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HEARING TO REVIEW THE STATE OF HEALTH 

CARE IN RURAL AREAS AND THE ROLE OF 

FEDERAL PROGRAMS IN ADDRESSING RURAL 

HEALTH CARE NEEDS

HEARING

BEFORE THE

SUBCOMMITTEE ON SPECIALTY CROPS, RURAL 

DEVELOPMENT AND FOREIGN AGRICULTURE

OF THE

COMMITTEE ON AGRICULTURE 

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

JULY 23, 2008

Serial No. 110–42

(

Printed for the use of the Committee on Agriculture 

agriculture.house.gov 

COMMITTEE ON AGRICULTURE 

COLLIN C. PETERSON, Minnesota, Chairman 

TIM HOLDEN, Pennsylvania, 

Vice Chairman 

MIKE MCINTYRE, North Carolina 

BOB ETHERIDGE, North Carolina 

LEONARD L. BOSWELL, Iowa 

JOE BACA, California 

DENNIS A. CARDOZA, California 

DAVID SCOTT, Georgia 

JIM MARSHALL, Georgia 

STEPHANIE HERSETH SANDLIN, South 

Dakota 

HENRY CUELLAR, Texas 

JIM COSTA, California 

JOHN T. SALAZAR, Colorado 

BRAD ELLSWORTH, Indiana 

NANCY E. BOYDA, Kansas 

ZACHARY T. SPACE, Ohio 

TIMOTHY J. WALZ, Minnesota 

KIRSTEN E. GILLIBRAND, New York 

STEVE KAGEN, Wisconsin 

EARL POMEROY, North Dakota 

LINCOLN DAVIS, Tennessee 

JOHN BARROW, Georgia 

NICK LAMPSON, Texas 

JOE DONNELLY, Indiana 

TIM MAHONEY, Florida 

TRAVIS W. CHILDERS, Mississippi 

BOB GOODLATTE, Virginia, Ranking 

Minority Member 

TERRY EVERETT, Alabama 

FRANK D. LUCAS, Oklahoma 

JERRY MORAN, Kansas 

ROBIN HAYES, North Carolina 

TIMOTHY V. JOHNSON, Illinois 

SAM GRAVES, Missouri 

MIKE ROGERS, Alabama 

STEVE KING, Iowa 

MARILYN N. MUSGRAVE, Colorado 

RANDY NEUGEBAUER, Texas 

CHARLES W. BOUSTANY, JR., Louisiana 

JOHN R. ‘‘RANDY’’ KUHL, JR., New York 

VIRGINIA FOXX, North Carolina 

K. MICHAEL CONAWAY, Texas 

JEFF FORTENBERRY, Nebraska 

JEAN SCHMIDT, Ohio 

ADRIAN SMITH, Nebraska 

TIM WALBERG, Michigan 

BOB LATTA, Ohio 

PROFESSIONAL STAFF

ROBERT L. LAREW, Chief of Staff 

ANDREW W. BAKER, Chief Counsel 

APRIL SLAYTON, Communications Director 

WILLIAM E. O’CONNER, JR., Minority Staff Director 

SUBCOMMITTEE ON SPECIALTY CROPS, RURAL DEVELOPMENT AND FOREIGN

AGRICULTURE

MIKE MCINTYRE, North Carolina, Chairman 

JIM MARSHALL, Georgia 

HENRY CUELLAR, Texas 

JOHN T. SALAZAR, Colorado 

JOHN BARROW, Georgia 

EARL POMEROY, North Dakota 

MARILYN N. MUSGRAVE, Colorado, 

Ranking Minority Member 

TERRY EVERETT, Alabama 

ADRIAN SMITH, Nebraska 

JEFF FORTENBERRY, Nebraska 

ROBIN HAYES, North Carolina 

ALETA BOTTS, Subcommittee Staff Director

(II) 

(III)

C O N T E N T S 

Page 

Goodlatte, Hon. Bob, a Representative in Congress from Virginia, opening 

statement .............................................................................................................. 30

Hayes, Hon. Robin, a Representative in Congress from North Carolina, opening statement ........................................................................................................ 3

McIntyre, Hon. Mike, a Representative in Congress from North Carolina, 

opening statement ................................................................................................ 1

Peterson, Hon. Collin C., a Representative in Congress from Minnesota, prepared statement ................................................................................................... 4

Pomeroy, Hon. Earl, a Representative in Congress from North Dakota, prepared statement ................................................................................................... 5

WITNESSES

Dorr, Hon. Thomas C., Under Secretary for Rural Development, U.S. Department of Agriculture, Washington, D.C. .............................................................. 9

Prepared statement .......................................................................................... 10

Morris, Tom, Acting Associate Administrator, Office of Rural Health Policy, 

Health Resources and Services Administration, U.S. Department of Health 

and Human Services, Washington, D.C. ............................................................ 12

Prepared statement .......................................................................................... 13

Spade, Jeff, Executive Director, North Carolina Rural Health Center; Vice 

President, North Carolina Hospital Association, Cary, NC .............................. 30

Prepared statement .......................................................................................... 32

Fluharty, Charles W., Founder, President Emeritus, and Director of Policy 

Programs and Research Professor, Rural Policy Research Institute, Harry 

S Truman School of Public Affairs, University of Missouri-Columbia, Columbia, MO ........................................................................................................... 38

Prepared statement .......................................................................................... 39

Myers, M.D., Wayne, Trustee, Maine Health Access Foundation; Past President, National Rural Health Association, Washington, D.C. ........................... 93

Prepared statement .......................................................................................... 94

Rheuban, Dr. Karen, Pediatric Cardiologist, Senior Associate Dean for Continuing Medical Education and Medical Director, Office of Telemedicine, 

University of Virginia Health System; President-elect, American Telemedicine Association; Member of the Board of Directors, Center for Telemedicine 

and E-health Law; President, Virginia Telehealth Network, Charlottesville, 

VA .......................................................................................................................... 98

Prepared statement .......................................................................................... 100

SUBMITTED MATERIAL

Submitted questions ................................................................................................ 113

(1)

HEARING TO REVIEW THE STATE OF HEALTH 

CARE IN RURAL AREAS AND THE ROLE OF 

FEDERAL PROGRAMS IN ADDRESSING RURAL 

HEALTH CARE NEEDS 

WEDNESDAY, JULY 23, 2008

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON SPECIALTY CROPS, RURAL

DEVELOPMENT AND FOREIGN AGRICULTURE, 

COMMITTEE ON AGRICULTURE, 

Washington, D.C. 

The Subcommittee met, pursuant to call, at 2:30 p.m., in Room 

1300, Longworth House Office Building, Hon. Mike McIntyre 

[Chairman of the Subcommittee] presiding. 

Members present: Representatives McIntyre, Cuellar, Salazar, 

Barrow, Pomeroy, Costa, Smith, Hayes, and Goodlatte (ex officio). 

Staff present: Aleta Botts, Claiborn Crain, Alejandra GonzalezArias, Tony Jackson, Tyler Jameson, Scott Kuschmider, John Riley, 

Patricia Barr, Josh Maxwell, and Jamie Weyer. 

OPENING STATEMENT OF HON. MIKE MCINTYRE, A 

REPRESENTATIVE IN CONGRESS FROM NORTH CAROLINA 

The CHAIRMAN. I will now call this meeting of the Subcommittee 

on Specialty Crops, Rural Development and Foreign Agriculture of 

the House Agriculture Committee to order. 

Good afternoon, and welcome to the Subcommittee’s hearing to 

review the state of health care in rural areas and the role of Federal programs in addressing rural health care needs. I am pleased 

to welcome Mr. Thomas Dorr, the Under Secretary for Rural Development; and Mr. Tom Morris, Acting Associate Administrator of 

the Office of Rural Health Policy for the U.S. Department of Health 

and Human Services. 

Gentlemen, welcome. I look forward to your testimony in just a 

moment. 

As the former Co-Chairman of the Rural Health Care Coalition, 

a coalition of approximately 178 Members of Congress, both Republican and Democratic, I have long been concerned about whether 

folks in rural areas have adequate access to quality health care. I 

continue to serve on the steering committee of the Rural Health 

Care Coalition, and its organization, I believe, has been one of the 

most active caucuses, especially on a bipartisan basis, in the 

United States Congress. 

If rural areas are not able to provide health care to their residents, then we have two possible scenarios. First, those rural resiVerDate 0ct 09 2002 10:40 Nov 03, 2009 Jkt 041481 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 I:\DOCS\110-42\51222.TXT AGR1 PsN: BRIAN
2

dents suffer from inadequate care, or second, those rural residents 

no longer are rural, they leave and go elsewhere. For those of us 

who care deeply about the vitality of rural America, neither of 

these scenarios is acceptable. 

Several programs operate at the Federal level to provide assistance to rural health care facilities and their provision of services 

to rural residents. I know that my home State of North Carolina 

has directly benefited from the operations of these programs, receiving over $20 million in the past 7 years for rural health care 

facilities through grants and loans from the USDA Community Facilities Program alone. So we are very grateful for that and the cooperative efforts. 

And, again, I commend our State Director, John Cooper, who has 

done such a wonderful job, a fine Christian gentleman that always 

knows how to reach out and care for people. I commend him as an 

example nationwide, Mr. Dorr. 

Despite the numerous programs designed to help, we know that 

gaps remain. The transportation, geographic, and staffing challenges are all too well known by Members of this Committee, and 

those who live in rural areas. The rural population as a whole 

tends to be older, tends to be folks of lower incomes, and tends 

often to have greater health problems than their counterparts in 

urban and suburban areas. 

In fact, nearly 1⁄4 of the U.S. population lives in rural areas, but 

only about ten percent of physicians live in these areas. That disparity alone says volumes: 25 percent of our population in rural 

areas, but only ten percent of our physicians. 

Another glaring statistic: One-third of all motor vehicle accidents 

occur in rural areas, but 2⁄3 of deaths from motor accidents occur 

on rural roads. While the National Center for Health Statistics recently reported that, nationwide, life expectancy reached a record 

high of 78.1 years in 2006, an April 2008 study in the Public Library of Science journal noted that life expectancy actually is falling for a significant number of American women, mostly living in 

rural counties in the Deep South, along the Mississippi River, and 

in the Appalachian Mountain region. 

We clearly have more to do on the issue of rural health care. 

With the limited dollars available for rural health care programs, 

we have to ensure they are used in ways that do address the challenges. After all, rural citizens are just as much American taxpaying citizens as citizens who live in the big city; and we have to 

make sure that they are not discriminated against. 

We have to make sure there is sufficient coordination to reach 

America’s citizens who may happen to live in the more rural areas. 

We want to make sure that we are maximizing those efforts, that 

we are making sure that we are getting the full bang for the buck; 

and make sure that as we look at these areas that tend to have 

older populations and tend to have those with greater disparities 

in terms of types of deaths and other illnesses, that we are not 

overlooking American citizens, American taxpayers, who also need 

the attention of the United States Government. 

I want to thank all of you for being here today. I encourage the 

witnesses to use the stated 5 minutes for their testimony. If you 

can read your testimony in 5 minutes that is fine, but otherwise, 

3

please do not read your testimony if you can’t finish it in 5 minutes. Just read the highlights; or better yet, tell us the highlights. 

Pursuant to Committee rules, testimony by witnesses, along with 

questions and answers by any Members of our Subcommittee, will 

be stopped at 5 minutes. We will, however, gladly accept your written testimony, no matter how long it is, for the record. And that 

will be a public record, so please do not hesitate to give us all the 

information you would like in that fashion. 

At this time, I would like to recognize the man who is serving 

in lieu of our regular Ranking Member, Mrs. Musgrave, but 

couldn’t be here, our next in order Ranking Member, my fine 

friend, a great Christian gentleman himself, a great colleague and, 

in fact, my neighbor who is from the neighboring Congressional 

district to mine in North Carolina, Mr. Robin Hayes. 

Robin? 

OPENING STATEMENT OF HON. ROBIN HAYES, A 

REPRESENTATIVE IN CONGRESS FROM NORTH CAROLINA 

Mr. HAYES. Thank you, Mr. Chairman. And you are a great 

friend. And interestingly, our districts really mirror each other; you 

could kind of overlay them. We have urban areas on the east and 

west, but tremendous rural areas in between. 

So this is a very relevant hearing. And I may even have to pay 

your alma mater, who are those folks in Chapel Hill, Carolina Area 

Health Education Program? 

I have to be careful giving him too many compliments on 

his———

The CHAIRMAN. This is a Duke man. 

All right. Go ahead. Thank you. 

Mr. HAYES. West Virginia now. All right. 

Thank you, Mr. Chairman, for holding today’s hearing so we can 

gain a better understanding of the health care needs of rural America. 

Rural Americans face unique challenges in getting quality health 

care services, most notably the physical and financial strain, particularly given the energy crisis, of traveling long distances. Often 

the lack of timely access to these services leads to delay, misdiagnosis, preventable diseases, and other issues, some of which you 

mentioned, like the accident issue in rural areas. 

The USDA’s many rural development grant and loan programs 

help to sustain the quality of life in rural communities. These programs build and maintain various health and human services facilities, such as water and wastewater systems; modern telecommunications systems for towns and rural areas, including making certain that emergency and health care services have the latest 

broadband capability; and in financing essential facilities such as 

community rooms, libraries, hospitals. 

Representing the Eighth District of North Carolina, which is a 

very rural district, USDA Rural Development and John Cooper 

have been a tremendous and innovative part of our efforts to improve life in the communities. John Cooper, the State Director and 

Director of USDA Rural Development in North Carolina, and his 

staff have served to greatly help increase the quality of health care, 

and increasing economic development in the Eighth and Seventh 

4

Districts, but also across the state as well. The recently enacted 

farm bill made several improvements to these current programs. 

Changes in the definition of rural will help to ensure dollars 

build hospitals and health care services will go to rural areas with 

the greatest need. Reauthorization of successful programs, such as 

distance learning and telemedicine, will continue to provide vital 

telecommunication infrastructure to health care and emergency 

services. Reforms to rural broadband programs will create incentives to increase access to affordable, high-speed Internet in rural 

and underserved areas. 

Because of these programs, the knowledge and expertise found in 

our finest medical facilities are now accessible to physicians, health 

care professionals, and patients all over the world, but most notably in some of the rural areas of my district. Because of telemedicine services, many of our rural constituents now benefit from the 

latest in medical knowledge, technology and treatment, while remaining under the care of their hometown health care provider. 

Folks living in rural areas should have access to quality health 

care. And I look forward to today’s hearing and the testimony so 

that we will learn more about the health care needs of rural America; and give my welcome and thanks to our witnesses for being 

here. 

Mr. Chairman, I yield back. 

The CHAIRMAN. Thank you, Mr. Hayes. 

The chair will allow other Members to submit opening statements. 

[The prepared statements of Mr. Peterson and Mr. Pomeroy follow:]

PREPARED STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE IN

CONGRESS FROM MINNESOTA

Thank you, Chairman McIntyre, for calling this hearing and for the leadership 

you and Ranking Member Musgrave have shown on highlighting the importance of 

health care delivery in rural areas. 

Access to quality, affordable health care is of great concern to all Americans, no 

matter where they live. The obstacles that Americans can face in obtaining this 

care, however, are magnified in rural areas—areas that everyone on this Committee 

represents. 

Logistics, distance, and under-investment are significant challenges rural areas 

face when it comes to health care. On average, rural residents are older and have 

fewer financial resources than urban and suburban residents. Health care delivery 

costs are higher in rural areas, and a low supply of medical professionals in the 

countryside has been a persistent problem. 

Distance plays a big role, as well. The distance between home and the nearest 

health care provider can mean less preventative care, and it can put more strain 

on emergency personnel and medical facilities when time is critical. 

This Committee is limited in what it can do to address rural health care delivery. 

USDA operates several rural development programs, in the form of loans and 

grants, designed to assist less-populated areas in meeting these challenges. The Department of Health and Human Services also operates rural health programs, but 

unfortunately, the Administration has proposed severe cuts in funding for the kinds 

of programs that would invest in quality health care for rural America. 

And an investment in these kinds of technologies can make a difference in closing 

the literal gap between a consumer and health care provider. High speed telecommunications and telemedicine, for example, are beginning to play a larger role 

in rural health care. 

The Distance Learning and Telemedicine Program, first authorized in the 1995 

Farm Bill, is a popular program that utilizes modern technology to provide additional access to specialists who are not available in many rural communities. 

5

Under Secretary Dorr with USDA’s Rural Development Mission is here before the 

Committee once again and I look forward to hearing not just on the operation within USDA, but the coordination with other agencies with rural health care programs 

in order to maximize the use of Federal resources in today’s budget climate. 

I also welcome our panel of witnesses that will provide a ground-level perspective 

to the problems facing rural medical services and rural health care delivery today. 

Thank you again, Mr. McIntyre, for calling this hearing today. I yield back my 

time. 

PREPARED STATEMENT OF HON. EARL POMEROY, A REPRESENTATIVE IN CONGRESS

FROM NORTH DAKOTA

I want to thank Chairman Mike McIntyre and the Subcommittee on Specialty 

Crops, Rural Development and Foreign Agriculture for holding this important hearing today to review the state of health care in rural areas and the role of Federal 

programs in addressing rural health care needs. As Co-Chair of the Rural Health 

Care Coalition, I am deeply concerned about access to affordable, quality health care 

in rural America and this hearing is a good opportunity to get on record the unique 

rural challenges that folks in my district and across the face. 

Rural health care providers and patients living in rural areas face obstacles vastly 

different that their urban counterparts. Rural health care delivery and access is 

challenged by numerous impediments including shortages of health care providers, 

geographic remoteness, low patient volume with disproportionately high Medicare 

populations, limited access to integrated health systems, and lack of electronic networks to efficiently manage health care delivery. 

In fact, only about ten percent of physicians practice in rural America despite the 

fact that nearly 1⁄4 of the population lives in these areas. Although only 1⁄3 of all 

motor vehicle accidents occur in rural areas, 2⁄3 of the deaths attributed to these accidents occur on rural roads. Rural residents tend to be poorer with average per capita income $7,417 lower than in urban areas. They also tend to have high death 

rates and poorer health than their urban counterparts. 

