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Tools for Monitoring the Health Care Safety Net

Rural Health Care Safety Nets

By David Hartley, M.H.A., Ph.D., and John Gale


Rural Safety Net Providers, Programs, and Populations
Geographic Eligibility for Special Programs
Special Issues for Rural Safety Nets
Appendix A. Resources and Tools


Rural and urban areas differ in many ways, including demography, environment, economy, social structure, and availability of resources (Eberhardt et al., 2001). The differences in these characteristics significantly affect the structure, capacity, and functioning of the rural health care safety net. According to the Centers for Disease Control and Prevention (Eberhardt et al., 2001), 20 percent of the Nation's population lives in nonmetropolitan counties. Rural populations, on average, tend to be older than those in urban areas and suffer from greater levels of poverty and unemployment and lower levels of income (Eberhardt et al., 2001). Rural residents are more likely to engage in risky health behaviors than urban residents. Rates of smoking, alcohol consumption, and obesity are higher in rural areas (Eberhardt et al., 2001). Chronic illnesses and associated limitations in activity are more prevalent, and mortality rates for chronic conditions such as chronic obstructive pulmonary disease are higher in rural areas (Eberhardt et al., 2001). Table 1 demonstrates many of these differences.

Rural residents are more likely than urban residents to describe their overall health as fair to poor (National Rural Health Association, 2002). On average, death rates for children and young adults and for seniors are higher in rural counties (ages 1-24: 52.3 deaths per 100,000 for rural counties versus 35.1 for large fringe counties1; age 65 and older: 5,416 deaths per 100,000 for rural counties versus 5,111 for large fringe counties). Deaths from unintentional injuries (49.7 deaths per 100,000 in rural counties versus 29.1 in large fringe counties) and suicide (17.3 deaths per 100,000 in rural counties versus 12.6 in large fringe counties) increase steadily as counties become more rural (Table 1).

Table 1. Urban-Rural Differences in Health Indicators

  Percent who smoke cigarettes, age 18 and older Percent who are obese, age 18 and older Percent with activity limitations due to chronic health conditions, age 18 and older Deaths from unintentional and traffic-related injuries per 100,000 population, all ages Suicides per 100,000 population, age 15 and older
   Large central 22.6% 19.1% 14.0% 31.2% 13.2%
   Large fringe 21.6% 17.7% 13.0% 29.1% 12.6%
   Small 25.4% 19.8% 15.8% 36.5% 15.2%
Non-metropolitan 27.3% 21.6% 17.9% 49.7% 17.3%

Source: Eberhardt, Ingraham and Makuc, 2001.

Rural areas also have considerable health care access problems related to health insurance coverage and provider supply. Rural residents are less likely to have employer-sponsored health insurance and are more likely to be uninsured than urban residents (Schur and Franco, 1999). In addition, the rural poor are less likely to be covered by Medicaid than the urban poor (National Rural Health Association, 2002). Although it does not appear that rural residents are unable to obtain needed care, rural residents are more likely to report delaying needed care because of financial barriers than are urban residents (Schur and Franco, 1999).

The supply of providers is lower in rural than in urban areas. Despite the fact that 20 percent of the Nation's population lives in rural areas, less than 11 percent of the Nation's physicians practice in these areas (National Rural Health Association, 1998). While shortages of nurse practitioners, physician assistants, certified nurse midwives, registered nurses, and allied health professionals have an impact across the country, they have a disproportionate impact on rural communities, in part because, lacking physicians, many rural communities depend on these professionals to function as physician extenders or substitutes (Baer and Smith, 1999). Moreover, as shortages of nurses and radiology and lab technicians become acute, wage competition will attract these professionals to urban areas.

Rural communities are less likely to have the types of formal safety net providers found in urban areas, such as public hospital systems, Federal, State, and locally supported Community Health Centers (CHCs), Federally Qualified Health Centers (FQHCs), and local health departments. On the other hand, there are special classes of providers found only in rural areas such as Rural Health Clinics (RHCs) and Critical Access Hospitals (CAHs). Although RHCs and CAHs do not receive formal funding for the provision of safety net services, they do serve a safety net function in the communities in which they are located.

In the absence of formal safety net providers, a greater demand is often placed on the "informal" safety net—the private professionals and organizations that provide free or low-cost care to people who are unable to pay, but do not receive any public funds or other public support to compensate them for these services (Taylor et al., 2003). These providers and the services they provide to low-income and uninsured patients are an important part of the rural safety net.

