What CMS Says (And Doesn’t Say) About Small and Rural Providers
by Louis Wenzlow, Rural Wisconsin Health Network
Proposed HIT Incentive Rule: What CMS Says (And Doesn't Say) About Small and Rural Providers
In order to comply with the Regulatory Flexibility Act and the Social Security Act, CMS is required to examine and analyze the impacts of the proposed EHR incentive rule on "small entities" and separately on small rural hospitals. The CMS analyses are noteworthy not for what they say, but for what they don't say, since they reveal literally nothing about the challenges small and rural providers are likely to face as a result of the proposed rule.
CMS's Analysis of the Proposed Rules Impact on Small Entities
CMS states that according to the Small Business Act, a "small entity" in the healthcare sector is one with between $7 million and $34 million in annual revenues. But CMS adds that the Regulatory Flexibility Act considers nearly all not-for-profit organizations to be "small entities, regardless of size." Since the vast majority of Medicare providers are not-for-profits, CMS concludes that "all affected providers are 'small.'" (Yes, CMS is in fact saying here that for the purpose of examining the impact of the proposed rule, it will be treating all hospitals, systems, and provider groups as small!)
In assessing the proposed rule's economic significance on so-called "small" (a.k.a. "all") providers, CMS states the following: "The costs for implementation and complying with the criteria of meaningful use could lead to higher operational expenses. However, we believe that the combination of payment incentives and long-term overall gains in efficiency will compensate for the initial expenditures. Additionally EPs and eligible hospitals will have to demonstrate meaningful use of their certified EHR technology as defined in the preamble. Since the definition for stage 1 meaningful use has not yet been finalized and may be altered due to public comment, it is difficult to determine how hard it will be for providers to achieve meaningful use."
What CMS doesn't say is that hospitals with annual revenues of between $7 million and $34 million are primarily rural community hospitals, and that these actually small entities face various HIT barriers not present in most large hospitals and systems with $100s of millions in annual revenues. Neither does CMS state that these providers are starting at significantly lower levels of HIT adoption and will therefore be less likely to achieve meaningful use than larger providers. Rather than honestly addressing what will be one of the great challenges of the incentive program (how do we not leave behind our smallest hospitals and physician practices?), CMS ignores the issue by conveniently designating all providers as small.
CMS's Analysis of the Proposed Rules Impact on Rural Hospitals
On the separate question of how the rule will impact rural hospitals with fewer than 100 beds, CMS states: "We have determined that this proposed rule would create a significant impact on a substantial number of small entities, and have prepared a Regulatory Flexibility Analysis as required by the RFA and, for small rural hospitals, section 1102(b) of the Act. Furthermore, any impacts that would arise from the implementation of certified EHR technology in a rural eligible hospital would be positive, with respect to the streamlining of care and the ease of sharing information with other EPs to avoid delays, duplication, or errors."
This is the full extent of CMS's analysis of the proposed rule's impact on rural hospitals with fewer than 100 beds. If I'm reading it correctly, CMS is saying (1) yes, there will be a significant impact, (2) the impact will be the same as the impact on all other providers (i.e. those analyzed as small entities), and (3) the impact will be positive.
How can this be considered an acceptable assessment? Besides the fact that it contains no actual analysis, it is worse than misleading. Any cursory review of the existing research will indicate the second and third assertions are false.
Louis Wenzlow's Regulatory Impact Analysis Framework
A serious small and rural hospital impact analysis should address at least the following issues:
- HIT Adoption Disparity
- According to HIMSS Analytics, the American Hospital Association and others, rural and critical access hospitals have significantly lower EHR adoption rates than general hospitals. These hospitals will find it more difficult to attain meaningful use in the timeframe required than larger, non-rural hospitals.
- HIT Staffing Level Disparity
- Small rural hospitals have proportionately fewer HIT professionals to plan, implement, and support EHRs. And many EHR-related tasks (security compliance and information exchange among them) will not proportionately scale down with facility size.
- Reduced Broadband Availability
- It is well documented that rural communities have reduced access to broadband, which may impact the ability of rural providers to engage in certain forms of information exchange.
All of the above are significant challenges, but they are not insurmountable ones. If we acknowledge them, analyze them, and develop solid strategies to help mitigate them, I firmly believe we can move into the coming digital healthcare age without leaving our most vulnerable providers behind. But if we ignore the fact that these challenges even exist, as CMS has done in the proposed rule, we will never be positioned to even begin the process of implementing effective resolutions.
- Negative Clinical System ROI
- According to CMS, "adopting entities will achieve dollar savings at least equal to their total costs." There is absolutely no data to support this assertion for small rural hospitals. According to a well known University of Iowa study, "the implementation of CPOE in rural or critical access hospitals may depend on net increase in operating costs. Adoption of CPOE may be financially infeasible for these small hospitals in the absense of increases in hospital payments or ongoing subsidies from third parties." 
- Policy makers should read this study to understand how provider size impacts EHR system return on investment. Clinical systems that provide ROI in larger facilities often will not have the same effect in smaller facilities. This is primarily because most EHR system ROI is related to transaction volume.
 "The 2006 Report to the Secretary: Rural Health and Human Service Issues," National Advisory Committee on Rural Health and Human Services (ftp://ftp.hrsa.gov/ruralhealth/NAC06forweb.pdf)
 "Implementation of Hospital Computerized Order Entry in a Rural State: Feasibility and Financial Impact," Robert Ohsfeldt et all, JAMIA 2005;12:20-27 doi:10.1197/jamia.M1553