In addition to these unique socioeconomic characteristics, patients living in rural 

areas face obstacles to access health care providers who struggle to stay afloat. Approximately 83 percent of North Dakota’s counties are federally designated as entire 

or partial health professional shortage areas. We have two counties without either 

physicians or medical facilities and 15 counties are served by satellite clinics that 

are not open every day. Over the last 4 years, four rural ambulance units have 

stopped operations and since 2000, twenty-six rural pharmacies have closed. In December 2007, a study found that 55 facilities throughout the state were recruiting 

185 vacancies including physicians, nurses, physician assistants, nurse practitioners, physical therapy and mental health. 

As Co-Chair of the Rural Health Care Coalition, I have fought hard to ensure that 

our rural providers receive equitable reimbursements under Medicare to help them 

keep their doors open. As you know, Congress just enacted into law a $3 billion 

rural health package that maintains and expands our commitment to rural health 

in the Medicare Modernization Act (MMA). However, these funds are provided for 

Medicare services only. And as we all know, the majority of the folks living in rural 

America are not seniors and they need access to rural health care services as well. 

That is why the Rural Health Care Coalition has fought hard to maintain the 

rural health care safety net via Federal funding including grant programs we are 

discussing today. I would like to submit for the record a letter submitted to the 

House Labor-Health and Human Services-Education Appropriations Subcommittee 

by the Rural Health Care Coalition in strong support of robust funding for these 

important programs in Fiscal Year 2009. Programs supported in this letter include 

the Rural Hospital Flexibility Program, Small Hospital Improvement Program, 

Rural Outreach Grants, State Offices of Rural Health and Telemedicine to name a 

few. 

I was disappointed that the Administration’s Fiscal Year 2009 budget recommended over $160 million in cuts to these rural safety net programs, which 

would cost North Dakota $3 million alone. These cuts in my opinion are penny 

wise—pound foolish. Despite assertions to the contrary, these funds are not duplicative of Medicare rural health care enhancements under the Medicare Modernization 

Act. MMA was never meant to replace the Health and Human Services rural health 

grant programs. MMA was about preserving access and helping providers keep their 

doors open to seniors, the HHS grant programs are meant to improve health care 

quality and develop innovative systems of care for all rural Americans, young and 

old. It is my hope that this Congress will avert the President’s recommended cuts 

6

and I look forward to working with the new Administration in placing a greater priority on preserving the rural health care safety net. 

I look forward to hearing the testimony of my colleagues and distinguished experts to learn more about the roots of these rural health challenges and how the 

Federal Government can craft common sense policies that can help bring relief to 

these important populations. I am committed to doing my part to helping reduce 

disparities in health care and I look forward to working with the Agriculture Committee to advance this important cause. 

ATTACHMENT

March 19, 2008

Hon. DAVID OBEY, Hon. JAMES WALSH,

Chairman, Ranking Minority Member,

Subcommittee on Labor, Health and 

Human Services, Education, and Related Agencies, 

Subcommittee on Labor, Health and 

Human Services, Education, and Related Agencies, 

Committee on Appropriations, Committee on Appropriations, 

U.S. House of Representatives, U.S. House of Representatives, 

Washington, D.C.; Washington, D.C. 

Dear Mr. Chairman Obey and Ranking Member Walsh:

As Members of the House Rural Health Care Coalition (RHCC) and on behalf of 

our constituents in rural America, we urge you to support rural health care programs by including funding for them in the FY09 Labor, Health and Human Services, and Education and Related Agencies Appropriations bill. Funding approved by 

the Committee is critical to the effective delivery of many health programs in rural 

and underserved communities across the country. We are greatly appreciative of 

your recommendations last year to restore the rural health care safety net to its 

2005 levels, adjusted for inflation. Building on your efforts from last year, we once 

again ask you to support modest inflationary updates for important rural health 

care services and giving strong and favorable consideration to the following programs, which are of the highest priority to the RHCC: 

Rural Hospital Flexibility Grants

FY 2009 RHCC Request $39.2 million 

FY 2008 Enacted Appropriation $37.87 million 

This funding line supports both the Medicare Rural Hospital Flexibility Grant 

program and the Small Hospital Improvement Grant program and we urge that the 

Subcommittee support a modest increase in funding for inflation. The Medicare 

Rural Hospital Flexibility (FLEX) Grant program is instrumental in guaranteeing 

access to basic inpatient and outpatient services to residents of rural communities. 

FLEX program funding can be used to determine if a facility would benefit from 

conversion to Critical Access Hospital (CAH) status under Medicare. While this 

funding has helped more than 1,200 facilities convert to CAH status, many of these 

facilities still have negative operating margins. That is why the FLEX program also 

supports quality improvement projects and the development of networks of hospitals 

and other providers such as tertiary care sites or emergency medical service providers to meet the full range of services for Medicare beneficiaries in rural areas. 

Under the Small Hospital Improvement program, approximately 1,600 hospitals 

grants of approximately $9,000 are awarded to purchase computer hardware and 

software and train staff on computer information systems that are necessary to comply with Federal regulations. Unlike FLEX grants, this program is not solely tied 

to Critical Access Hospitals but rather to any rural hospital with 50 beds or less. 

These small grants greatly aid rural facilities in integrating quality improvement 

strategies and the ongoing implementation of the Prospective Payment System and 

HIPAA rules that further the need to obtain new technology. According to past reports to Congress, these funds meet critical needs for these small hospitals that 

would go unmet given their precarious financial situation and lack of operating 

funds needed to keep pace with constant software and hardware upgrades needed 

to operate in a complex environment. 

7

Rural Health Outreach and Network Development Grant Program

FY 2009 RHCC Request $53.9 million 

FY 2008 Enacted Appropriation $48 million 

The Rural Health Outreach funding line supports innovative health care delivery 

systems as well as vertically integrated health care networks in rural areas. 

Projects funded under this funding line have brought care that would not otherwise 

have been available to at least two million rural citizens across the country. The 

grants fund demonstration programs and usually last no more than 3 years. The 

intent is to provide initial support for innovative ideas in rural communities and 

then to transition off Federal funding as the projects become self sufficient. Grant 

programs in this line include: Rural Health Outreach Services Grants, Rural Network Development Grants, Rural Network Planning Grants, and Delta Network Development Grants. Our appropriation request provides for a modest inflationary adjustment. 

Office for the Advancement of Telehealth

FY 2009 RHCC Request $7.1 million 

FY 2008 Enacted Appropriation $6.7 million 

This grant program helps increase access to quality care services in underserved 

and rural communities through the use of advanced telecommunications and information technology. These grants support distance-provided clinical services, and are 

designed to reduce the isolation of rural providers, foster integrated delivery systems through network development, and test a range of telehealth applications. 

Given the many challenges facing health care providers and their patients in rural 

communities, improving the availability of telehealth services is a critical step forward for our rural constituents. We respectfully request that the Subcommittee provide $7.1 million in the FY09 Labor, HHS, and Education appropriations legislation 

for this important program. 

State Offices of Rural Health Grant Program

FY 2009 RHCC Request $9.2 million 

FY 2008 Enacted Appropriation $7.99 million 

This program is a small matching grant program to states to promote the operation of state offices of rural health. Since the initiation of the program in 1991, 

the number of state offices has increased from 14 to 50. The concept behind the program is to create a state focus for rural health interests, bring technical assistance 

to rural communities, and help them tap state and national resources available for 

rural health and economic development. The RHCC requests that the Subcommittee 

provide adequate funding, including a modest inflationary adjustment, to support 

the State Offices of Rural Health Grants and enhance the effectiveness of the important programs they oversee. 

Rural Health Research Grant Program

FY 2009 RHCC Request $9.7 million 

FY 2008 Enacted Appropriation $8.5 million 

This grant program supports eight academic-based rural health research centers, 

which study rural health issues, including rural hospitals, health professionals, delivery of mental health services, and functioning of managed care, in rural 

healthcare delivery systems. This research program is the only one in the Department of Health and Human Services (HHS) that soles examines the rural dimensions of traditional health services research. This research plays an essential role 

informing the Office of Rural Health Policy staff about key Medicare, Medicaid and 

workforce issues and their impact on the ability of rural providers to provide essential health care services to rural communities. As Congress continues to modify and 

reform Medicare, rural communities will rely on the research provided through 

these centers to adapt to Federal policy changes. The RHCC supports a modest inflationary adjustment to support this important rural health policy research. 

8

National Health Service Corps (NHSC)

FY 2009 RHCC Request $133.9 million 

FY 2008 Enacted Appropriation $123.5 million 

The NHSC plays a critical role in maintaining the health care safety net by placing primary health care providers in our nation’s most underserved rural communities. Currently, more than 4,000 NHSC clinicians are providing primary care services to four million Americans. Unfortunately, this represents only 8% of our nation’s underserved population. We request this increase in funding to hire additional 

primary care practitioners, dental practitioners and mental health practitioners are 

needed to serve the 46 million Americans without adequate health care in their 

communities. Moreover, President Bush’s commitment to expand the number of individuals served by community health centers will require additional health professionals to staff these facilities. We request that the Subcommittee provide $133.9 

million for this program which plays a key role in providing clinicians to community 

health centers. 

Area Health Education Centers

FY 2009 RHCC Request $36.9 million 

FY 2008 Enacted Appropriation $28.18 million 

Area Health Education Center funding provides direct financial support to schools 

for healthcare workforce development and education. AHECs link the resources of 

university health science centers with local planning, educational and clinical resources. This network of health-related institutions provides multidisciplinary educational services to students, faculty and local practitioners, ultimately improving 

health care delivery in medically underserved areas. This is an effective program 

as primary care graduates of this and other Title VII health professions programs 

are up to ten times more likely to serve minority and disadvantaged populations by 

practicing in medically underserved communities. We respectfully request your support for a modest inflationary adjustment for these important community resources. 

Rural and Community Access to Emergency Devices

FY 2009 RHCC Request $2.04 million 

FY 2008 Enacted Appropriation $1.46 million 

Automated external defibrillators (AEDs) are small, easy-to-use devices that shock 

a heart back to normal rhythm during cardiac arrest, saving the life of the victim. 

Access to AEDs for police forces, fire departments, first responders, and community 

organizations in rural areas is critical to increasing the survival rates of cardiac arrest victims in remote locations. The Rural and Community Access to Emergency 

Devices program assists in purchasing emergency devices such as AEDs and in 

training first responders in their use and we urge the Subcommittee to support a 

modest inflationary adjustment. 

The RHCC is grateful for your support in recognizing the need for providing a 

sound future for the delivery of rural health care. We hope you will continue to support the millions of Americans in rural and underserved areas by acknowledging 

and considering these funding priorities. 

Sincerely,

Hon. EARL POMEROY, Co-Chair, Hon. GREG WALDEN, Co-Chair,

House Rural Health Care Coalition; House Rural Health Care Coalition. 

The CHAIRMAN. We appreciate Mr. Salazar being here; and any 

of the other Members who may come in will be allowed to submit 

any opening statements for the record, so that we can proceed immediately now and let the witnesses begin their testimony. 


11042098
9

Hopefully, we can get through the hearing before we are called 

to votes. We will ensure there is ample time for questions for each 

of our Members. 

So panel one, we will begin with Mr. Tom Dorr, the Under Secretary, as I said earlier, for USDA Rural Development. And followed immediately by Mr. Tom Morris, the Acting Associate Administrator for the Office of Rural Health Policy. 

Mr. Dorr, please begin. 

STATEMENT OF HON. THOMAS C. DORR, UNDER

SECRETARY FOR RURAL DEVELOPMENT, U.S. DEPARTMENT 

OF AGRICULTURE, WASHINGTON, D.C. 

Mr. DORR. Thank you, Mr. Chairman. 

Mr. Chairman, Mr. Hayes, I too must outwardly admit in a very 

grateful manner that John Cooper is one of our outstanding State 

Directors; and we are delighted to have him in our camp. 

I would like to thank the Members of the Subcommittee for this 

opportunity to testify on rural health care. This is a high priority 

for the Administration, for USDA Rural Development and, obviously, for Members of this Subcommittee as well. And I do appreciate, we all do appreciate, the support that Congress continues to 

provide in this area. 

Modern technology has created remarkable new opportunities to 

improve access to health care in rural communities. We look forward to working with each of you to ensure that these opportunities are realized. We work closely, as well, with our friends at the 

Department of Health and Human Services, the Indian Health 

Service, and the Veterans Administration to identify and meet the 

health care needs of rural communities. 

For example, we have developed in conjunction with them a prototype of a rural Critical Access Hospital. This was done with the 

leadership of the Department of Housing and Urban Development, 

Department of Health and Human Services and, particularly, the 

leadership of the Health Resources Service Agency. This model is 

now available to rural communities as an efficient, cost-effective 

planning tool. 

We are continuing to participate in a Rural Hospital Working 

Group with HRSA and others in an effort to create a how-to manual for rural communities undertaking the construction of replacement hospitals. 

In the private sector, we have developed a close partnership with 

the National Rural Health Association and with large lenders such 

as the Farm Credit System, which can handle larger loans than 

many local banks are able, in many cases, to make. For our own 

part, we are working to break down the stovepipes and develop 

synergies across our own program areas. 

Rural Development’s health-related investments have traditionally been made by our Community Facilities and Distance Learning 

and Telemedicine Programs. Since 2001, however, we have also invested more than $200 million through the Business and Industry 

Guaranteed Loan Program, and smaller amounts through the 

Rural Business Enterprise Grant Program, the Rural Economic Development Loan and Grant Program, and the Renewable Energy 

and Energy Efficiency Program. 

10

The point here is simply that we are prepared to respond flexibly 

and to apply all of our tools, as needed. We recognize that projects 

can be structured differently, approaches may vary, and we intend 

to work with communities to identify viable solutions. 

Finally, we recognize that limited budgets may create a more 

competitive program environment in the future. The DLT, or the 

Distance Learning Telemedicine Program, is already competitively 

awarded. The Community Facilities Program has traditionally had 

an open loan window in which qualifying projects were funded first 

come, first served. 

We are now examining our options as the market evolves and as 

it grows. And we look forward to a continuing discussion with the 

Subcommittee on these and a variety of other matters. 

Thank you all very much for this opportunity to be with you, and 

I look forward to any questions you may have. 

[The prepared statement of Mr. Dorr follows:]

PREPARED STATEMENT OF HON. THOMAS C. DORR, UNDER SECRETARY FOR RURAL

DEVELOPMENT, U.S. DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C. 

Mr. Chairman, Members of the Subcommittee, thank you for this opportunity to 

discuss the role of USDA Rural Development in improving access to quality health 

care in rural America. 

This is a high priority for the Administration and, I know, for the Members of 

this Subcommittee as well. We are appreciative of the support that the Congress 

continues to provide in this area. 

At the Federal level, several agencies share responsibility for this effort. We work 

closely with our colleagues at the Department of Health and Human Services, The 

Department of Housing and Urban Development, the Indian Health Service, and the 

Department of Veterans Affairs to identify and meet the heath care needs of rural 

communities. 

As an example of this inter-agency coordination, in cooperation with the Department of Housing and Urban Development and the Department of Health and 

Human Service’s Health Resources and Services Administration (HRSA), we have 

developed a prototype of a rural Critical Access Hospital, which we have made available to rural communities to aid in the development of efficient, cost-effective hospitals. 

We are continuing to participate in a Rural Hospital Working Group with HRSA 

and others in an effort to create a how-to manual for rural communities undertaking the construction of a replacement hospital. 

In addition, in the private sector we have developed a close partnership with the 

National Rural Health Association (NRHA) and with larger lenders, such as the 

Farm Credit System, which can handle loans that many local banks are unable to 

make. We are committed to forming additional partnerships which will enable all 

parties to strengthen the services we provide to rural America. 

While several Federal agencies collaborate to provide rural health care services, 

our perspectives may sometimes vary. The mission of USDA Rural Development is 

to increase economic opportunity and improve the quality of life in rural communities. From this perspective, investments in rural health care are a triple play. 

First and foremost, we of course recognize the inherent importance of quality 

health care to rural residents. 

In addition, major health care facilities—clinics, hospitals, and a wide variety of 

specialized care facilities—are intrinsically high-value assets to rural communities. 

They provide jobs, generate economic activity, support a wide range of ancillary 

services, and bring to town highly skilled professional people who are likely to make 

valuable contributions across the entire spectrum of civic life. 

Finally, access to quality health care is clearly an important condition for many 

business and institutional site decisions. In this respect, quality health care is essentially an infrastructure issue like transportation, adequate electric capacity, 

water and wastewater treatment capacity, and broadband access. Communities that 

lack these attributes may be effectively redlined for many types of developmental 

opportunities. It is therefore an important part of our mission to help ensure that 

these gaps are filled. 

11

In considering Rural Development’s role in this area, it is important to note that 

we are community-driven. We administer over 40 programs which we are prepared 

to use flexibly to solve problems identified by rural communities themselves. Since 

2001, we have worked hard to build synergies among programs, break down stovepiping, and encourage both our own staff and our partners in the communities we 

serve to work across traditional program boundaries. 

Traditionally the bulk of USDA Rural Development’s investment in rural health 

care has been provided through the Community Facilities Program, and in dollar 

terms this continues to be the case. 

Since 2001, we have supported investments of more than $1.75 billion in Community Facilities to help rural communities develop or improve more than 1,000 health 

care facilities. Of this total, 144 facilities were hospitals while 262 were health clinics. Other health care investments in this period included assisted living facilities, 

nursing homes, vocational and medical rehabilitation centers, and mental health 

centers. 