1 The urban-rural classification system used in Health United States, 2001, Urban and Rural Health Chartbook uses three categories of urban counties: large central (central city in metro area of 1 million or more), large fringe (remaining counties in metro areas of 1 million or more), and small (metro areas of less than 1 million), and two categories of rural counties: those with a city of 10,000 or more population, and those whose largest city is has a population smaller than 10,000.

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Rural Safety Net Providers, Programs, and Populations

A description of the safety net typically begins by describing the populations served and the services delivered by public hospitals and CHCs. These two provider types account for a considerable proportion of safety net care in some communities. The Institute of Medicine notes that public hospitals "tend to be located in urban centers and primarily serve Medicaid beneficiaries and uninsured patients" (Lewin and Altman, 2000). On the other hand, rural hospitals are significantly more likely to be government owned than their urban counterparts (Mohr et al., 1999). Moreover, rural hospitals with fewer than 50 beds are more likely to provide a high percentage of uncompensated care than urban hospitals (Fishman, 1997).

Urban and rural hospitals differ considerably in regard to the safety net and their financial vulnerability. Rural hospitals, on average, have a lower Medicare inpatient margin (4.1 percent in 1999) than do urban hospitals (13.5 percent) (Medicare Payment Advisory Committee, 2001). In addition, rural hospitals are more dependent on Medicare (45.4 percent of total costs in 1999) than are urban hospitals (34.0 percent) and have a smaller share of private payer business (35.5 percent for rural hospitals compared with 43.6 percent for urban facilities) (Medicare Payment Advisory Committee, 2001). Thus, the ability of rural hospitals to cost shift indigent care to their paying customers is significantly reduced by the nature of their revenue mix. While urban hospitals also face a large proportion of publicly funded patients, they typically have a larger tax base to draw on as well as the availability of clinicians-in-training to deliver care. Very few rural hospitals are teaching hospitals; in addition to the fact that they do not receive medical education support from Medicare, they are less likely to have clinicians-in-training available to deliver care.

As of 1998, 42 percent (795) of the 1,890 Federally Qualified Health Centers were located in nonmetropolitan counties (Farley et al., 2002). The National Advisory Committee on Rural Health correctly noted in its report to the Secretary that estimates of the number of rural FQHCs made using the Office of Management and Budget (OMB) definition of rural may understate the number of FQHCs as the OMB definition is county based. As a result, it does not detect those FQHCs that are located in urban counties but serve rural populations; located in urban counties with significant rural populations; or that have satellite clinics that operate on a hub and spoke basis (National Advisory Committee on Rural Health, 2002). Although many rural FQHCs exist, there are significant regional differences in the distribution of rural CHCs. While many Eastern and Southern States have as many as 30-40 rural CHC sites, many Midwestern and Mountain States have few (Iowa, Minnesota, Nebraska, Kansas) or none (North Dakota) (National Advisory Committee on Rural Health, 2002). Thus, a small community with no hospital or a very small hospital (typically operating at a loss) in the Midwest is not likely to have either of the two major types of core safety net providers.

Local public health departments are a third type of safety net provider. Unfortunately, direct services (often restricted to prenatal care, well-child care, and HIV/AIDS treatment) sometimes delivered by local health departments in urban areas are less likely to be available from rural health departments, and the availability of these services is declining (Ricketts, Slifkin, and Silberman, 1998). Moreover, some rural States have either no rural public health departments (Maine) or a very limited public health presence in rural areas (Nebraska).

Rural Health Clinics and Critical Access Hospitals

The Federal Government has created programs establishing categories of providers that are unique to rural areas. Chief among these are Rural Health Clinics and Critical Access Hospitals.

There are currently 3,477 federally designated RHCs in the United States (Gale and Coburn, 2003). This program was established in 1977 to help recruit and retain physicians, nurse practitioners, and physician assistants in rural areas. RHCs are legally obligated to serve Medicaid recipients. However, they are not required to have an "open door" policy for uninsured patients. The formula used to compute reimbursement rates for RHCs can penalize the provision of indigent care by lowering the unit cost used to derive cost-based reimbursement. Nevertheless, rural physicians, including those with the RHC designation, are more likely to treat Medicaid-eligible patients than are their urban counterparts (Perloff et al., 1995). Particularly in rural areas with no CHC and no hospital, RHCs serve as core safety net providers.

