A clinically based service limitation option for alternative model rural hospitals - Hospital Payment: Beyond the Prospective Payment System

Health Care Financing Review, Winter, 1993 by Ira Moscovice, Anthony Wellever, Anne Sales, Mei-Mei Chen, Jon Christianson

INTRODUCTION

A number of alternative model rural hospitals have been designed and implemented to address the problems faced by small, isolated rural hospitals (Moscovice et al., 1992; Christianson et al., 1990; Mick and Morlock, 1990; Moscovice, 1989). Alternative model rural hospitals typically feature a reduction in the regulations required of full-service hospitals in exchange for a limitation on the range of patient services the facility may provide. The term limited-service rural hospital is used synonymously with alternative model rural hospital (Arthur D. Little, Inc., 1974). The most prominent examples of the alternative model rural hospitals to be implemented are the Montana medical assistance facility (MAF), the California alternative rural hospital model (ARHM), and the Federal rural primary care hospital (RPCH) of the Essential Access Community Hospital (EACH) program (Wellever, 1994; Moscovice et al., 1992).

Service limitation is the most important characteristic in defining alternatives to the traditional acute care rural hospital (Christianson et al., 1990). It drives the size, composition, and staffing requirements of the facility, along with decisions about basic equipment and core diagnostic and therapeutic modalities. It also drives the rules and regulations intended to assure the safety and welfare of patients cared for in these facilities. Despite its importance, service limitation is the least developed aspect of alternative model experimentation.

The Montana State law establishing MAFs and the Federal statute establishing RPCHs define the service limitations for these facilities by a maximum LOS--96 hours for MAFs and 72 hours for RPCHs (Agency for Health Care Policy and Research, 1991). These LOS limitations have no clinical basis. Their strict 7enforcement would result in transfers of patients who may require only one or two additional inpatient treatment days, and inhibit transfer of patients from full-service hospitals to MAFs and RPCHs for convalescence.

A recent review of the current state of development of institutional alternatives to traditional rural hospitals identified four mechanisms used to define service limitations:

* LOS limits that restrict the amount of

time a patient may remain in a facility

following admission.

* A laissez-faire approach that voluntarily

limits admissions and services relative

to the professional staff and other resources

available in a facility.

* A modular approach that certifies facilities

to provide a group of core services,

which may be augmented by the addition

of various service modules depending

on the needs of the community

and capabilities of the facility and

staff.

* Diagnosis-related group (DRG)-based

limits that place restrictions on the

types of patients that may be admitted

to a limited-service facility.

This review also found that the most common service limitation used in defining alternative models is an LOS limit, although it has little empirical or conceptual support (Moscovice et al., 1992).

The issue of defining service limitations for alternative model rural hospitals has become a source of controversy in discussions about implementation of the Federal EACH/RPCH program. Following the publication of proposed rules for the program (Federal Register, 1991), the seven States that received EACH/RPCH grants participated in a series of implementation meetings. At these meetings, the States stated the need for programmatic flexibility to implement the EACH/ RPCH concept in a variety of different hospital, network, and State settings (EACH Grant States, 1992). Although they agreed with the legislative intent to limit inpatient services, they expressed concerns about the strict interpretation of both the 72-hour LOS and the 6-bed limit in law and HCFA regulations. The States were concerned that an inflexible policy could lead to increased costs and considerable disruption for Medicare patients treated in RPCHs.

The purpose of this article is to present an alternative proposal for defining service limitations for limited-service rural hospitals based on the results of an analysis of relevant existing secondary data sources and the judgments of a technical advisory panel of rural clinicians. Although our findings are relevant to all alternative model rural hospitals, they are specifically intended to inform RPCH policymaking. For this reason, the term RPCH is used interchangeably with alternative model rural hospital.

ANALYSIS OF MEDICARE DATA

To assess alternative proposals for defining service limitations, we examined information on the services provided in small rural hospitals likely to be interested in becoming limited-service facilities. Based on our previous research, we defined this group as non-metropolitan statistical area(MSA) hospitals with an average acute patient dally census of fewer than 10. Our goal was to answer the following questions:

* What types of patients should we expect