The Community Facilities Program, however, does not stand alone. In the health 

care sector, from FY 2001 through FY 2007, no fewer than six separate Rural Development programs have invested or supported investments in a total of over $2.2 billion in more than 1,800 health care-related projects:

Projects Funding 

• Community Facilities 

Loans 795 $1,152,420,669

Guaranteed Loans 284 648,953,654

Grants 363 32,950,541

• Distance Learning and Telemedicine/Medical 

100% Grants 245 80,789,842

Loans and loan combos 17 78,409,821

• Business and Industry Guaranteed Loans 82 202,897,348

• Rural Business Enterprise Grants 28 3,553,287

• Rural Economic Dev. Loans and Grants 27 10,929,833

• Renewable Energy Guaranteed Loans And Grants 5 59,386

During the same period, our Community Facilities Program also supported investments of over $831 million in 5,201 fire, rescue, and public safety projects. Many 

of these, including rescue and ambulance services, communications facilities, storm 

warning systems, and fire equipment, directly support the public health mission. 

Looking forward, demand for these programs is growing and we expect that this 

will continue. Anticipating this demand, the Administration proposed in its 2007 

Farm Bill submission $85 million in mandatory funding to support an additional 

$1.6 billion in guaranteed loans and $5 million in grants to support the reconstruction and rehabilitation of Rural Critical Access Hospitals. 

Although Congress did not choose to fund this initiative, we will continue to invest in rural health care as funds are available. We also anticipate that growing 

demand coupled with new technologies and a stringent budget environment are likely to drive changes in program delivery. 

The Distance Learning and Telemedicine program is already in high demand. It 

is administered as a nationally competitive program with scoring based on (a) the 

rural nature of the service area; (b) economic need; (c) leveraging, through matching 

funds; (d) project location in USDA Enterprise Zones; (e) the need for services and 

benefits; (f) innovativeness; and (g) cost effectiveness. In 2008, we anticipate making 

approximately $24 million in grants and $28 million in loans and combos. 

Health care investments through the Community Facilities Program, in contrast, 

have historically been community and demand driven. And we continue to fund 

rural health care infrastructure through this program as the current resources 

allow. 

In closing, let me express again my thanks for the support of this Subcommittee 

for rural health care. These investments are critical to rural residents and to the 

long-term health of rural communities. We look forward to working with you to ensure that these needs are met.

The CHAIRMAN. Thank you so much for that very prompt and excellent summary. We look forward to our questioning time. 

In the meantime, Administrator Morris, if you would proceed. 

12

STATEMENT OF TOM MORRIS, ACTING ASSOCIATE

ADMINISTRATOR, OFFICE OF RURAL HEALTH POLICY, 

HEALTH RESOURCES AND SERVICES ADMINISTRATION, U.S. 

DEPARTMENT OF HEALTH AND HUMAN SERVICES,

WASHINGTON, D.C. 

Mr. MORRIS. Mr. Chairman, Members of the Subcommittee, 

thank you for the opportunity to meet with you today to discuss the 

health care needs of rural populations in this country. I am here 

today representing the Health Resources and Services Administration, known as HRSA. 

HRSA focuses on the most vulnerable Americans and makes sure 

they receive health care. HRSA works to expand the health care of 

millions of Americans—the uninsured, mothers and their children, 

those with HIV/AIDS, and residents of rural areas. 

HRSA takes very seriously its obligation to implement enacted 

legislation. We help train future nurses, doctors, and other clinicians and place these clinicians in the areas of greatest need. Our 

efforts stress cross-cutting alliances within the agency to deliver 

quality services. We also work with governments at the Federal, 

state, and local levels, and with community-based organizations to 

seek solutions to rural health care problems. 

My testimony will describe HRSA’s activities in rural America 

and our collaboration with other partners, such as the USDA. 

HRSA’s Office of Rural Health Policy is the leading Federal proponent for better health care services for the 55 million people that 

live in rural America. Housed in HRSA, ORHP has a departmentwide responsibility to analyze the impact of health care policy on 

rural communities. ORHP informs and advises the Secretary of 

HHS, and works to ensure that rural considerations are taken into 

account in the policymaking process. 

Some of our efforts at ORHP include the Medicare Rural Hospital Flexibility Grant Program, Rural Health Care Services Outreach grants, and the State Offices of Rural Health. We also help 

support the Rural Recruitment and Retention Network, which links 

providers to rural communities in need. 

The Community Health Center Program is a major component of 

America’s health care safety net, and due to the efforts of the 

health centers and the generous support of the Congress, we recently completed a Presidential initiative that created over 1,200 

new or expanded health centers in this country. They served 16 

million patients in 2007, and as part of a renewed focus on highpoverty areas in the last year, we awarded 80 new health center 

sites that serve 300,000 people in areas of highest need. Today, 

more than half of the health centers, 53 percent, serve rural populations. 

The National Service Corps is another program, and has placed 

more than 28,000 health professionals committed to providing improved access to primary care, oral health care, and mental health 

services in underserved areas. This is a service program, and the 

clinicians go wherever the area is of greatest need. Approximately 

60 percent of NHSC’s placements are in rural areas. 

In an era of high gasoline prices, travel costs have become an 

even greater barrier to residents of rural areas. In 2007, HRSA 

provided funding for 140,000 telehealth visits in 46 different speVerDate 0ct 09 2002 10:40 Nov 03, 2009 Jkt 041481 PO 00000 Frm 00016 Fmt 6633 Sfmt 6601 I:\DOCS\110-42\51222.TXT AGR1 PsN: BRIAN
13

cialty areas to patients in rural communities. We estimate that this 

has saved patients over 14 million miles in travel, or almost $7 

million in travel-related costs. 

The geographic isolation of rural communities poses significant 

challenges in ensuring that all mothers and children have access 

to routine preventive care, acute care, and specialty care. To meet 

this challenge, HRSA funds the Healthy Start Program and the 

Maternal and Child Health Services Block Grant Program to 

states. 

HRSA works with sister agencies in HHS and other Federal departments as we seek solutions to rural health care problems. We 

collaborated with the U.S. Department of Agriculture on the capital 

projects that Mr. Dorr already mentioned. We are also seeking to 

work with them in the coming year with their Economic Research 

Service to seek to create a definition of frontier. We are also working to make sure that the health centers provide WIC services, 

Women, Infant, and Children’s services, in the health care setting, 

and we will serve as an ex officio member of the recently formed 

Rural Advisory Committee for the Department of Veterans Affairs. 

In conclusion, we take great pride in the work we do to provide 

quality health care for rural Americans. I thank you for the opportunity to testify, and I am happy to answer any questions. 

[The prepared statement of Mr. Morris follows:]

PREPARED STATEMENT OF TOM MORRIS, ACTING ASSOCIATE ADMINISTRATOR, OFFICE

OF RURAL HEALTH POLICY, HEALTH RESOURCES AND SERVICES ADMINISTRATION, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, WASHINGTON, D.C. 

Mr. Chairman, Members of the Subcommittee, thank you for the opportunity to 

meet with you today on behalf of Dr. Elizabeth Duke, Administrator of the Health 

Resources and Services Administration (HRSA), to discuss rural access issues as 

they affect the nation and what is being done to meet the health care needs of the 

rural and highly rural populations in this country. We appreciate your interest and 

support of rural health care and access to care for people residing in rural areas. 

Introduction 

The Health Resources and Services Administration (HRSA) helps the most vulnerable Americans receive quality medical care without regard to their ability to pay. 

HRSA works to expand the health care of millions of Americans: the uninsured, 

mothers and their children, those with HIV/AIDS, and residents of rural areas. 

HRSA takes seriously its obligation to zealously and skillfully implement enacted 

legislation from the Congress. HRSA helps train future nurses, doctors and other 

clinicians, and to place these clinicians in areas of the country where health care 

is scarce. HRSA’s efforts stress cross-cutting alliances across its offices and bureaus 

to bring about quality integrated services. The Agency works and collaborates both 

within government at Federal, state and local levels, and with community-based organizations to seek solutions to rural health care problems. 

My testimony will briefly describe several HRSA activities that touch millions of 

people in rural America. These include Office of Rural Health Policy programs, the 

Health Center program, the National Health Service Corps, Telehealth, and Maternal and Child Health programs. I will also briefly describe our collaboration with 

our partners in other agencies, including the U.S. Department of Agriculture who 

is testifying alongside of me today. 

RSA’s Rural Activities 

Office of Rural Health Policy 

HRSA’s Office of Rural Health Policy (ORHP) is the leading Federal proponent 

for better health care services for the 55 million people that live in rural America. 

Housed in HRSA, ORHP has a department-wide responsibility to analyze the impact 

of health care policy on rural communities. ORHP informs and advises the Secretary, and works to ensure that rural considerations are taken into account 

throughout the policy-making process. 

14

I would like to highlight six of ORHP’s efforts to improve the health of rural 

Americans. The Medicare Rural Hospital Flexibility Grant Program (FLEX) provides 

funding to states who in turn award the dollars to rural hospitals. For example, the 

FLEX grants has helped over 1,200 small rural hospitals secure higher payments 

from the Medicare program under cost-based reimbursement. 

Another program, Rural Health Care Services Outreach, worked to improve the 

health status of rural resident by providing a range of services such as health 

screenings, health education, and provider training. These community-driven 

projects provided flexibility for addressing health needs specific to rural communities. A majority of these projects fulfilled the needs in rural communities as 80 

percent of them have continued after Federal funding ended. 

The State Office of Rural Health grant program, which funds the 50 states, ensures that there is a focal point for rural health issues. In 2006, the State Offices 

worked with close to 4,700 rural communities on a variety of activities ranging from 

quality improvement to assistance with grant writing. In Colorado, for example, 

funds support quality reviews for over 30 clinical cases from small rural hospitals 

across the state. Physicians review the cases for appropriate and timely care, helping these hospitals to monitor and improve care if necessary. 

ORHP efforts also include assisting in the enrollment of more than 180 rural hospitals in the 340B Discount Drug program. A change in the law under the Medicare 

Modernization Act of 2003 allowed qualifying rural hospitals which take care of a 

large percentage of poor and elderly to qualify for this program. ORHP works extensively with the states to identify eligible hospitals and assist them in the application 

process for gaining access to low-cost pharmaceuticals. 

HRSA’s ORHP also supports the Rural Recruitment and Retention Network 

(3RNet). The 3RNet works to increase the number of providers practicing in rural 

America by linking rural communities in need of a provider with providers seeking 

to practice in a rural setting. The 3Rnet consists of 43 states who work together 

to share information and recruitment strategies. During FY 2007, 3RNet placed 404 

physicians and 277 other health professionals such as nurse practitioners, physician 

assistants and dentists. As a result, the 3Rnet saved rural communities close to $9 

million in recruitment costs last year. Over the past 4 years, 3RNet placed nearly 

2,900 clinicians in rural communities. 

Finally, the Rural Assistance Center (RAC), supported by ORHP, offers rural residents one-stop shopping on health related rural issues. Rural residents can e-mail 

or call the RAC staff and find out about funding opportunities, successful rural 

health models or news and statistics on rural communities. In one success story, a 

23-county consortia in Pennsylvania used information and assistance from the RAC 

to help design and monitor a managed care plan for behavioral health. Over its 5 

year existence, RAC has worked with more than 5,000 individuals for customized 

assistance via its 1–800 line. 

Consolidated Health Centers 

The Health Center Program, a major component of America’s safety net for the 

nation’s underserved populations for more than 40 years, is at the forefront of the 

President’s Health Center Expansion Initiative to increase health care access in the 

nation’s most needy communities. Due to the incredible efforts of the clinicians and 

staffs of the Health Centers, and the generous support of a bipartisan Congress, the 

Initiative created over 1,200 new or expanded Health Center sites, serving 16 million patients in 2007C compared with ten million patients served in 2001. In 2007, 

as part of a renewed focus on high poverty areas, 80 new Health Center sites serving 300,000 people without access to Health Center services in areas of high need. 

Health Centers are community-based and patient-directed organizations serving 

populations with limited access to care. These include low income populations, the 

uninsured, those with limited English proficiency, migrant and seasonal farmworkers, homeless families, and residents of public housing. Health Centers are 

open to all regardless of ability to pay. Moreover, the Health Centers provide comprehensive primary care service on a sliding fee based on the patient’s income. 

Health Centers improve the health status of underserved populations living in isolated rural communities, where residents often have no where else to go. To meet 

this need, over half (53 percent) of Health Centers serve rural populations. HRSA 

funds health center services in rural areas within a 40 to 60 percent range as required by statute. For example, in 2006, in rural areas, Health Centers served over 

6.6 million people with 20.5 million patient visits. In the last fiscal year, HRSA 

awarded approximately $836 million to Health Centers serving rural areas. Additionally, the Agency recently awarded nearly $5 million in grants to Health Centers 

in rural areas to spur greater health information technology investments. For examVerDate 0ct 09 2002 10:40 Nov 03, 2009 Jkt 041481 PO 00000 Frm 00018 Fmt 6633 Sfmt 6621 I:\DOCS\110-42\51222.TXT AGR1 PsN: BRIAN
15

ple, one rural grantee implemented an electronic health record in 22 Health Center 

locations, reaching over 50,000 patients. 

Peer reviewed literature and major reports document that Health Centers successfully improve access to care, improve patient outcomes for underserved patients, 

and are cost effective. Clearly, since their inception in the 1960s, Health Centers 

remain on a quality quest for their rural patients, grounded in the principles of community-oriented primary care. 

National Health Service Corps 

The National Health Service Corps (NHSC) has the unique distinction of having 

a book, The Dance of Legislation, a television series, Northern Exposure, and a 

movie, Doc Hollywood, feature aspects of its story. From its inception in 1970, the 

NHSC has placed in underserved areas more than 28,000 health professionals committed to providing improved access to primary care, oral, and mental health services. 

The NHSC is a service program and its clinicians go wherever the need is great, 

where others choose not to go. By statute, the Program requires its recruited clinicians to serve targeted areas where they are needed most by linking educational 

support with a clinical placement (through a scholarship or loan repayment) to serve 

patients most in need of primary care services. 

From 1993 to 2006, the NHSC provided almost 18,000 total years of dedicated 

service from its clinicians practicing in rural areas. Approximately 60 percent of the 

NHSC’s placements are in rural areas, continuing a trend throughout its history. 

Moreover, the most current retention rate of NHSC clinicians in rural areas is approximately 75 percent. To overcome shortages and scarcities in rural areas and to 

expose students to hands-on primary care rotations, the Agency supports state and 

community recruitment efforts including retention of their grow-your-own health 

professionals. Additionally, according to one study, in rural areas, NHSC clinicians 

are major contributors to local economies, resulting in up to 14,367 jobs, and generating $1.5 billion in economic impact. 

For over 35 years, the NHSC has been and continues to be an important contribution to the health care needs of underserved people in rural America. 

Telehealth 

In an era of high gasoline prices, travel costs have become an even greater barrier 

to rural patients receiving specialty services that are not locally available. The Telehealth Network Grant Program (TNGP) funds projects that demonstrate the use of 

telehealth systems in order to improve health care services for medically underserved populations. The TNGP focuses on providing innovative telehealth services 

to rural areas. From March 2007 through February 2008, nearly 140 thousand telehealth visits for 46 different specialty services were provided to patients in rural 

communities under this Program. During the same period, the TNGP is estimated 

to have saved patients over 14 million miles in travel, or otherwise stated, an estimated savings of almost $7 million in travel costs. 

In terms of health outcomes, the TNGP examines the impact of remote disease 

management services on patient outcomes. From September 2006 through February 

2008, 33 percent of diabetic patients enrolled in Telehealth diabetes case management programs achieved control over their disease as measured by their hemoglobin 

A1c levels. This is a significant improvement over the baseline of ten percent of diabetic patients who are estimated to have had control over the disease. 

Under the Telehealth Resource Center grant program, HRSA supports five regional and one national telehealth resource centers to provide technical assistance 

to rural communities interested in providing or receiving telehealth services. The 

five regional centers work together to make available technical assistance from the 

nation’s experts on practical approaches to creating a successful telehealth program, 

whereas the national center focuses on technical assistance to address the legal and 

regulatory barriers to sustaining successful programs. For example, the California 

Telemedicine and eHealth Center Mentor Program created a network of mentors, 

individuals who have developed successful telehealth programs in California, to 

serve as role models and advisors to communities that wish to use telehealth technologies to overcome barriers to service. 

Maternal and Child Health 

The geographic isolation of rural communities poses significant challenges in assuring that all mothers and children have access to routine preventive care, and 

acute medical and specialty care. To meet this challenge, HRSA funds programs to 

improve maternal and child health through the Healthy Start Program and the Maternal and Child Health Services Title V Block Grant to states. Healthy Start works 

to eliminate or reduce racial/ethnic disparities in birth outcomes in high-risk comVerDate 0ct 09 2002 10:40 Nov 03, 2009 Jkt 041481 PO 00000 Frm 00019 Fmt 6633 Sfmt 6621 I:\DOCS\110-42\51222.TXT AGR1 PsN: BRIAN
16

munities. For example, North Carolina’s Healthy Start Program serves fourteen 

rural counties. The minority infant mortality rate in these counties was 21⁄2 times 

higher that the state’s rate. A recent evaluation indicates this year that there has 

been close to a 14 percent reduction in racial disparity for early entry into prenatal 

care, 12.9 percent reduction in the racial disparity for neonatal mortality, and a 10.8 

percent reduction in overall infant mortality. 

The Maternal and Child Health Services State Block Grant Program helps improve the health care of many rural mothers and children. States prioritize the use 

funds to address a multitude of maternal and child health needs within the state. 

Among other things, states work to reduce the rate of child deaths by motor vehicle 

accidents, decrease the number of child suicide deaths, and lessen the rate of birth 

for teenagers. Several rural states focus on reducing child injuries caused by motor 

vehicle crashes. In South Dakota, for example, the state’s efforts have reduced the 

rate of deaths to children caused by motor vehicle crashes from 11.1 in 2002 to 7.1 

in 2006. 

Collaboration With Partners 

HRSA works with its sister agencies in HHS and other Federal departments to 

seek solutions to rural health care problems. We collaborate with the U.S. Department of Agriculture (USDA) and the Department of Housing and Urban Development to assist small rural hospitals in accessing capital for building projects 

through programs funded by these two Departments. HRSA has also worked with 

USDA to revise and define a frontier definition, and to increase the number of 

health center grantees providing Women, Infant and Children (WIC) services such 

as supplemental foods and nutrition education. Today 95 percent of health centers 

provide such services. In addition, we will serve as an ex officio member of the Department of Veteran’s Affairs Rural Advisory Committee, which advises the Secretary on health issues affecting veterans living in rural areas. 

