Fowler/Houston