OVERLAND PARK — Federal budget shortfalls could force one out of every 10 rural hospitals in the U.S. to close their doors within the next two to five years, a national trade association executive said Thursday.

“There are going to have to be programs cut,” said Alan Morgan, chief executive of the National Rural Health Association, which has about 21,000 members nationwide.

In raw numbers, Morgan said, as many as 200 of the nation’s roughly 1,500 rural hospitals could close.

Morgan was the keynote speaker at the “Healing Tomorrow Together” conference, which drew about 60 hospital executives from Kansas and Missouri.

Sponsored by Saint Luke’s Health System, which is based in Kansas City, Mo., the one-day conference focused on ways hospitals can collaborate to provide cost-effective care.

Many potential fiscal challenges loom for rural hospitals, Morgan said.

For instance, there is talk in Washington of trimming infrastructure support for critical access hospitals, he said. Those are outlying facilities that, according to federal regulations, must have 25 or fewer inpatient acute care beds and (with some exceptions) must be at least 35 miles from another hospital.

Morgan said policymakers are also questioning the wisdom of “necessary provider” waivers, which allow some critical access hospitals to be located closer than the mileage rules otherwise allow — as few as five miles apart.

There are valid reasons for each waiver granted, Morgan argued, or the federal Centers for Medicare and Medicaid Services would not have approved them. For instance, he said, they might be serving differing populations by being on either side of a state line.

Morgan said hospitals of all types face funding reductions if across-the-board spending cuts go into effect in January, as envisioned by a budget deal reached last year between Congress and the White House. Congress could act to halt the cuts.

An analysis of the potential spending cuts, prepared by the federal Office of Management and Budget, estimated Medicare providers would see a cut of about $11 billion. Hospitals would bear the largest share of the cuts, according to Kaiser Health News.

Morgan also said a provision that has provided higher Medicare reimbursements for hospitals with relatively low patient volumes is set to expire this year.

The imperative for rural providers, Morgan said, is to make the case to policymakers and community leaders that quality care costs less in rural areas than it does in urban areas.

Morgan cited a study by his association that found Medicare spending is 3.7 percent less per beneficiary in rural markets than in urban markets.

During another of the conference’s sessions, panelists said a major challenge they face is managing the transition from the present payment structure, which largely funds procedures done in a segmented system, to the model of tomorrow, which envisions a continuum of care that rewards good outcomes.

“We have a foot in the past and a foot in the future,” said Bryant McNally, vice president of rural services and regulation for the Missouri Hospital Association.

In that environment, he said, policymakers must be crystal clear about their expectations.

If federal officials impose mileage restrictions on critical access hospitals, for example, McNally said they must explain details like whether the mileage determination includes back roads or bridges.

“Whatever it is, whatever the changes are,” he said, “they have got to be transparent, and they have got to have enough detail behind them, so you can at least plan going forward.”

Fellow panelist Charles Myers, a local health care attorney, predicted the future would feature a smoother system of care among the different types of hospitals — from major trauma centers down to community hospitals.

The end result, he said, would be a “loose affiliation” among facilities “providing services of assistance all down the chain.”

The Health Care Foundation of Greater Kansas City is proud to partner with the Kansas Health Institute news service to provide weekly health stories about health and policy issues impacting the greater Kansas City region. This News Service is an editorially independent program of the Kansas Health Institute and the Health Care Foundation of Greater Kansas City and is committed to objective coverage of health issues.