Conclusion 

HRSA takes great pride in the work we do to provide quality health care for rural 

Americans. Thank you for the opportunity to discuss the agency’s rural programs 

and I am happy to answer any questions you have.

The CHAIRMAN. Thank you. 

Thank you, gentlemen. And you two have been the first witnesses we have ever had that have done a very succinct job in less 

than the time offered. So thank you for showing it can be done and 

done with great respect. That allows us even more time for discussion and questions as we may need it, and we thank you for that 

respect. 

The chair would like to remind Members that they will be recognized for questioning in order of seniority for Members who were 

here at the start of the hearing, according to Committee rules. 

After that, Members will be recognized in order of arrival. And I 

appreciate the Members understanding and following this procedure. 

But I would also like to welcome Mr. Costa. Although not a 

Member of this Subcommittee, is a Member of the larger Agriculture Committee, and he has joined us today. And I have consulted with the Ranking Member, and we are pleased to welcome 

him and let him join us, as appropriate, during times of questions 

as well. 

And we are also pleased to be joined by Mr. Barrow of this Subcommittee, who is joining us just in time for the questions. So we 

are glad to have you, Mr. Barrow. 

Secretary Dorr, can you discuss the role of financing from local 

banks in the Farm Credit System in particular, that you mentioned 

in your testimony, and the excellent job it has done for the construction or renovation of health care facilities in rural America? 

Mr. DORR. Well, certainly. 

17

Traditionally, our programs have emphasized the direct loan 

component. Over the years, however, we have recognized that limited resources and, in fact, the ability to more effectively engage 

local communities is likely to develop a stronger relationship and 

a stronger commitment to the success of the programs, long term. 

As a result, we have been for the last few years going toward more 

effective guaranteed loan programs. 

An example of this is a project in St. James, Minnesota, which 

was initiated a couple of years ago. In that particular case, they 

had a hospital that was built in 1957. It needed to be rehabilitated 

and, in fact, replaced, which they did. It was a $22 million project, 

I believe about $17 million of it was a guaranteed loan, and $4 million or thereabouts was a direct loan. That guaranteed loan component was one in which our Rural Development Office was struggling to find someone to originate that loan. Ultimately, Arborone, 

I believe a North Carolina-based farm credit investment group, got 

involved in it and provided the origination of the loan, and we were 

able to provide the guarantee. 

What this really demonstrates is that we are working with a 

more and more diverse group of banks, investors, and other financial entities to address this emerging rebuilding of the infrastructure of rural America. Because of the history of the way we have 

financed things in rural America over the last several decades, this 

has been a bit of a new challenge. 

We are delighted to find that there are organizations like Farm 

Credit. There are some banks that are also now beginning to get 

involved and they are actually able to utilize our loan guarantee 

in a very low-cost way to step in and provide the necessary buildout for this. In this particular case, we were able to mitigate about 

250 basis points or 21⁄2 interest off the prime rate. That probably 

would have been an added cost that may have prohibited the local 

community from embarking on this project. If you amortize that, 

say, on a $15 million loan, just on an average basis, that amounts 

to $350,000, $360,000 a year. 

So we are looking for these kinds of partners, Farm Credit 

through their investment groups. I understand this particular 

project evolved out of the Investments in Rural America Initiative 

that was started under Chairman Nancy Pellett at the Farm Credit 

Administration. We found this as being a very attractive project 

and program for us to work with. So we think it has been very 

good. 

The CHAIRMAN. Thank you, sir. 

Administrator Morris, as part of the Administration’s assessment 

of rural health programs, we know your office sets goals both to reduce health disparities and to strengthen public health infrastructure and health care delivery systems. 

Would you give us your honest assessment of the progress that 

you have been able to achieve on those goals, both in the short 

term and in the long term? 

Mr. MORRIS. Yes, Mr. Chairman. In terms of health disparities, 

certainly rural America has its share of them. And there is a very 

regional tilt to it, with areas in the Southeast facing some severe 

challenges. 

18

Our Rural Health Care Outreach Services Grant Program, the 

beauty of the program is, it is noncategorical, which means the 

community can decide what the focus should be. And what we find 

is that most of the applicants of this program tend to focus on trying to improve health through health fairs, and adapt them to what 

the local need is. 

In order to track this, we have begun a performance measurement system that will allow them to report on their progress on 

disease indicators, access to primary care, and things like that. We 

are hopeful that through the creation of this we will be able to report quantifiable results that show direct community health status 

improvement for where we make those investments. 

The CHAIRMAN. All right. Thank you, sir. Thank you very much. 

I will proceed and let Mr. Hayes be recognized to see if he has 

any questions at this time. 

Mr. HAYES. Thank you, Mr. Chairman. 

Mr. Dorr, what analysis has USDA done to compare the impacts 

of various projects that you funded in rural communities, and the 

examples of successes. Hopefully, no failures, but if so, what are 

some of those? 

Mr. DORR. We have begun to attempt this. I will try to respect 

the time and abbreviate this. 

As I have indicated to this Committee in the past, it was very 

difficult when I first became the Under Secretary to ascertain what 

the impact was of the variety of loans and grants and loan guarantees we were making. In other words, what kind of an impact in 

terms of new jobs, gross domestic product, tax revenues, those sorts 

of things were being created with an investment that we made, 

whether it was a grant or whether it was a direct loan—which obviously has a higher credit score—or whether it was a loan guarantee? 

We embarked several years ago to try to ascertain how to do that 

in our B&I Program, in our Business and Industry portfolio. This 

evolved into something we called SEBAS, the Socio-Economic Benefits Assessment System. And what that system does in our B&I 

portfolio, using economically valid databases and appropriate models, is to scrub and determine how many gross new jobs we have 

created; it reduces them to net FTEs. 

That is, if you invest money someplace, and it provides the same 

service and eliminates a job over there, you can’t technically call 

a job here a net new job. This system scrubs a lot of that out of 

the system. And, it ultimately generates a number that identifies 

how much additional new gross domestic product that investment 

creates. You then are able, for example, to divide that by the number of jobs. You get a salary per job or a quality of job indicator. 

The interesting thing is that in addition to giving us that data, 

it also is going to be a tool that ultimately will help us analyze 

whether an application or an investment is really a good one. So, 

in preparation for coming up here, I had our folks pull the SEBAS 

numbers for B&I loans. We don’t do SEBAS yet in Community Facilities, but we are looking at how to implement that technology 

there. 

We have done a number of loan guarantees in the B&I portfolio 

that are directly related to health care. For example, in the area 

19

of continuing care retirement, in a period from 2001 through to 

date, we have made 26 B&I loans. It required a total of $3.45 million in budget. These investments generated $7.5 million in GDP 

annually, and they created 272 net new jobs. 

Now, here is the interesting thing: The total tax revenue generated at the state and the local level annually will pay off that 

budget requirement in 15 years and will have created an additional 

job that is worth about $29,000. 

What we also found out was that of those 26 loans, nine of them 

actually created no new jobs. That is a significant finding. This is 

a tool that allows us to determine whether or not it is a good investment. We are able to find out, for example, that our investments in hospitals create jobs with about $45,000 annual salaries. 

You can repay the budget authority off in about 21⁄2 or 3 years. 

This varies by category of investment. 

This is a tool that, in the long term, will offer a lot of potential. 

It will enable us to provide you with the kind of information necessary for you to make better decisions as you write statutes and 

decide what you are interested in funding. And I think, as an Administration, we can likewise do the same. 

I am sorry for the lengthy answer, but it was a bit involved. 

Mr. HAYES. Mr. Morris, quickly, how do you assess the effectiveness of the programs operated by your office in helping rural areas 

meet challenges associated with providing health care? 

Mr. MORRIS. Yes, Mr. Hayes, we have moved in HRSA towards 

developing quality indicators for all of our programs, some of which 

are common across programs, whether it is Maternal and Child 

Health or Community health centers or even grant programs in our 

office. 

What we are trying to do with that is be able to measure where 

our dollars have actually resulted in an improvement in terms of 

various conditions, whether it is diabetes, cardiovascular health, 

things such as that. And what we hope to do is wrap that in an 

overall agency performance assessment that will enable us to see 

what is working and what is not. And that can factor into how we 

write our guidance for our grants in the coming year, stressing continuous quality improvement as we can. 

Mr. HAYES. Thank you, sir. 

Mr. Chairman, I yield back. 

The CHAIRMAN. Thank you very much. 

Mr. Salazar. 

Mr. SALAZAR. Thank you, Mr. Chairman. 

And thank you Under Secretary Dorr and Mr. Morris for being 

here with us today. 

As you know, I represent the western and southern part of Colorado, one of the largest districts in the country, very sparsely populated, and we have great disparities in how we are able to afford 

health care to many of our constituents. The biggest problem that 

we have is retaining doctors in rural communities. 

But let me just ask you a question about what some of the health 

care administrators have told us. They say that financing buildings 

through the Community Facilities Program requires more red tape 

than it does through financing it through other institutions. Have 

20

you looked at ways to cut down and to make things—simplify the 

procedures, Mr. Dorr? 

Mr. DORR. I believe we have. We are doing so on a continuing 

basis. 

We are cognizant of the limitations in many of these rural areas 

in terms of the expertise to deal with these programs. We are attempting vigorously to cross-train our field staffs so they are more 

capable of working with the customers at their locations to figure 

out how to submit applications, and to ascertainment whether or 

not these sorts of applications really will work. 

I just talked about SEBAS. If we are able to ultimately implement that system it should begin to quantify the kinds of services 

we provide in the context of what really makes sense for those 

areas. 

For example, we know from our colleagues’ databases is that no 

one should be more than 35 minutes—I believe is the number—

from an emergency trauma center in the event of an accident. 

There are a number of those sorts of measures that we are trying 

to incorporate into how we analyze applications, how we provide 

guidance and assistance and, more importantly, how we begin to 

leverage our loan guarantee programs with outside lenders. And it 

is going to take time, but we are making progress, and a number 

of these performance indicators will make it less complicated to get 

where we need to get. 

Mr. SALAZAR. Thank you. 

And, Mr. Morris, like I said before, one of the biggest problems 

that we have in our community is trying to retain doctors in rural 

areas. Do you have any ideas as to how we might enhance programs to solicit doctors to come and stay in rural communities? 

Mr. MORRIS. Yes, sir, Mr. Salazar. 

Well, I think that over the years one of the most successful programs we have had has been National Service Corps both through 

its scholarships and its loans. And we find that now we are leaning 

more towards the loan repayment as an effective tool. 

We place these folks based on where they score in terms of a 

Health Professional Shortage Area score. And so, that way we 

make sure they are going to the area of greatest need. 

So, what we found is that more than 50 percent of them go to 

rural areas. We are seeing a great need in rural areas, and so the 

National Service Corps has committed a lot of resources to that 

also. 

Two other things we have done to try to help is we support the 

Rural Recruitment and Retention Network. This is 45 states working together, usually with a state point of contact who does recruitment and retention for the state. And over the last 4 years the 

3RNet, as we call it, has placed 2,900 clinicians in rural areas; and 

that is mostly physicians, but some dentists, physician assistants, 

and nurses. They do about roughly 4,000 a year. 

They do a lot of site development where they do a lot of work 

ahead of time trying to make sure that the community is the right 

fit for the clinician. 

I think ‘‘grow your own’’ programs tend to be very popular, where 

you identify somebody who enjoys the rural lifestyle, who appreVerDate 0ct 09 2002 10:40 Nov 03, 2009 Jkt 041481 PO 00000 Frm 00024 Fmt 6633 Sfmt 6601 I:\DOCS\110-42\51222.TXT AGR1 PsN: BRIAN
21

ciates it, and is more likely to stay. And that is the sort of retention issue that I think is important. 

To help support this, we have also asked each of our State Offices of Rural Health—there are 50, one in each of the 50 states—

to identify a point of contact for rural recruitment and retention 

issues so that there will be one person they can call in each state 

to do this. And I will say that in your State of Colorado we have 

one of our strongest State Offices of Rural Health; they have really 

done a great job with the resources they have over the years of recruitment and retention, sir. 

Mr. SALAZAR. Thank you. 

And could you, Mr. Morris, give me a list of the different programs, retention programs that you have? If you would provide my 

staff with that, I would certainly appreciate that very much. 

Mr. MORRIS. I would be happy to do that for the record. 

Mr. SALAZAR. Thank you, Mr. Chairman. I yield back. 

The CHAIRMAN. Thank you very much. 

Mr. Costa. 

Mr. COSTA. Thank you very much. 

Mr. Morris, we are all obviously concerned about the new rulemaking that is coming out and its definitions and impact on our 

rural areas throughout the country. In my district, I have some significant health challenges. It is a rural area, but we have urban 

populations nearby, like Fresno—and Hanford is now over 50,000—

and Bakersfield. Yet we are three of the number one ag counties 

in the nation, based on gross receipts, have large populations of uninsured or underinsured; and health clinics are obviously very important. 

Critical access to hospitals through health care is also overused, 

i.e., emergency rooms. And so I understand funding is limited, but 

in your regulation process, I believe we are going to exclude more 

and more of these rural health facilities. 

Here is my question: Under your rules to address capacity, does 

the capacity to handle the patient caseload which, in my district, 

I have 14 facilities that may lose their rural designation because 

of your rulemaking. If they close, clearly the caseload is going to 

enlarge the responsibility of other facilities for these rural patients. 

Again, many of them are uninsured or underinsured. So the primary care facilities sometimes do exist within 25 miles under your 

rulemaking, but that doesn’t mean they are easy to access. These 

are working poor people that at $4+ for a gallon of gasoline, it is 

very difficult. 

So what does this mean? I mean, this does a disservice not only 

to the clinics, but it further impacts the hospitals. Do you have a 

response? 

Mr. MORRIS. Yes, sir, Mr. Costa. 

Are you referring to the recently published proposed rule on 

Health Professional Shortage Area Designation? 

Mr. COSTA. Right. Right. 

Mr. MORRIS. The comment period just closed on that, and we are 

in the process of looking through all the comments to decide what 

our next steps are. 

22

I would be happy to get back to you for the record, or have our 

legislative staff follow up about what we think our next steps are 

going to be. I don’t know myself. 

Mr. COSTA. The irony, of course, all politics is local in part. But 

in Kings County I have a community with right around 50,000, another community that is 15 miles away, 10 miles away, with 30,000 

people. For the purpose of qualifying under Federal formulae, they 

have combined their geographical formula population, which now 

no longer makes them, by definition, rural. CMS is really complicating and making it more difficult to provide access. How about the issue of areas where they are principally served by farm workers? Do these Rural Health Programs 

that provide the access, are there other programs based on patients 

served that would be made available, not just the location of the 

facility? And do you provide waivers for these centers? 

Mr. MORRIS. I think for migrant farm workers—the program that 

has been the most effective over the years has been the Migrant 

Health Center Program, because they built on a track record and 

have served those folks. That is not determined by either rural or 

urban status. It is defined mostly by where the population is. 

I think the set of Migrant Health Centers are best equipped to 

do that. 

And with the President’s expansion, we put Community Health 

Centers, 1,200 new sites, in places they hadn’t been before. So that 

safety net of Community Health Centers is much broader than it 

used to be. 

And can I ask one question about the definition of rural that you 

raised? 

Mr. COSTA. Right.

Mr. MORRIS. For our programs in the Office of Rural Health Policy, we try to use a broader definition of rural that we developed 

in partnership with USDA. So we look at nonmetro counties, but 

then we also look at the metro counties, which are the areas you 

are referring to, and we identify the rural Census tracts within 

those, so they are eligible for our grants. 

Mr. COSTA. So if 51 percent of the patients come from a nonurban area, would they qualify? Is a waiver possible? Can the number be lowered to 25 percent? 

Mr. MORRIS. I think that is referring to a regulation of the Community Health Center Program. I will have to get back to you for 

the record. 

Mr. COSTA. It is. And in terms of timeline, I have been told it 

is different than what you just told us—my time is almost up—that 

the new rule was proposed 2 weeks ago, but August 26th is the 

deadline for the first comment period, and CMS has 90 days to respond to the comments. 

And if the clinic can’t meet the requirements, they can’t get an 

exemption. And it can be decertified in 180 days. 

Mr. MORRIS. Okay. 

Mr. COSTA. I mean, I am told that this could impact, in California, 14 sites—or I mean eight areas in California by this new 

rule. 

Mr. MORRIS. There are several regulations pending right now, 

and a lot of them focus on the same populations as the Rural 

23

Health Clinic regulation that is out for comment right now, which 

has a process in it in which clinics may be decertified if they are 

no longer in a rural area, or if they are not in an updated shortage 

area. 

And then there was the Health Professional Shortage Area redefinition that just closed. 

I think we can follow up with you and get some clarification on 

all those issues. 

Mr. COSTA. I would appreciate that. My time has expired. 

Mr. Chairman, I want to thank you for holding this very important and timely hearing for our rural areas throughout the country. 

And I would like to add whatever support to you and the Subcommittee, if you want to put together a letter in terms of questioning this whole rulemaking process, because, if the impacts can 

happen in rural California, they happen all over rural America, 

and this health care for the under- and uninsured is critical. 

The CHAIRMAN. Absolutely. Thank you. Thank you Mr. Costa, for 

joining us today. And thank you for your kind words. 

Mr. Barrow. 

Mr. BARROW. Thank you, Mr. Chairman. I want to talk Critical 

Access Hospital funding for a minute. 

This is something I learned about in two different ways. One is 

a result of my serving on both this Committee and the Energy and 

Commerce Committee, which has jurisdiction over HHS for some 

purposes. And also I learned about it on my last rural hospital listening tour last year. 

Critical Access Hospitals, as best I understand it, we basically 

make a deal with rural hospitals. We say, ‘‘Look, you give up your 

dream, your ambition, your struggle to try and be a full-service 

hospital, we will make you, in a feeder system, sort of a primary 

clinic for a larger hospital to be designated elsewhere, and we will 

reimburse you on a completely different rate. 

