Lawmakers seek lifeline for rural hospitals

The Iowa Legislature has worked to address the financial pressure that rural hospitals face, though some say policymakers’ solutions haven’t gone far enough to give the facilities the lifelines they need to stay open.

Iowa Gov. Kim Reynolds signed Senate File 75 into law on March 28 and established a state licensure process allowing certain hospitals to receive a Rural Emergency Hospital designation. Hospitals with this designation would have to cease inpatient care and surgical procedures. Under the license, the hospital would not be able to provide care for a patient longer than 24 hours.

The designation would increase the reimbursement rate for the care given to Medicare patients and a flat payment for facility costs from the Centers for Medicaid and Medicare Services.

Rural Emergency Hospital designations were established by the federal government under legislation spearheaded by Iowa’s senior Republican U.S. Sen. Chuck Grassley in December 2020.

Grassley lobbied the U.S. Department of Health and Human Services to implement and finalize regulations so that rural hospitals can benefit from the designation. Regulations were finalized by the federal government in November 2022.

Grassley, having grown up in rural Iowa, said the designation allows hospitals to adapt and continue serving their communities in an outpatient capacity as they face financial struggles.

Iowa Sen. Janet Petersen, D-Des Moines, argued the Senate should go one step further and increase Medicaid reimbursement rates for Rural Emergency Hospitals and Critical Access Hospitals. Critical Access Hospitals are determined by the U.S. Department of Health and Human Services and serve rural areas providing critical lifelines to rural communities. CAHs can become Rural Emergency Hospitals by downsizing and stopping inpatient care.

While the federal legislation championed by Grassley increased Medicare reimbursement rates, Medicaid reimbursement rates — which are controlled by the state — have remained stagnant for over a decade.

Iowa Democrats want to increase the state’s share of costs in maintaining rural hospitals by boosting Medicaid reimbursement rates, but Republicans voted against the measure Petersen introduced to raise those rates.

“If we want to save rural health care, we need to fund rural health care,” Petersen said during floor debate in the Iowa Senate on Feb. 15. “Iowa should put skin in the game to keep our community hospitals open.”

Map by Jami Martin-Trainor/The Daily Iowan

During the debate on the bill, state Sen. Mark Costello, R-Imogene, said the federal government will increase payments to these hospitals. However, the federal government only sets Medicare reimbursement rates, and states administer, pay, and set the reimbursement rates, while states for Medicaid services.

SF 75, introduced by Sen. Jeff Reichman, a Republican born and raised in Keokuk, passed unanimously on the Senate floor and was signed into law in March.