The newest entity in the rural safety net is the Critical Access Hospital (CAH). Created by the Medicare Rural Hospital Flexibility Act of 1997, this program allows very small rural hospitals to reconfigure their operations, particularly for acute inpatient care, as CAHs. As CAHs, these facilities qualify for cost-based Medicare reimbursement (and Medicaid reimbursement in States that chose to do so), greater flexibility in staffing, and protection from the impact of the Outpatient Prospective Payment System.

To qualify for designation as a CAH, a facility must:

Facilities that meet all other CAH criteria except the mileage requirements may qualify for designation as a CAH, if they are certified by the State (using State-developed criteria) as being a necessary provider of health care services to residents in the area (Gale, 2002).

The CAH designation does not explicitly obligate the hospital to function as a safety net provider. However, CAHs are required to maintain an emergency room. As a condition of participation in Medicare, the 1986 Emergency Medical Treatment and Active Labor Act requires that hospitals with an emergency room provide a medical screening exam and stabilizing treatment, regardless of the patient's ability to pay.

The Informal Safety Net

Because rural communities have fewer formal safety net providers such as public hospital outpatient departments, community health centers (CHCs), and local health departments, and many do not have either RHCs or CAHs, vulnerable populations in rural areas are often dependent on an informal safety net of providers who are not explicitly dedicated to providing care to low-income populations (Taylor et al., 2003). These providers often include hospitals, clinics, private physicians, and other providers who do not receive funding to serve vulnerable populations, but do provide some access to care for these groups. Monitoring or even identifying the components of this "informal" safety net is quite difficult and depends on providers' self-reports of the level of care provided.

Underinsured Populations in Rural Areas

The rural economy of the United States consists, to a much greater extent than the urban economy, of small businesses, sole proprietorships, and the self-employed (Schur and Franco, 1999; U.S. Small Business Administration, 1999). In 2001, insurance premiums for the smallest businesses increased by an average of 16.4 percent, while only 58 percent of these small firms offered insurance to their employees (Levitt, Holve, and Wang, 2001). Many small businesses are responding by either dropping insurance coverage for all employees, dropping coverage for dependents, or increasing the employee's share of the premium, coinsurance, and deductibles. The self-employed face even greater premium increases and are consistently responding by purchasing catastrophic insurance with deductibles as high as $5,000 (Ziller and Kilbreth, 2003; Hartley, Quam, and Lurie, 1994). These trends have resulted in a greater proportion of rural residents paying the first dollar for basic primary care services. When combined with lower household incomes, the working lower-middle class has become a vulnerable population in many rural areas. This problem is exacerbated by urban-rural disparities in chronic illnesses such as diabetes, chronic obstructive pulmonary disease, and heart disease (Eberhardt et al., 2001).

Programs Supporting Health Care in Rural Areas

The Federal Office of Rural Health Policy (ORHP) coordinates and administers the following series of grants designed to expand access to, restrain the cost of, and improve the quality of health care in rural areas. Information on these grants can be obtained from the ORHP, which is located in the Health Resources and Services Administration (http://ruralhealth.hrsa.gov/funding/).

ORHP also administers the following two additional grant programs designed to support State involvement in meeting State and local rural health needs:

The following Federal programs support the delivery of health care services in rural areas. Some, like the Rural Health Clinics Program or Medicare reimbursement for teleconsultations, directly target rural areas. The others, although not solely rural programs, are important sources of direct care (Community Health Centers [CHCs] or Federally Qualified Health Centers [FQHCs]), financial support (Medicare incentive payments for physician's services delivered in Health Professional Shortage Areas [HPSAs]), or staffing, recruitment, and health professions training support (the National Health Service Corp, Area Health Education Centers, and Public Health Service grants) in rural areas.

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Geographic Eligibility for Special Programs

What is "Rural?"

Any Federal or State program seeking to target support to rural areas must use an explicit or implicit definition of "rural." Historically, the Federal Government has used two principal classification systems to identify rural areas. The Office of Management and Budget has developed a system that classifies counties as either metropolitan or nonmetropolitan. The U.S. Census Bureau has developed a census tract-based system that identifies urbanized areas, urban places, and rural areas. These two systems are most commonly used by the Federal Government for statistical classification, to determine eligibility for participation in Federal programs, and for the allocation of funds. Additional rural classification systems have been developed, using either of these two systems as their base, to compensate for the flaws in these systems or to expand upon them for analytic purposes. We will discuss each of these systems briefly.