Since most of your patients are Medicare patients, we will reimburse you on something different than your traditional Medicare. 

We will do sort of a cost-plus type basis, kind of keep you afloat. 

You lower your mission, you lower your sights to be something different than what you have been in the past, and we will reimburse 

you on a basis to make it possible for you all to keep on doing it.’’ 

That is the deal in a nutshell. 

I found out last year that CMS is telling Medicare C—is telling 

hospitals, Critical Access Hospitals that have accepted this deal 

that their Medicare C patients aren’t Medicare patients for purposes of this reimbursement formula agreement that has been in 

place from the very get-go. Of course we hadn’t had any Medicare 

C patients to speak of until Medicare D came along. 

And then, all of a sudden, when folks had to go to Medicare D 

to get the drugs they couldn’t get anyplace else, they were bamboozled, hornswoggled, pushed, shoved, or tricked into buying 

Medicare C coverage. So all of a sudden you have a whole bunch 

of people showing up at hospitals, and they have Medicare C coverage, when they have always had traditional, and they didn’t even 

know they were buying C. 

Nobody in their right mind would buy a C policy in exchange for 

Medicare A and B, but that is where we are finding increasing perVerDate 0ct 09 2002 10:40 Nov 03, 2009 Jkt 041481 PO 00000 Frm 00027 Fmt 6633 Sfmt 6601 I:\DOCS\110-42\51222.TXT AGR1 PsN: BRIAN
24

centages of our rural constituents who have bought into it without 

realizing it. 

Now they show up at the Critical Access Hospitals, and the Critical Access Hospitals are saying, ‘‘Wait a minute, this person isn’t 

a Medicare A, not a Medicare B, they are Medicare C. So we don’t 

reimburse you for these folks at cost-plus basis; we treat them as 

if they aren’t a part of the system at all.’’

I can’t think of anything more stupid. Under Medicare A and B, 

the government is paying an insurance company to administer and 

manage the government’s risk. Under Medicare C, we are using tax 

dollars to pay an insurance company to assume the government’s 

risk. In both cases, the government is paying for both of them out 

of Medicare funds; the taxpayer is footing the bill either way. But 

the administrations at these hospitals are being told, ‘‘Wait a 

minute, you folks, an increasing percentage of these folks simply 

aren’t covered by the original deal.’’

Now my question to you all is in three parts. Are you aware of 

this? If not, why not? If so, what are you doing about it to try and 

persuade your counterparts at CMS that what they are doing is, 

they are killing rural hospitals while Medicare C is eating people 

alive with this bait-and-switch deal we have going on, on a massive 

scale. 

I will let either one or both of you gentlemen try your hand at 

answering these questions. Are you aware of it? If not, why not? 

And if so, what are you doing about it? 

Mr. MORRIS. Mr. Barrow, I am not aware of the full extent of 

that, but I do know that Part C plans are paid differently than 

Part A and B. But we meet quarterly with CMS and go over there 

and talk to them about rural health issues. 

And I will definitely take your concerns back. 

Mr. BARROW. Will you commit to me that you will undertake to 

advocate with these folks that as far as the hospitals are concerned, their Medicare C patients should be treated exactly the 

same for reimbursement purposes as Medicare A and B patients 

should be? After all, the same taxpayers are footing the same bill. 

How about you, Mr. Dorr? Are you aware of this? Can you shed 

some light on this? 

Mr. DORR. I can offer no insight. 

Mr. BARROW. Will you undertake to advocate that so far as the 

hospitals are concerned, Medicare C folks should be treated exactly 

the same way as Medicare A and B folks? 

The hospitals aren’t selling the policies, the constituents are exactly the same, and the person who is underwriting the cost of this 

government financed benefit is precisely the same. 

Do you see the sense of this? 

Mr. DORR. I will do what I can to look into the issue and get information back to you. But I am not familiar with this issue. 

Mr. BARROW. Then I would ask you, please, to become familiar 

with it, and let’s see what we can do to fix it. 

Thank you very much. I yield the balance of my time. 

The CHAIRMAN. Thank you. 

Along those lines, normal Committee rules would be to ask for 

your response to come within 10 calendar days. Can you gentlemen 

25

comply with that, as per Mr. Barrow’s request? I would like an answer. 

Mr. DORR. Certainly. 

Mr. MORRIS. Yes, sir. 

Mr. DORR. We will certainly try. 

The CHAIRMAN. Okay. All right. Thank you. 

Thank you, Mr. Barrow. Mr. Smith has consented. 

Mr. Pomeroy, you may proceed. 

Mr. POMEROY. Thank you, Mr. Chairman. I have a statement I 

would like to add to the record. 

The CHAIRMAN. Your statement will be allowed. We announced 

earlier, any statements you would like to enter we will be glad to 

receive. 

Mr. POMEROY. Thank you very much. 

The CHAIRMAN. Yes, sir. 

Mr. POMEROY. I want to thank you for having this hearing, Mr. 

Chairman. Like the hearing you had on hunger last week, I think 

that you are showing the kind of leadership that is fleshing out the 

real potential of this Subcommittee. As a Member of the Subcommittee, I appreciate it. 

The CHAIRMAN. Thank you. 

Mr. POMEROY. To attest to this statement, I have a letter that 

we sent to the Appropriations Committee regarding the funding of 

a number of programs that were discontinued in the President’s 

budget, specifically the funding of Rural Hospital Flexibility 

Grants, Rural Health Outreach and Network Development Grants, 

and the Office for the Advancement of Telehealth. Basically, these 

and other programs mentioned in the attached letter that I will 

add to the record reflect investments in rural health infrastructure. 

[The document referred to is located on p. 6.] 

Mr. POMEROY. Mr. Morris, you are pretty new on the job, as I 

understand it; is that correct? 

Mr. MORRIS. I am sorry? 

Mr. POMEROY. How long have you been in your position at CMS? 

Mr. MORRIS. I have been with the government for 12 years, the 

Office of Rural Health Policy for 10 of those, and in this job officially as of Monday. 

Mr. POMEROY. Well, in fact, some of your prior experience at one 

point was as an intern with Senator Kent Conrad of North Dakota; 

is that correct? 

Mr. MORRIS. Yes, sir. 

Mr. POMEROY. Great. Anyone with an internship in one of the 

North Dakota offices has a good grounding for a start. I will not, 

therefore, hold you in any way responsible for the cuts that we are 

trying to restore. 

But it does seem to me important, especially in light of some of 

the funding issues that you are talking about—grant funding for a 

hospital improvement project here, grant funding for something 

there—that this is part of some kind of plan, there is some strategic evaluation of rural infrastructure that is funded and advanced as part of these investments that we are making. And I 

would like you to reflect on how that takes place through CMS in 

a rural outreach area like North Dakota. 

Mr. MORRIS. Thank you, Mr. Pomeroy. 

26

I think that one of our primary focuses right now is on the quality side, especially as it relates to rural hospitals, because of the 

move towards public reporting, which is the right thing to do for 

folks. But the challenge is that rural hospitals sometimes have less 

staff, and therefore, developing the capacity to actually publicly report to show how they are doing it can be a bit of a challenge. 

We have been working with CMS extensively to try to make sure 

that the measures that are in place, are reflective of the types of 

services that are delivered in rural hospitals. And some of the data 

we have seen so far shows that, like for pneumonia cases in Critical Access Hospitals, they do as well or better than their urban 

and suburban counterparts. Other cases, where they transfer out, 

is probably not as appropriate a measure for them. 

As we expand public reporting to the outpatient side and we add 

things like transfer, we are going to have a much fuller picture of 

how rural hospitals perform from a quality standpoint. I think that 

dovetails nicely with what the Institute of Medicine has been pushing folks since the release of their report, To Err Is Human. That 

has been one of the primary areas we have been focusing on as of 

late. 

Mr. POMEROY. I look forward to continuing to work with you, 

now in your new position, on this whole HRSA grant rural health 

infrastructure issue. I think it is critically important to strategically advancing the system in a rational way. I appreciate what 

you have told me about quality reporting. 

Mr. MORRIS. Yes. 

Mr. POMEROY. Mr. Secretary, nice to see you again. I want to ask 

you about, in my opinion, a very curious decision made by the Administration in the funding of its human nutrition labs under ARS. 

You have recommended the closure of the only rural nutrition lab 

focused on obesity research, and that would be the human nutrition lab in Grand Forks, North Dakota. 

Now, I like the ARS folks. I have worked hard to support their 

budget to the fullest extent that I can. I think they made a really 

bad judgment call in trying to take down capacity for what has become a national epidemic and, arguably, a national epidemic particularly problematic in rural areas with Native populations, like 

the areas served by the human nutrition lab in Grand Forks. 

Do you have any response to that? 

Mr. DORR. I really don’t. It is not in my area. I was not involved 

in that decision. And I will certainly share your concerns with 

those who are. I suspect they have already heard them, but I will 

reiterate that they have come up again. 

And aside from that, I don’t really think I can offer any insight 

into that decision. 

Mr. POMEROY. I saw the Secretary at lunch today, and like Mr. 

Morris, the Secretary had an early, very positive grounding as a 

North Dakotan for his responsibilities. 

Mr. DORR. I am well aware of that on a daily basis. 

Mr. POMEROY. I know my time has elapsed. 

Do you attempt to break down the stovepiping that occurs? You 

know, we ask him to do some stuff on rural; and you, rural; and 

other people, rural. How do you try and coordinate all this? 

27

Mr. DORR. I would just simply say on behalf of our organization 

that we have made a very definitive attempt to break down stovepipes. 

As I indicated in my early testimony, perhaps my oral statement 

before you were here, we have worked together to develop a prototype on Critical Access Care Hospitals in order to minimize costs 

and duplication and increase efficiencies and, yet, enhance the ability to have flexible space and flexible use of these facilities. 

There are a number of other areas as well. We are working with 

the Indian Health Services and the Veterans Administration. 

I would be the last to suggest that we are doing everything perfectly in that area, but it is an area that we need to aggressively 

pursue. And I have encouraged our shop to do so in any one of a 

number of areas, including this. 

Mr. POMEROY. Good. 

Thank you, Mr. Chairman. I yield back. 

The CHAIRMAN. Sure. Thank you, Mr. Pomeroy. 

Mr. Smith? 

Mr. SMITH. Thank you, Mr. Chairman. 

My question—well, first let me say, Mr. Dorr, that I appreciate 

the communication with my district. And your representative, Mr. 

Blehm, in Nebraska does a fabulous job. 

Mr. Morris, I do have a question pertaining to policy. It is interesting, the feedback that I hear from, say, a rural physician versus

an urban physician as it relates to midlevel practitioners, advanced 

practice nursing, and otherwise. There seems to be a little more 

open-mindedness in rural areas, and that a physician sees a physician assistant as an enhancement to the practice rather than a 

threat; and I find it quite refreshing, actually. 

But could you elaborate perhaps on any policies that you think—

Federal policies that could be enhanced or changed to offer better 

health care, perhaps—meaning access through maybe some expanded scopes of practice? 

Mr. MORRIS. Thank you, Mr. Smith. 

I think that one reason for that open-mindedness stems from one 

of the longest-standing rural programs that has been on the books, 

and that is the Rural Health Clinic Act, which was established in 

1977. And for 20 years it was the only way that physician assistants and nurse practitioners could practice in almost an autonomous way. It wasn’t until 1997 that, under Medicare, they were 

given the right to bill directly. 

And so, as a result, there are 3,400 rural health clinics around 

the country—that infrastructure has shown that these folks can 

play a very important role in being a source of primary care in 

rural communities. I think the RHC program is really to be saluted 

for that. 

I have no comment on the state scopes of practice. That is an 

issue that is determined at the state level. But, what we have seen 

in the literature and other things is that you can get primary care 

from a nurse practitioner or a PA, as well as a physician; and it 

can be good, high-quality care. 

Mr. SMITH. Okay. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. 

28

Mr. Cuellar. 

Mr. CUELLAR. Thank you, Mr. Chairman. 

First of all, I appreciate what you all are doing to provide health 

care in the rural areas. One of the questions I have is, I wish we 

could find a place where we could look at all the different programs. Because I know, for example, Mr. Secretary, you all have 

a list of programs; and I appreciate that. 

And same thing for HHS, Mr. Morris. 

But is there a way that you could have them coordinated, where 

we could look at the list? Is there a way that you have all done 

that together already that we could, say, for this type of category 

from both the agencies, we have this available? Or even from the 

working group, if you have the other agencies, could you put that 

together? 

And I would like to get a copy so that way we are not going to 

find everything under USDA, find everything under HHS and the 

other members of your working group. How fast—or do you have 

that already? How fast could you get that over to us? 

Mr. MORRIS. I think we have a good start on it. And it is through 

the Rural Assistance Center (RAC) which is in North Dakota. And 

this was created just over 5 years ago with the express intent of 

being one-stop shopping for all things rural. 

And so, you can go to that. There is a reference librarian. You 

can call up. They will do information searches for you. They try to 

share information across the Federal Government about funding 

opportunities for rural, not just within the Federal Government, 

but at foundation level, things like that. And so we found that the 

RAC is a good way do that. 

But one thing we could do is make sure that USDA is aware of 

it, and that we have all their programs, and that we are reflective 

fully of their rural investment, too. We can commit to doing that. 

Mr. CUELLAR. Okay. 

So how fast could you—both of you all get that over to us? 

Mr. MORRIS. I can send you information on the RAC within a day 

or 2. And we will have some conversations about getting them to 

take a look at the RAC website and make sure it is representative 

of what their programs do. 

Mr. CUELLAR. Yes. Because I am a big believer, Mr. Secretary, 

in a one-stop center. And if we have a hard time looking for it, you 

can imagine the person in a rural area trying to find that. 

So if you all can put it into plain English and simplify it for us, 

this would be a great tool to provide to the rural areas. So, Mr. Secretary, if you all could get together on that. 

Mr. DORR. You are speaking to the choir. And I can assure you 

that I will have our staff work with these folks to make sure that 

there are appropriate links made as quickly as we can make them. 

And we will get that feedback to you. 

Mr. CUELLAR. Who would be one contact person we could have? 

Linda or—I am sorry, could we have—because we have different 

agencies, I want to make sure that if somebody contacts me, both 

of you haven’t talked already. 

Mr. DORR. Certainly. I just suggest you call my office, and we 

will make sure we have somebody to contact, to deal with this 

issue, when I get back. I am not sure who it exactly would be 

29

today. I would want to talk to the Administrator, and I am sure 

he will appoint someone within his staff to do it. 

Mr. CUELLAR. Okay. I appreciate it. 

The other point I want to go into is, it was in your testimony, 

about the distance learning and the telemedicine. I am a big believer in that. 

In my areas—I have rural areas in south Texas, I have Colonials. 

As you know, they are basically Third World conditions, and the 

long-distance learning and the telemedicine is a good, effective way 

of using the dollars. 

Could you again, when that individual comes in—Mr. Secretary 

and Mr. Morris—if you could, get us everything that is available 

on long-distance learning and telemedicine to us. Again, not only 

to me, but for the Committee, because I think this would be a great 

tool for our constituent work, which is important to us. 

I have no further questions, Mr. McIntyre. I just want to say 

thank you very much. 

I was with the Secretary Schafer in Colombia on the trade agreement, and I really appreciate it. We had a good visit. And I appreciate the work that you all have been doing. 

Mr. DORR. Well, thank you very much. 

Mr. CUELLAR. Thank you, Mr. Morris. 

The CHAIRMAN. Thank you. And I agree with Mr. Cuellar, if you 

could get us all that information on telemedicine and how that relates to health care in rural areas that would be helpful to us, 

given that that, in essence, is what we are here for today, talking 

about the delivery of rural health care and how we can tie that in, 

especially to our great medical universities and research centers as 

they relate to our particular states. Where the telemedicine would 

best be served in each state in terms of what you all have seen according to your surveys and information, that would be most helpful. 

Let me say, as a native of Robeson County in North Carolina, my 

home county, which is also the largest, but yet the poorest of all 

100 counties in North Carolina, we know how important rural 

health care is. In fact, our county had the first public health department in the entire United States. 

So we invite you to come down sometime, and we would love for 

you to come see the long history, in fact, the longest history of any 

public rural health department in the nation down in my native 

Robeson County. And we hope to have you come join us sometime, 

each of you gentlemen, in the future. 

And with that, I want to thank you for being with us today. We 

will conclude this panel in the interests of time, but may God bless 

you. Thank you for your good work, and please continue it. 

We will ask our next panel to proceed to the table as I introduce 

you. Now the second panel will begin. 

We would like to invite to the table Mr. Jeff Spade, Vice President of the North Carolina Hospital Association, and also Executive 

Director of the North Carolina Rural Health Center in Cary, North 

Carolina, which is in the Research Triangle Park area; Mr. Charles 

W. Fluharty, President Emeritus and Director of Policy Programs 

of the Rural Policy Research Institute; Dr. Wayne Myers, Trustee 

for the Maine Health Access Foundation, on behalf of the National 

30

Rural Health Association; and Dr. Karen Rheuban, Professor of Pediatrics and Medical Director for the Office of Telemedicine with 

the University of Virginia Health System. 

If would you each take your seat, we will proceed immediately 

with testimony. 

While we are welcoming you to the table, I would also like to recognize—we are thrilled to have the Ranking Member of the entire 

Committee on Agriculture for the U.S. House, whose portrait is 

right behind you, but look in front of you and the man is really 

here, Bob Goodlatte, a great friend, former Chairman of the full 

Committee. 

And, Mr. Goodlatte, prior to starting this panel if you have any 

statement for the record we would welcome it. 

OPENING STATEMENT OF HON. BOB GOODLATTE, A 

REPRESENTATIVE IN CONGRESS FROM VIRGINIA 

Mr. GOODLATTE. Thank you, Mr. Chairman. I really appreciate 

your holding this hearing, and I am looking forward to hearing 

what all of our panelists have to say. 

But I particularly want to welcome Dr. Karen Rheuban, who is 

a good friend and has been a great help to me and my constituents 

by helping to spread telemedicine to some of the most remote 

places and some of the most unlikely places, to help people in all 

different walks of life receive excellent health care and excellent 

advice from one of the finest university hospitals in the country, 

the University of Virginia. 

So, Dr. Rheuban, welcome; and to all the panelists welcome. I am 

always interested in opportunities to mix my two great loves, technology and agriculture. So that is what we are doing here today. 

The CHAIRMAN. Amen. Thank you, sir. And thank you again for 

being with us. 

All right. I am pleased to introduce our first presenter starting 

off with the panel, from Cary, North Carolina, which is just outside 

of Raleigh. Jeff Spade is the Executive Director of the North Carolina Rural Health Center, a resource center supported by the North 

Carolina Hospital Association, whose mission is to provide and assist rural health providers in addressing local and regional health 

needs, and to foster innovation and improvements in rural health 

care delivery. 

Mr. Spade, please begin. 

STATEMENT OF JEFF SPADE, EXECUTIVE DIRECTOR, NORTH 

CAROLINA RURAL HEALTH CENTER; VICE PRESIDENT, 

NORTH CAROLINA HOSPITAL ASSOCIATION, CARY, NC 

Mr. SPADE. Thank you, Chairman McIntyre and distinguished 

Members of this panel, Subcommittee in the House of Representatives. I am honored to be able to address you today. I appreciate 

the opportunity. 

And especially Chairman McIntyre and Representative Hayes, 

who was here earlier, I am grateful for the work that you do on 

behalf of rural hospitals and North Carolina hospitals. Both of you 

have been very supportive. 

And I really extend my gratitude to the Members of the Subcommittee for their vigorous support of rural health development. 

31

I am the Executive Director of the Rural Health Center, as the 

Chairman mentioned, which is a resource in technical assistance 

there for rural hospitals, rural health organizations, communities 

in North Carolina. I am based at the Hospital Association in North 

Carolina, but I work at the front line of rural communities every 

day to help rural hospitals, rural health organizations and rural 

health leaders in addressing the needs of their residents. 

As a matter of fact, I also have done some work on the Institute 

for Health Care Improvement campaign to improve care for five 

million lives. And, in that capacity, I have worked with hospitals 

in Colorado, Texas, Nebraska and Georgia as well. So, other members of this panel, I have been in your states and worked with the 

Critical Access Hospitals and rural hospitals there. 

I am most familiar with rural hospitals in health care in North 

Carolina. And my opening statement today will briefly describe key 

traits of rural North Carolina hospitals, explore these critical aspects of rural hospitals in relation to the communities they serve, 

and identify the issues and concepts that are vital to the development of rural hospitals. 

I have three priority improvements, requests of this Subcommittee and of Congress. First, I would like you to consider reconstituting the rural infrastructure grants and loans that were 

considered and introduced in the earlier versions of the farm bill. 

Second, we definitely need to improve Medicare and Medicaid policies and payment structures to support and accelerate the continuing development of hospital and health care services in rural 

communities. And, third, provide more incentives for Federal rural 

health programs to emphasize and promote alignment and collaboration amongst rural health care organization providers. Very similar to the alignment you are talking about at the Federal level, this 

needs to happen at the community level too. 

In North Carolina, we have 61 rural counties served by 60 rural 

hospitals. We have 21 Critical Access Hospitals. I have had the opportunity to bring all of those 21 Critical Access Hospitals into existence. About 1⁄3 of our rural hospitals are Critical Access Hospitals, but in the country, more than half, almost 60 percent, of 

rural hospitals are Critical Access Hospitals. This is a very high 

number. 

In North Carolina, rural hospitals cared for 243,000 inpatients, 

four million outpatients, 1.25 million emergency patients, 137,000 

patients that receive outpatient surgery. So there is no doubt about 

the numbers for rural health care—millions of visits for urgent and 

emergent care and health care for hundreds of thousands of hospitalized and surgical patients. And in North Carolina, of our 61 

rural counties, that is 2.8 million residents, a third of our total population. There are over 400,000 Medicare beneficiaries and 600,000 

Medicaid beneficiaries residing in North Carolina. 

A crucial aspect of rural hospitals is the role as catalyst for development of local access points for health care. Both primary and 

specialty physicians are very dependent upon our hospitals. And in 

North Carolina, 3,700 physicians practice in rural North Carolina. 

Many of these physicians’ practices would not even be viable without the ability to diagnose, treat and care for patients at their local 

hospital. 

32

But I do really want to focus on fiscal integrity and viability for 

our rural hospitals. They are highly dependent on Medicare and 

Medicaid reimbursement for sources of revenue, which counts for 

63 percent of our hospital revenues in rural areas. This dependence 

presents very serious difficulties because government payers only 

reimburse hospitals at the financial break-even point or less. 

And our rural hospitals also have an uninsured burden. In our 

case it is about nine percent. So you add that together, and the average rural North Carolina hospital receives two percent or more 

less in revenues than it costs to provide care for its patients. 

The North Carolina Hospital Association has extensively studied 

the issue of financial viability and learned that the most financially 

vulnerable hospitals are those with the highest rates of Medicare, 

Medicaid and uninsured utilization. And in our case, 55 percent of 

our rural hospitals fall into this most vulnerable category simply 

because of serving government patients and the uninsured, while 

only 12 percent of our urban hospitals are similarly burdened. 

But do not forget that we have this great economic catalyst in our communities in rural hospitals: $4.2 billion in economic output 

in North Carolina from rural hospitals, $1.8 billion in salaries and 

benefits, and employment of 42,200 rural hospital employees. In 75 

percent of our rural counties, the hospital is amongst the top five 

largest employers in the county. 

In summary, the major challenges facing rural hospitals are substantial: financial instability, ability to access critical investment 

for capital, increasing burden of chronic disease, and a rising number of uninsured. And we also need to continually improve the 

quality, efficiency and performance of our rural hospitals and 

health care organizations. 

I can speak more to these issues as we move into our discussion. 

I appreciate this opportunity to address this Subcommittee. And I 

look forward to working with you further, as you look at how to increase the viability of rural health care across the United States. 

Thank you very much, Chairman McIntyre, Members of the 

House of Representatives. 

[The prepared statement of Mr. Spade follows:]

PREPARED STATEMENT OF JEFF SPADE, EXECUTIVE DIRECTOR, NORTH CAROLINA

RURAL HEALTH CENTER; VICE PRESIDENT, NORTH CAROLINA HOSPITAL

ASSOCIATION, CARY, NC 

Chairman McIntrye and distinguished Members of the House of Representatives, 

I am honored and privileged to be invited to address you today. Representative 

McIntyre and Representative Hayes, I am especially grateful and appreciative of 

your active support for rural healthcare and rural hospitals in North Carolina. Your 

votes in support of the recent legislation to correct and improve the Medicare reimbursement for physicians, along with your continued and patient guidance to establish a moratorium on CMS regulations regarding certified public expenditures in the 

Medicaid program are immensely valuable to the physicians, hospitals and residents 

of North Carolina. I also extend my gratitude to the Members of this Subcommittee 

for your vigorous support of rural health development. In my 25 years of experience 

as a healthcare executive, the House of Representatives has acted as a unified, bipartisan leader in establishing congressional priorities for rural healthcare improvements, significant healthcare legislation and Federal budget investments in 

healthcare. Please be encouraged to continue the tradition of supporting accessibility, affordability and excellence in healthcare for our rural residents and communities. 

I am Jeff Spade, the Executive Director of the North Carolina Rural Health Center, a resource and technical assistance center for rural hospitals, healthcare organiVerDate 0ct 09 2002 10:40 Nov 03, 2009 Jkt 041481 PO 00000 Frm 00036 Fmt 6633 Sfmt 6621 I:\DOCS\110-42\51222.TXT AGR1 PsN: BRIAN
33

zations and communities, based at the North Carolina Hospital Association, located 

in Raleigh, North Carolina. In addition to directing the NC Rural Health Center, 

I am a Vice President with the North Carolina Hospital Association, Chairperson 

of the Governor’s Task Force for Healthy Carolinians for the State of North Carolina 

and faculty with the Institute for Healthcare Improvement based in Boston, MA. I 

work closely with the Institute for Healthcare Improvement to engage more than 

1500 rural hospitals across the nation in the 5 Million Lives Campaign, an initiative 

to improve hospital quality and patient safety. 

Since I am most familiar with rural hospitals and healthcare in North Carolina, 

my testimony today will briefly describe the key traits of rural North Carolina hospitals, explore the most critical aspects of rural hospitals in relation to the communities they serve, and identify the issues and concepts that are vital to the development of rural hospitals and healthcare in North Carolina. 

I have three priority improvements to request of this Subcommittee and Congress. 

First, restore the rural infrastructure grants that were considered and submitted in 

the early versions of the FY 2008/09 Farm Bill. Second, improve Medicare and Medicaid policies and payment structures to support the continued development of hospital and healthcare services in rural communities. And third, push for Federal 

rural health programs to emphasize and drive greater alignment and collaboration 

among rural health care organizations and providers. 

North Carolina’s rural healthcare system was initially organized around the concept of a hospital serving its home county. Passage of the Hospital Survey and Construction Act of 1946, better known as the Hill-Burton Act, began a proliferation of 

hospital construction in the poor, rural communities of America, places where no 

hospital or healthcare would have been possible before. As a consequence many 

rural communities throughout the country built their own local hospital. For North 

Carolina, community hospitals were founded in 72 of the state’s 100 counties, thus 

establishing the leadership role that rural hospitals fulfill within their communities, 

even today. 

North Carolina’s 61 rural counties, as defined by the Office of Management and 

Budget, are served by nearly sixty rural hospitals. Rural hospitals are usually 

smaller than the average North Carolina hospital, with rural hospitals caring for 

an average daily census of 51 acute care patients in 2007 versus an average of 119 

acute patients for all North Carolina hospitals. In 2007, North Carolina rural hospitals cared for 243,383 inpatients, approximately 4.07 million outpatients, an estimated 1.25 million emergency patients and 136,954 patients that received outpatient surgery (see Table 1). The numbers speak for themselves—millions of visits 

for urgent and emergent care and hundreds of thousands of hospitalized patients. 

North Carolina’s rural residents depend heavily upon their local hospitals for valuable, timely and necessary inpatient, outpatient, surgical and emergency care services. 

The demographics of rural North Carolina are similar to many rural states. The 

population of North Carolina’s 61 rural counties is estimated at 2.8 million residents, nearly a third of North Carolina’s total population of 8.8 million. It is estimated that more than 412,000 Medicare beneficiaries and 627,000 Medicaid recipients reside in rural North Carolina, respectively accounting for 15% and 23% of the 

rural population. The challenges facing North Carolina’s rural counties are proportional, that is North Carolina’s rural population has higher s proportions or percentages, when compared to the state averages, of elderly, low income residents and 

those in poverty, minority residents, immigrants and uninsured residents, as well 

as higher rates of unemployment, chronic disease, health-related mortality, avoidable hospitalizations and the underlying determinants of health, such obesity, poor 

nutritional status, lack of exercise and physical activity and lower rates of educational attainment. In summary, the difficulties of providing healthcare in rural 

North Carolina are multiplied by the challenges of our rural demography. 

North Carolina was blessed to be the home state of an innovator and leader in 

rural healthcare, Jim Bernstein. I was fortunate to be a colleague and prote ́ge ́ of 

Jim’s. In 1975, at a time when very few health leaders understood the merits of 

rural health integration, Jim Bernstein emphasized the importance of integrated 

rural health networks in meeting the needs of rural residents. In 1986 Jim Bernstein brought his concepts into practice in developing the prototype rural hospital 

network in Scotland Neck, North Carolina. In 1990 Jim was able to share his ideas 

regarding rural hospitals and health networks before a Subcommittee of the House 

Ways and Means Committee of the U.S. House of Representatives. As a result, the 

rural hospital network as envisioned and created by Jim Bernstein became the national model for the Small Rural Hospital Flexibility Program, which evolved into 

the Critical Access Hospital (CAH) program. In the early 1990s, Our Community 

34

Hospital in Scotland Neck became one of the first Critical Access Hospitals in the 

country. 

North Carolina’s version of a network, as defined by Jim Bernstein, is a patientfocused system of care consisting of private and public organizations that provide 

an array of medical and social services to the community. A successful rural network should include the local rural hospital, along with its tertiary care referral 

center, in a highly-integrated collaborative supported by community-based organizations such as public health, primary care, dental care, emergency medical services, 

social services, transportation, mental healthcare and long term care. The composition of a rural health network varies by community, but in communities across 

North Carolina rural health networks consistently deliver efficient, effective and coordinated quality health services to rural North Carolina residents. 

Jim Bernstein’s innovative design for successful rural hospital and health networks can be summarized in four basic concepts:

• To build community systems of care that assure access to healthcare services 

focused on meeting the health needs of rural residents.

• To provide the planning, implementation and operational support required by 

rural hospital networks to achieve higher levels of integration while continuing 

to meet patient needs.

• To integrate national and local initiatives that complement state priorities and 

programs in order to improve the access, quality and cost-effectiveness of patient care for Medicaid, low-income and uninsured patients.

• To focus on patients, not the provider, as the key integral in rural health network development.

The vision that Jim Bernstein established and fostered for rural hospitals and 

networks in the early 1970s is even more important today—a model that has gained 

wide acceptance nationally. 

What are the critical aspects of rural hospitals in relation to the communities they 

serve? First, rural hospitals are central to the healthcare and social service networks that under gird every rural county and community. The healthcare ‘‘quilt’’ of 

a rural community is comprised of a broad spectrum of healthcare organizations, 

community agencies and services, government-sponsored health services and providers, and a vast array of human service organizations that provide invaluable 

health related benefits to the residents of rural communities. In North Carolina, 

rural hospitals touch every component of this community support system, from public health departments and Medicaid, to Healthy Carolinians projects, community 

health centers and free clinics. In addition to their healthcare mission, rural hospitals offer to the community knowledgeable health professionals, leadership, badly 

needed resources and space for community activities and organizations, in-kind support and the basis for collaboration and coordination. The rural hospital is an invaluable resource and lifeline that ensures the viability of rural communities and 

their associated healthcare networks. 

Another crucial aspect of rural hospitals is their role as catalysts for the development of local access points for healthcare. Both primary care and specialty care physicians are dependent upon the local hospital for a range of health services, from 

outpatient and emergency care to complex inpatient care. Many rural communities 

would lack access to even basic healthcare services without the support of their 

local, rural hospital. Today, rural hospitals are highly involved in the recruitment 

and retention of critical healthcare providers such as physicians and nurses. More 

than half of North Carolina’s rural counties are designated by the Federal Government as whole or partial healthcare professional shortage areas (HPSA). Since many 

rural North Carolina counties are considered HPSAs, the contribution of rural hospitals as the regional anchor for trained health professionals is paramount. More 

than 3,727 physicians practice in rural North Carolina counties. Many physician 

practices would not be viable without the ability to diagnose, treat and care for patients at a local hospital. Furthermore, over 19,800 registered nurses, 6,192 licensed 

practical nurses and 1,931 pharmacists practice in rural North Carolina. The 

healthcare services provided by these valuable, highly skilled health professionals 

are directly tied to the services anchored by rural hospitals. 

A summary of rural hospital traits and characteristics would not be complete 

without mentioning that fiscal integrity and vulnerability are a constant concern for 

North Carolina’s rural hospitals. As I highlighted earlier, by virtue of their location, 

rural hospitals serve proportionately more elderly, more poor, more uninsured and 

more disadvantaged patients than their urban counterparts. As a consequence, rural 

hospitals are highly dependent upon Medicare and Medicaid reimbursement for 

sources of revenue (63% of rural hospital revenues); some rural North Carolina hosVerDate 0ct 09 2002 10:40 Nov 03, 2009 Jkt 041481 PO 00000 Frm 00038 Fmt 6633 Sfmt 6621 I:\DOCS\110-42\51222.TXT AGR1 PsN: BRIAN
35

pitals depend upon government payers for more than 70% of their revenues. This 

dependence presents serious difficulties because government payers only reimburse 

hospitals at the financial break-even point, or less. In addition, government payment 

sources can be unpredictable due to Federal and state budget constraints, leading 

to budget freezes, or even worse, budget cuts. Rural hospitals also have a substantial uncompensated care burden (8.8% of gross charges in 2007). As a result, in 2007 

the average rural North Carolina hospital received 2.2% less revenue than it actually cost to provide patient care services—a situation that is untenable in the long 

run. The precarious fiscal situation of rural hospitals led to two North Carolina hospitals closing their doors and two other rural hospitals to declare bankruptcy. 

Rural hospital financing of Critical Access Hospitals is worthy of special mention. 

A CAH is a small, rural hospital with 25 acute beds or less. North Carolina has 

21 CAHs, soon to be 22 CAHs, 1⁄3 of North Carolina’s rural hospitals. Nationally 

more than 60% of rural hospitals are officially designated as Critical Access Hospitals. The CAH program is designed to help small, rural hospitals manage the detrimental impact of fixed-payment government reimbursements upon their hospital 

finances. In North Carolina, CAHs are reimbursed their inpatient and outpatient 

costs for providing services to Medicare and Medicaid beneficiaries. The CAH program has had a stabilizing effect on small, rural hospital finances. However, CAH 

reimbursement does not address the fiscal burdens of caring for uninsured patients, 

nor does it provide an adequate level of reimbursement for investments in renovations and upgrades to buildings, capital equipment and medical technology, or to establish new health services. As a consequence, the financial picture for North Carolina’s CAHs has improved but many small, rural hospitals, including CAHs, still 

face the perils of substantial operational losses and fiscal vulnerability. 