The simplest approach to the definitional issue, and the most commonly used, is the county-based classification system used by the Federal Office of Management and Budget (OMB), in which counties with cities or urbanized areas with populations over 50,000, or which meet a complex set of conditions based on population density and commuting patterns, are classified as metropolitan (Ricketts et al., 1998). All other counties that do not meet these criteria are classified as nonmetropolitan. This system is used extensively by the Federal Government for statistical reporting and the allocation of funds, and has recently been revised (http://www.whitehouse.gov/omb/bulletins/b03-04.html).

The OMB system works reasonably well in States with relatively small, uniformly sized counties, but has resulted in some serious misclassifications in large counties (due to the problem of over-bounding, in which a large metropolitan county defined by the presence of a large city within its borders also contains geographically remote small communities) or in rural counties adjacent to urban areas. Extreme examples of the flaws in the metropolitan/nonmetropolitan classification system are the uninhabited parts of the Mojave desert in San Bernardino County, California and in the Boundary Waters Wilderness Canoe Area in St. Louis County, Minnesota, both of which are classified as metropolitan or urban areas despite having vast areas that are virtually unpopulated.

The U.S. Census Bureau has taken a different, census tract-based approach, defining urbanized areas as "continuously built up areas with a population of 50,000 or more comprised of central places and urban fringe," and also identifying urban places outside of urbanized areas as "any incorporated place or census designated place with a population of at least 2,500" (U.S. Census Bureau, 1995). Rural areas are all those not classified as urban. This approach uses census tracts rather than counties as the geographic unit. Although this system addresses the over-bounding problems inherent in county-based, urban-rural classification systems, it has its own flaws. The definition of urban is overly inclusive, as it includes very small towns; the definition of urbanized areas is not inclusive enough, as it includes only large cities of 50,000 or more (Washington State Department of Health, Office of Community and Rural Health, 2002). At the same time, the use of census tracts as the basis for this system limits the ability to link to existing databases for purposes of analysis, since many databases use counties or ZIP codes as their geographic unit of analysis.

As mentioned, additional classification systems have been developed to compensate for the flaws in these two systems and to provide additional analytic capacity. A number of county-based classification systems build upon the OMB system (Ricketts et al., 1998). These include:

The Rural-Urban Commuting Area (RUCA) Codes are based on the U.S. Census Bureau definitions of urbanized areas, urban places, and rural areas (Washington State Department of Health, 2002). They are based on census tracts and take into account the commuting patterns of area residents, as well as population density, with metropolitan, suburban, large town, small town, and rural designations. This approach uses a continuum of 10 whole numbers, with 30 subheadings. It is particularly useful for helping policymakers consider the effects of adjacency on access to care, and helps illustrate the interdependencies of the economies of different communities. A ZIP code approximation file has been developed that allows the RUCA Codes to be easily linked to existing data sets for analytic purposes.

In addition to their uses in understanding health trends and health care utilization patterns, rural classification systems are used to determine eligibility for various Federal programs. For example, the Rural Health Clinics Program uses a comparatively liberal definition of rurality, requiring a clinic to be located in a non-urbanized area with a population of less than 50,000 to be eligible for certification as a Rural Health Clinic (Gale and Coburn, 2003). Facilities applying for the Small Rural Hospital Improvement Grant Program must be located outside of a Metropolitan Statistical Area (MSA) or within a rural census tract of an MSA, as determined under the Goldsmith Modification. The Rural Health Outreach Grant, Rural Health Network Development Grant, and the Network Development Planning Grant programs require an applicant to be located in a designated rural county or a rural ZIP code of an urban county. In its report to the Secretary, the HHS Rural Task Force acknowledged the complications created by this lack of a common definition for the 225 HHS programs serving rural communities, including difficulties in targeting grants, evaluating services, developing policy, and quantifying the HHS investment in rural and frontier communities (HHS Rural Task Force, 2002).

Although it is beyond the scope of this chapter to thoroughly describe the various rural classification systems used to determine eligibility for Federal grants and programs as well as their use in analyzing rural health issues and rural health care utilization patterns, it is important for those interested in supporting the rural safety net to understand the differences between them. For additional information, go to Appendix A for resources on classification systems.

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