Looking beyond healthcare and into the realm of economic development, rural 

hospitals are vital to the economic health of the community. Rural economic development and the viability and sustainability of rural hospitals are closely linked. Employers in rural communities frequently cite the availability of local healthcare services as a determining factor in business development. Less well known, however, is 

the contribution of rural hospitals to the economic vitality of rural communities. For 

the purpose of economic investment, North Carolina categorizes all counties into 

three economic development tiers. The economically challenged counties are in Tier 

1 and Tier 2, with the economically advantaged counties in Tier 3. Of the forty-one 

counties in the most economically disadvantaged category (Tier 1), thirty-three of 

the counties are rural. Furthermore, these thirty-three economically disadvantaged 

rural counties are served by 28 rural hospitals. The importance of rural hospitals 

as an economic engine is best understood by examining some revealing statistics 

from 2003 (see Table 2). North Carolina’s rural hospitals accounted for an estimated $4.21 billion in economic output and $1.79 billion in salaries and benefits paid to 

an estimated 48,219 rural hospital-related employees in 2003. Overall, rural health 

in North Carolina generated an estimated $11.6 billion in economic output and $4.9 

billion in salaries and benefits paid to an estimated 165,029 rural workers in 

healthcare-related businesses. In 75% of North Carolina’s rural counties, the hospital is among the top five leading employers in the county. The evidence is simple 

and straightforward; rural hospitals contribute billions of dollars in local and regional economic value and bring tens of thousands of jobs to rural North Carolina 

economies and communities year after year. 

Rural North Carolina hospitals are a treasure to be valued, nurtured, understood 

and embraced. Rural hospitals and health networks are vital components of the 

rural communities they serve. Attention must be given to the value of preserving, 

enhancing and investing in rural hospitals and rural health networks in order to 

ensure that effective, quality healthcare services remain consistently available and 

accessible for North Carolina’s rural residents and communities. 

In summary, the major challenges facing our rural hospitals are substantial: financial instability, mostly due to dependence on government payers and a lack of 

commercially insured residents; the inability to access critically needed investment 

capital for medical technology, health information systems and electronic medical 

records, for facility renovations and replacements and the development of medical 

and clinical services; the increasing burden of chronic disease and the rising numbers of uninsured; the withering effects and expense of substantial and chronic 

workforce shortages (both physician and allied health); and the absolutely vital need 

for consultation and assistance to continually improve the quality, efficiency and 

performance of our rural hospitals and healthcare organizations. 

I congratulate the House Agriculture Committee and confirm that the USDA rural 

health and development programs are meeting a definite need, however more support and funding are required to stabilize and improve our rural healthcare systems. 

The rural hospital loan programs initially supported in this year’s Farm bill were 

36

a step in the right direction—to offer a package of grants and low-cost loans for advanced medical technology, for quality and patient safety upgrades and for investments in small rural hospital facilities and renovations. At a minimum, please restore the health information technology and infrastructure grants as initially introduced in the farm bill. 

A second priority for North Carolina rural hospitals is directly related to Medicare 

and Medicaid policy and payment, since these payment programs are absolutely 

vital to the continued existence of rural hospitals. These issues for Medicare and 

Medicaid include a fair and equitable payment structure by CMS for rural hospitals; 

continued maintenance and support of the certified public expenditure program to 

fund state Medicaid services to low income rural residents; giving rural hospitals 

and CAHs strong opportunities for success in the new pay-for-performance system; 

and protecting and improving the Critical Access Hospital program by increasing 

CAH reimbursement to 103% of cost, expanding the bed size for eligible CAHs to 

50 beds or less, and allowing CAHs to participate in the Federal 340B drug program. 

A third priority for rural North Carolina hospitals is the need for Federal rural 

health programs to increase collaboration and alignment among rural health providers and their communities. For instance, Congress and CMS can act to improve 

the alignment between quality incentive programs for rural physicians and hospitals. In addition, Federal grant programs should emphasize and require greater 

community-level collaboration among Federally Qualified Health Clinics, Community Health Centers, migrant health centers, rural health clinics, rural hospitals 

and other rural health programs funded by Federal grants and loans. The substantial issues and challenges of providing quality healthcare services in rural communities can only be solved by high levels of cooperation and collaboration among the 

critical healthcare providers in our rural communities. Congress can improve collaboration by creating incentives for rural health providers to work together, and 

with, their rural communities to design healthcare solutions that are more integrated and more responsive to rural health needs. 

In closing, I appreciate this opportunity to address this Subcommittee and the 

Members of the House of Representatives. In light of the renewed debate on comprehensive health reform and the likelihood that Congress and the White House 

may, in the near future, take important steps towards a health care marketplace 

that provides greater access, higher quality and better value for rural residents and 

patients, the NC Rural Health Center and NCHA look forward to working with Congress and the Subcommittee as the Federal health reform agenda develops and 

evolves.

37


11042001
38

The CHAIRMAN. Thank you, Mr. Spade. 

Mr. Fluharty? 

STATEMENT OF CHARLES W. FLUHARTY, FOUNDER,

PRESIDENT EMERITUS, AND DIRECTOR OF POLICY

PROGRAMS AND RESEARCH PROFESSOR, RURAL POLICY

RESEARCH INSTITUTE, HARRY S TRUMAN SCHOOL OF

PUBLIC AFFAIRS, UNIVERSITY OF MISSOURI-COLUMBIA,

COLUMBIA, MO 

Mr. FLUHARTY. Thank you, Mr. Chairman. It is an honor to be 

with you again. And I would ask my full statement be placed in 

the record. 

The CHAIRMAN. Yes, sir. 

Mr. FLUHARTY. I would just like to make a few comments. I want 

to commend you for talking about rural development. As everyone 

on the Committee knows, it is the first or second most critical economic sector in every rural community. And I really commend you 

for starting to think about that framework within this Rural Development Committee. I thank you for that. It is critical. 

Just several observations, as the hour is late. 

This USDA RD interaction with HHS is emergent, but it is a 

really stellar example of what future rural policy for our Federal 

system needs to look like. 

When I was in front of this Committee last year in March, when 

you were looking at the RD title, I laid out two or three things that 

we in RUPRI feel are essential if we are going to move to a globally 

competitive rural development policy. Two of those were thinking 

about greater attention to diverse regional actions and, second, 

thinking about how various Federal, state and local departments 

work together. 

We in the RUPRI rural health panel, which, as you know, has 

worked with the caucus for 15 years, have been honored to think 

about this with the Congress over time. And so I just would like 

to offer some thoughts about how this Committee might move forward on this agenda you are clearly leading. 

A couple of things have to happen, it seems to us. The first is 

the Committee needs to think more about viewing Federal expenditures as an investment. And the quid pro quo for that investment 

needs to be stronger attention to return on investment and some 

sense of longer-term benefits. Second, thinking about how we drive 

synergy in those investments so that the whole is greater than the 

sum of the parts in the Federal Government. 

Now, this emergent USDA–HHS interaction is really exciting. It 

is an example of what we think could move forward. I just would 

encourage you to continue that, because it is complementarity that 

we are seeking. 

As you know, HHS has small grants programs, technical assistance, balanced scorecard, the outreach grants. But USDA RD has 

a huge capital investment opportunity, and linking those two in a 

rational way is a truly unique opportunity to move forward. 

The question you have to ask, how can we do this better and how 

can we do it more? And what can this Committee do to support the 

other committees of jurisdiction? 

39

I just offer one possibility from our perspective, and that is a lot 

stronger evaluative framework that improves the scope of the 

USDA rural health policy investments. 

We are probably unique in this regard in RUPRI. Two programs 

were mentioned here earlier: SEBAS, the evaluative program at 

USDA, and the Rural Access Center at North Dakota. We are honored to be strong partners in both of those. So we have a unique 

orientation as to how these two Committees might work better together. So just a couple of suggestions for the Committee, if I could. 

First of all, if you look at greater FLEX program authority, 

which may come on the other side, and we think about Critical Access Hospitals maybe being able to convert to assisted living, 

skilled nursing—you combine that with the fact that Medicare in 

2011 is going to have a mandatory e-prescribing. So when you 

think about the infrastructure grants USDA is publicly able to 

make, including public reporting, we should be thinking about RD 

investments in infrastructure as much as bricks and mortar. 

And there are really three issues in the continuum of care: time, 

appropriateness of care, and where it occurs. And ORHP is looking 

at all that. And I really think that if we think a bit more about 

population health and appropriateness in terms of investment, this 

Committee could really help a great deal in building the linkage 

with ORHP. 

Just in closing, I want to applaud you again for this. I do believe 

if we think about a regional rural innovation system, the health 

care sector, the sector that you are talking to, has gone far further 

than any other sector in building that integration. But USDA RD 

has an absolutely unique ability to build the information infrastructure systems that are going to be essential for wiser economic 

choices in the future. And I commend you for starting to think 

about that, Mr. Chairman. 

Thank you. 

[The prepared statement of Mr. Fluharty follows:]

PREPARED STATEMENT OF CHARLES W. FLUHARTY, FOUNDER, PRESIDENT EMERITUS, 

AND DIRECTOR OF POLICY PROGRAMS AND RESEARCH PROFESSOR, RURAL POLICY

RESEARCH INSTITUTE, HARRY S TRUMAN SCHOOL OF PUBLIC AFFAIRS, UNIVERSITY

OF MISSOURI-COLUMBIA, COLUMBIA, MO 

Chairman McIntyre, Ranking Member Musgrave, and Members of the Subcommittee, it is an honor to appear before you again. I applaud your leadership in 

assuring that the rural development concerns addressed under the purview of this 

Subcommittee include attention to rural health care. As you know, quality health 

care that is equitable, affordable, and accessible is one of the most critical components in the continuing viability of our nation’s rural regions. 

I am Charles W. Fluharty, Director of Policy Programs for the Rural Policy Research Institute, and a Research Professor in the Harry S Truman School of Public 

Affairs at the University of Missouri-Columbia. RUPRI is a multi-state, interdisciplinary policy research consortium jointly sponsored by Iowa State University, 

the University of Missouri, and the University of Nebraska. 

RUPRI conducts research and facilitates dialogue designed to assist policy makers 

in understanding the rural impacts of public policies. Continual service is currently 

provided to Congressional Members and staff, Executive Branch agencies, state legislators and executive agencies, county and municipal officials, community and farm 

groups, and rural researchers. Collaborative research relationships also exist with 

numerous institutions, organizations and individual scientists worldwide. Since 

RUPRI’s founding in 1990, over 250 scholars representing 16 different disciplines 

in 100 universities, all U.S. states and 25 other nations have participated in RUPRI 

projects, which address the full range of policy and program dynamics affecting 

40

rural people and places. Collaborations with the OECD, the EU, the German Marshall Fund, the Inter-American Institute for Cooperation on Agriculture, the International Rural Network and other international organizations are framing RUPRI’s 

comparative rural policy foci. 

As this Committee begins consideration of the future design of USDA organizational structure and program delivery, it is important to note that we also anticipate 

a renewed discussion of more systemic change in health policy in the next session 

of Congress. I would hope that this Committee and USDA Rural Development will 

also engage those discussions, as you represent a very critical building block in sustaining a viable rural health system. 

The Rural Policy Research Institute established the RUPRI Rural Health Panel 

in 1993 to provide science-based, objective policy analysis to Federal policy makers. 

While panel members are drawn from a variety of academic disciplines and bring 

varied experiences to the analytic enterprise, panel documents reflect the consensus 

judgment of all panelists. 

This panel, comprised of many of our nation’s leading rural health researchers, 

has advocated since its inception that Federal, state, and local public sector decision 

makers create innovative investment approaches which unite multiple funding 

streams to ensure local sustainability. For this to be accomplished, two major shifts 

must occur. First, we must consider public sector expenditures to be investments, 

designed to force local grant and loan recipients to demonstrate long-term benefit. 

Second, this process must also create synergy across investment streams, so that 

the whole of these investments is greater than the sum of their parts. Today, in 

most developed nations, these principles are driving rural regional innovation approaches, across all public sector policy and program design. 

In discussing this global rethinking before this Subcommittee last spring, during 

your consideration of the farm bill rural title, I offered the following rationale for 

such an approach:

‘‘. . . The promise of such a Regional Rural Innovation Policy is premised upon 

the following realities:

1. National competitiveness is increasingly determined by the summative impact 

of diverse regional actions, capturing asset-based competitive advantage.

2. Support for such an approach will require a substantive rethinking of core 

missions across Federal departments, state agencies, and regional and local 

governments, and a commitment to leadership renaissance within these institutions and organizations.

3. Funding support for these place-based policies are WTO greenbox compliant, 

non-trade distorting funding opportunities for the Federal Government.

4. Finally, such a commitment improves the potential for Congressional Agriculture Committees to retain existing funding baselines, and for these Committees to retain statutory responsibility for rural development policy . . .’’

Nothing has changed since to alter my perspective. In fact, most OECD nations 

are now moving to align policies and programs with this new rural paradigm. 

We all recognize the importance and challenge of rural health care delivery, but 

this paradigm offers a very specific framework for how this Committee might approach its work in this regard, to ensure the emerging cooperation between USDA 

Rural Development and HHS/Office of Rural Health Policy is supported and enhanced. Other panelists will no doubt speak to other specifics within the health sector. I would like to limit my comments to the very real opportunities which exist 

to better align and target USDA investments in rural health care, to complement 

and expand HHS/ORHP programs and facilitate even greater inter-agency alignment. 

We are pleased these efforts are already underway, and commend the leadership 

of both agencies for these innovative developments. In this regard, we are perhaps 

uniquely positioned to comment, since RUPRI receives significant policy research 

support from both agencies, and works across the entire Federal portfolio to assist 

decision-support in both rural development and rural health care delivery and finance. 

We were very encouraged by the possibility for expanded RD rural health program support within the rural development title of the new farm bill, and were very 

disappointed that these new mandatory commitments were not included in the final 

legislation. However, as these programs were under consideration by the Senate 

Committee on Agriculture, Nutrition, and Forestry, our rural health panel was 

asked to assist USDA RD Community Facilities program staff in exploring a new 

grant and/or loan framework which could be utilized in implementing this expanded 

41

authority, should it be enacted into law. While this outcome did not materialize, recommendations of our panel could also be applied to existing RD rural health programs, and could inform future approaches which better integrate USDA RD and 

HHS/ORHP investments. 

I have summarized our recommendations below, and included the full working 

document developed by our panel for USDA RD at the conclusion of this testimony. 

Any major policy shift should ensure that core health services are available locally, 

that they are integrated into services outside the local area, and that this is done 

in a manner consistent with science-based evidence, to ensure results which both 

improve the quality of life for residents and better health quality integration, across 

rural geography. USDA investments in rural health care have implications beyond 

the bricks and mortar of individual facilities; they are part of a mosaic readying the 

rural areas of our nation to be fully advantaged by systemic improvements in health 

care delivery and finance. 

Specifically, future USDA Rural Development investments in rural health care 

should be framed around these considerations: 

I. Access to Affordable Care. USDA loan and loan guarantee programs sustain the 

presence of hospitals in rural areas, enabling rural residents to receive essential 

hospital services locally. 

II. Value of Health Care. As in urban areas, health care value must be measured 

in relationship to health care costs. USDA Rural Development programs should use 

this goal as one criterion in assessing applications for loans and loan guarantees. 

These return-on-investment considerations ensure that program investments are assessing economic realities, while helping to create the infrastructure needed to advance the more ambitious goal of system improvement. 

III. Choice Considerations Apply to Both Providers and Treatment Options. The 

effective exercise of choice assumes information is available to compare alternatives. 

USDA RD facility investments are assisting in the development of these information 

systems. Significant additional work should be done in this area. 

IV. Capacity Must Exist in Systems of Care. Beyond affordability, we must ensure 

that systems of care exist to address the rural health needs of a region. One critical 

element to assure this outcome is adequate consideration of rural interests in any 

resource allocation within the sector. USDA, as a long-standing spokesperson for 

rural interests, advances this goal by collaborating with other agencies, especially 

HHS, to use its investments in combination with rural program spending within 

those agencies. 

V. High Quality Health Care is Delivered Through Coordinated Care. In the enclosed document, the RUPRI Health Panel recommends that USDA consider targeted investments (through a priority-setting scheme) in rural institutions with ties 

to larger geographic systems of care (formal or informal). USDA investments could 

create incentives to leverage interest in building information systems and relationships necessary to better coordinate patient care across providers not practicing in 

the same large groups or even the same localities. This is one of the most promising 

potentialities within a USDA/HHS collaboration, and should be specifically pursued 

in an interagency agreement. 

VI. A Redesigned System Elevates the Health of Populations. Public health services are essential in all local areas, including rural regions. USDA programs supporting local infrastructure can and should require applicants to demonstrate linkages to local public health agencies. Examples can include sharing information to 

help identify local health issues (e.g., hospital admissions for asthma in children), 

programs the loan or loan guarantee institutions support (e.g., special wellness programs using hospital facilities and hospital-employed nutrition and health counselors), and organizational participation in regional efforts designed to improve the 

health of the public (e.g., comprehensive community-based programs targeting important goals, such as obesity reduction). 

These recommendations are more fully addressed within the following document. 

I hope they are helpful to this Subcommittee, and I thank you, again, Mr. Chairman 

and Members of the Subcommittee, for the opportunity to testify before you today. 

Your continuing leadership in crafting a twenty-first century rural policy is critical, 

and we look forward to working with you in the future. I’ll be pleased to answer 

any questions you have.

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The CHAIRMAN. Thank you. Thank you very much. 

Dr. Myers? 

STATEMENT OF WAYNE MYERS, M.D., TRUSTEE, MAINE 

HEALTH ACCESS FOUNDATION; PAST PRESIDENT,

NATIONAL RURAL HEALTH ASSOCIATION, WASHINGTON, 

D.C. 

Dr. MYERS. Chairman McIntyre and distinguished Members of 

the Committee, thank you very much for this opportunity. 

My name is Wayne Myers. I am a past President of the National 

Rural Health Association and Trustee of the Maine Health Access 

Foundation. National Rural Health Association is a national nonprofit organization, probably 18,000 members, whose mission is to 

improve the health of rural Americans. 

The quality of health care is critical to the physical, mental, and 

even economic health of rural communities. Often, the rural health 

facility is the center post supporting both the health and the economy of the community. If local health care disappears, as much as 

20 percent of the local economy goes with it. 

Over the past decade, as the nation lost manufacturing jobs, it 

has gained health care jobs. In fact, even though rural manufacturing jobs declined at twice the rate of urban manufacturing, 

health care has filled a lot of that void. Health care and education 

are now the largest rural employers and added the most to the 

rural economy across the nation in 2007. These jobs provide skilled 

employment, abundant employment due to recirculation of dollars 

paid into the community, and help retain families in the rural community. 

My State of Maine has 15 Critical Access Hospitals, 50 federally 

qualified health center sites and 39 rural health clinics. Each is 

vital to rural patients and the rural economy. Our Maine Department of Labor estimates that statewide, 30 percent, nearly a third, 

of all new jobs until 2014 will be health care jobs. 

The ancillary or secondary spending impact of all that is very 

significant. A typical rural hospital has a multimillion-dollar payroll, and a lot of that money is re-spent in the community, generating local jobs and revenue. 

But there is a lot of difficulties. Disparities between rural and 

urban persist. In 2005, the average health care wage in Maine’s 

rural counties was $26,800, nearly $10,000 less than health care 

job salaries in urban counties. 

Rural facilities face significant challenges: budget constraints, recruitment and retention of health care personnel, access to capital. 

Rural populations, as you mentioned in your opening statement, 

Mr. Chairman, are older and poorer. Therefore, rural facilities are 

terribly reliant on reimbursement rates of Medicare and Medicaid, 

which do not cover the cost of the care that is provided, and those 

programs are continually threatened by cuts. 

Due to these concerns, NRHA recommends stronger Federal investment in and partnership with rural America. Capital investment in rural facilities helps retain and recruit physicians and improves patient safety and quality. 

USDA, through its Community Facilities Loan and Grant Program, has an impressive record of rural lending. This program has 

94

helped to create some vibrant rural communities by ensuring that 

essential structures receive the capital that they need. Under Secretary Dorr has made, I believe, a personal commitment to Critical 

Access Hospitals as an important component of that program, and 

we sincerely thank him for his commitment. 

Mr. Chairman, NRHA does strongly support these programs, but 

we do need improvements. First of all, more Federal dollars are 

needed to replace all those rural hospitals that were built during 

the 1960s and the 1970s. NRHA was disappointed to see Title VI 

funding levels reduced in the farm bill. 

The lending process for USDA loans is complex. A facility must 

convincingly demonstrate that private financing is really not available, and that can be a long and discouraging process. The loan 

amount is typically insufficient to fund a project, and facilities 

truly in need of the program may fail to qualify due to rigid lending 

standards. So NRHA strongly supports increasing the lending program, easing the red tape and cost of applying, and improving outreach to facilities that provide quality care, yet fall short of the 

stringent USDA lending criteria. 

On a slightly different topic: RUPRI has come forth with a recommendation for a new capital lending program from USDA, and 

we strongly support that. NRHA applauds the Committee for including language in the 2008 Farm Bill and we regret that that 

didn’t make it. 

We would strongly support any continuing efforts to strengthen 

health information technology in rural areas—terribly important, 

yet more difficult to implement than in other communities. 

So, Mr. Chairman, in conclusion, thank you for all that you do 

for rural America. I and NRHA look forward to working with you. 

[The prepared statement of Dr. Myers follows:]

PREPARED STATEMENT OF WAYNE MYERS, M.D., TRUSTEE, MAINE HEALTH ACCESS

FOUNDATION; PAST PRESIDENT, NATIONAL RURAL HEALTH ASSOCIATION,

WASHINGTON, D.C. 

Chairman McIntyre, thank you for this opportunity to testify. I am Wayne Myers, 

M.D., Trustee of Maine Health Access Foundation and I am a Past-President of the 

National Rural Health Association (NRHA). Thank you for this opportunity to speak 

on behalf of the NRHA at this important hearing. I am pleased to tell you why quality health care in rural America is critical to both the community’s citizens and the 

community’s economy. I will also discuss the impact of Federal programs with a specific focus on USDA health programs. 

The NRHA is a national nonprofit, non partisan, membership organization with 

approximately 18,000 members that provides leadership on rural health issues. The 

Association’s mission is to improve the health of rural Americans and to provide 

leadership on rural health issues through advocacy, communications, education and 

research. The NRHA membership consists of a diverse collection of individuals and 

organizations, all of whom share the common bond of an interest in rural health. 

Health Care in Rural America is a Vital Component of the Economy 

Health care is critical to the physical and mental well-being of the citizens of a 

community. In rural America, health care is also critical to the economic well-being 

of the community. 

As factories and plants across the nation close due to outsourcing, many parts of 

rural America’s economy are in flux. A vital health care system is often one of the 

few bright spots in the local economy. 

Over the last decade, cities and towns across the nation lost manufacturing jobs, 

but gained heath care jobs. Last year the manufacturing industry lost 310,000 jobs 

and the health care industry gained 363,000 jobs. Rural manufacturing jobs declined 

at double the rate of urban manufacturing jobs. In fact, health care and education 

95

are the largest rural employers and added the most jobs to the rural economy in 

2007. According to Health Resources and Services Administration (HRSA), health 

care services are consistently a top employer in rural America and if local health 

care should disappear, as much as 20 percent of a local economy could go with it. 

In brief, health care services provide skilled employment, abundant ancillary employment, and help retain young families and the elderly (who rely on quality health 

care) in the community. 

My State of Maine is similar to the rest of America. Healthcare looms large in 

Maine’s present day economy and in 2005 accounted for 15% of all rural jobs. The 

Maine Department of Labor forecasts that, statewide, 30% of all new jobs from now 

until 2014 will be health care jobs. 

Between 1998 and 2007, the Bangor metropolitan area (population 150,000) lost 

about 3,700 jobs in manufacturing, but gained 3,500 jobs in health care. For many, 

the hospital is replacing the mill as the passport to the middle class. The shift to 

medicine is evident throughout Bangor. The local community college’s most popular 

courses are no longer welding and pipe fitting; they are nursing and medical radiology. In 1990, 16% of the jobs in the Bangor area were in manufacturing, while 

12% were in health care. In 2007, 6% of the jobs were in manufacturing and 20% 

were in health care. 

In rural Maine, health facilities are the communities’ lifeline, both literally and 

figuratively. Maine has 15 Critical Access Hospitals, 50 Federally Qualified Health 

Center sites and 39 Rural Health Clinics. Each of these facilities is vital to the betterment of the rural patients and the rural economy. Despite this, the disparities 

between rural and urban persist. Rural areas have a larger share of lower-paying 

health care jobs such as nursing assistants and personal care attendants. In 2005, 

the average health care wage in Maine’s rural counties was $26,841 a year, $10,000 

less than in the urban counties. Statewide the average wage for all jobs was 

$32,393. 

The Wall Street Journal recently outlined this concern with a feature on a 51 year 

paper mill worker in Millinocket, Maine who was told he would be laid off his job 

of 28 years. The mill worker quit his job, took classes at the local community college 

and became a certified surgical technologist. Today he makes $16 an hour, $5 less 

than what he made at the paper mill. 

Health Care’s Influence on Other Sectors of the Rural Economy 

The ancillary economic impact of health care in rural America is significant. A 

typical rural hospital may employ 20 percent of the local workforce and possess a 

multimillion dollar payroll. Much of the money paid to health sector employees is 

then spent in the community, which generates additional local jobs and revenue. 

Additionally, health care employers and employees are important purchasers of 

goods and services, supporting many local business establishments. The employees 

who in work in health care, such as hospital and nursing home workers, physicians, 

dentists and pharmacists, are important sources of income in the community, supporting services such as housing and construction, retail establishments, restaurants and other local services. The hospitals and other health care institutions 

are also important purchasers of local inputs such as food, laundry services, waste 

management and other resources. 

An often-overlooked aspect of the health care system in economic development is 

its importance to communities’ efforts to attract and recruit firms. Rural leaders 

across the nation are becoming increasingly aware that the presence of quality 

health care is a vital component of numerous economic development strategies. 

From a survey of community leaders, almost 90% indicated that health care is important to the local economy. Manufacturers and high tech industries are unlikely 

to locate in an area that does not have adequate access to health care. Health care 

is also a key factor in attracting and retaining retirees. 

The Challenges of Rural Health Care 

Despite the growth of health care in rural America and its importance to the rural 

economy, many geographic and demographic challenges jeopardize its viability. 

Rural health systems are often facing severe budgetary restraints. Some rural facilities are on the verge of closing. In other cases, health care services are being cut. 

Recruitment and retention of physicians and other providers are often extremely difficult and expensive. Access to capital for facility improvements can be severely limited. Rural populations are older and poorer than urban. Younger, more prosperous 

rural citizens are more likely to seek care in larger, regional urban centers while 

relying on local rural resources for emergency care. Therefore, rural healthcare facilities are heavily reliant on the reimbursement rates of Medicare and Medicaid, 

which do not adequately cover the cost of care and are continually threatened by 

96

cuts. Indigent care burdens are increasing due to rising unemployment and a flagging economy, while states are struggling to meet their Medicaid budgets. 

Recommendations: Federal Investment and Partnership Vital to Rural 

Health and Economic Development 

A. Grants and Loans for Capital Improvements 

Health care will only be an important economic component if rural facilities can 

maintain quality structures and equipment. A large portion of rural hospitals were 

built using funding provided through the Federal Hill-Burton Act, in force from 

1946 through 1975. Unfortunately, many quality rural facilities continue to operate 

in obsolete and deteriorating buildings, or operate with sub-standard equipment, because of the difficulty in accessing capital. This does not have to continue. 

According to a 2005 Rural Hospital Replacement Study conducted by Stroudwater 

Associates and Red Capital Group, investment in rural facilities:

• Helps physicians and staff recruitment and retention;

• Reduces facility expenses (due to improved efficiencies);

• Improves patient safety;

• Improves quality of care and continuity of care; and

• Increases patients use and utilization.

The USDA has a long history of bolstering the rural economy and its influence 

on rural health care has been both direct and indirect. The vehicle for much of the 

USDA efforts has been the farm bill, which generates about $100 billion in Federal 

spending each year. 

Rural Development Programs in the farm bill provide some amount of grant funding for hospital and clinic construction, and leverage much more through loan guarantees and interest rate subsidies. They help fund construction of a range of related 

facilities, including wellness centers, emergency medical services (EMS), and longterm care centers. The NRHA strongly supports these programs yet believes improvements can and should be implemented.

1. Current Loan Guarantee Programs Must be Improved. From our members who have utilized or attempted to utilize USDA loan programs, the concerns are consistent:

• The process is long and complex.

• The process often proves not cost-effective because of the costly application requirements.

• Inter-creditor loan agreements are cumbersome.

• The program is often limited to Critical Access Hospitals. Other rural health 

facilities are excluded.

• The loan amount is typically insufficient to fund the entire project.

• The process precludes facilities that are in true need of the program from 

qualifying for the program.

The NRHA often hears complaints from Critical Access Hospitals, who are in dire 

need of capital improvements or equipment improvements, which failed to meet the 

strict criteria of USDA guaranteed loan programs. The USDA’s stringent lending 

criteria deserve credit for the low default rate of these loans. The NRHA commends 

a low default rate; however, the NRHA also strongly supports greater outreach to 

the facilities in true need. 

The USDA guaranteed lending programs’ mission is to improve economic development. That mission is best achieved if the USDA reaches facilities with significant 

needs. Since 1977, under the Community Reinvestment Act (CRA), Federal law has 

required private lending institutions to offer credit throughout their entire market 

area. The purpose of the CRA is to provide credit to underserved populations and 

small businesses that may not have previously had access to such credit. USDA 

Federal lending programs should have a similar mission. The NRHA strongly believes that this type of Federal outreach is the most effective way to improve quality 

health care and improve local economies.

2. Implement New Loan Program Per Recommendations of RUPRI.

In March 2008, the Rural Policy Research Institute (RUPRI) documented recommendations for implementing a new USDA Rural Development Program that 

strengthens rural health care delivery systems. RUPRI was established in 1990 

to address a concern of Members of the Senate Agriculture Committee that no 

objective non-government source of external data, information, and analysis, reVerDate 0ct 09 2002 10:40 Nov 03, 2009 Jkt 041481 PO 00000 Frm 00100 Fmt 6633 Sfmt 6621 I:\DOCS\110-42\51222.TXT AGR1 PsN: BRIAN
97

* The document referred to is located on p. 42.

garding the rural community was available for policy decision makers. NRHA 

finds RUPRI’s recommendations for expansion of the USDA lending program to 

be sound and prudent. Attached to this testimony are RUPRI’s complete recommendations.* 

3. Grants for Capital Improvements are Needed.

The NRHA applauds this Committee for including language in the 2008 Farm 

Bill that would have made grant monies available to a wide range of rural facilities and to improve health care quality and patient safety. We regret that 

this section was not included in the final farm bill.

4. Increase Investment in Information Technology

Health Information Technology (IT) is particularly important for rural people, 

yet difficult to secure. Rural people typically get their primary health care in 

their home communities, but travel to larger centers for specialty services. The 

dangers and inefficiencies related to moving paper and film record are great, 

as are the difficulties of having access to these records where and when they 

are needed across the region.

Therefore, the importance of a usable and interoperable health IT infrastructure 

and equipment in rural America is critical to patient safety, quality and facility sustainability. Additionally, technology can increase access to care, provide remote diagnostic services, and provide education and training for health care workers who 

otherwise have limited access to professional colleagues and continuing education. 

Development funds through the farm bill and other programs have been used to establish telemedicine and support broadband construction for rural communities. 

Such funding must continue and expand. 

In it’s 2004 report, Quality through Collaboration: The Future of Rural Health 

Care, the Institute of Medicine (IOM) stated that the acceleration of health knowledge is ‘‘pivotal’’ to patient safety and quality health care improvement in rural 

America. The report calls for a stronger health care quality improvement support 

structure to assist rural health systems and professions, and recognizes the importance of ‘‘investing in an information and communications technology infrastructure.’’

Health IT in rural America faces challenges far more significant than their urban 

counterparts. Both the 2004 IOM and Medicare Payment Advisory Commission 

(MedPAC) highlight problems with health IT in rural communities because of the 

relative scarcity of professional, technical and financial resources and interoperability issues which arise among numerous small independent health agencies. 

Of these concerns, finance is the overriding challenge. Rural health facilities are 

small businesses who struggle to keep their doors open and meet their mission of 

providing care to their community. Investment in health IT or continued operation 

of the equipment is prohibitively expensive. (Often in rural areas, there is only a 

single telecommunications service provider—which limits competition and increases 

costs.) 

Additionally, rural hospitals often depend on the Critical Access Hospital designations and the Universal Services Funds to maintain operations and access technology. This tenuous existence, however, doesn’t allow for any financial cushion in 

invest in technology. Current payment rates are insufficient to cover the costs associated with overcoming challenges of acquiring hardware and software, implementing community-based communications networks and obtaining training and ongoing support. 

Investment in health IT can drive the expansion of telecommunication technologies to rural communities. Other rural businesses have similar investment and 

infrastructure issues. Successful projects driven by health providers such as hospitals, community health centers, or training facilities have demonstrated how the 

entire community can benefit when it is ‘‘wired.’’ NRHA strongly supports provisions 

in the farm bill to expand broadband services in rural areas and hopes that more 

can be done. 

Health Insurance Coverage in Rural America 

While health insurance is outside the scope of this Committee and this summit, 

I would be remiss to not mention this important issue and help highlight how difficult and complex rural economic development can be. On this issue, rural America 

lags behind its urban counterparts and has disproportionately higher rates of the 

uninsured and underinsured. This is true of both adults and children. 

98

As already highlighted, a healthy workforce is vital to having a vibrant economy. 

Without insurance coverage of the local populace, most people cannot afford routine 

health checkups and must rely on more expensive emergency care. This is both 

more costly for the community and leads to poorer health outcomes. In addition, 

health insurance coverage can help provide the monies necessary to keep health providers in rural communities driving further economic development. 

For the future of our rural communities, we cannot continue to see increasing 

rates of uninsured adults and children. Nationwide, the trend has been decreasing 

employer sponsored health coverage. This trend has been more acute in our rural 

communities that tend to have smaller-sized businesses and more small business 

owners that cannot afford to insure their own family. We must find ways to provide 

insurance coverage. 

Already, rural citizens disproportionately rely more on Medicare, Medicaid and 

the State’s Children Health Insurance Program (SCHIP) than their urban counterparts. However, in providing this coverage, we must be cognizant that health insurance does not equal health care. Federal insurance programs such as the ones mentioned have a responsibility to make sure that our rural citizens can access care in 

their own communities and that the care they receive is of high quality. Without 

it, rural America may lack a productive workforce in the future. 

Congress has attempted to pass meaningful SCHIP legislation only to have it vetoed. This program has been a significant source of health coverage for rural children. If additional SCHIP legislation is debated in this Congress, the NRHA asks 

that considerable improvements in health insurance coverage and outreach for children in rural communities be included. For those that care about the future of rural 

America, the reauthorization and expansion of SCHIP is of the utmost importance. 

Conclusion 

Health care is a vital segment of the rural economy. Quality health care in rural 

America not only provides for the health of the community, but creates jobs, infuses 

capital into the local economy, attracts businesses and encourages families and seniors to maintain residency within the community. Federal, state, and local partnerships must be formed to protect this critical yet fragile component of the local economy. Grants and loans must be accessible for both capital improvements and IT infrastructure and development. Insurance programs such as SCHIP, Medicare and 

Medicaid must take into account their responsibility in providing health insurance 

for rural beneficiaries and in making sure those same people can access their care 

in their community. And finally, the USDA must continue to establish policies that 

help rural health care flourish—for both the sake of the health of rural Americans 

and for the economy of rural America.

The CHAIRMAN. Thank you. And thank you for the work you all 

do with the National Rural Health Association, which I know our 

rural health care coalition has worked very closely with through 

the years. 

Dr. Karen Rheuban? 

STATEMENT OF DR. KAREN RHEUBAN, PEDIATRIC

CARDIOLOGIST, SENIOR ASSOCIATE DEAN FOR CONTINUING 

MEDICAL EDUCATION AND MEDICAL DIRECTOR, OFFICE OF 

TELEMEDICINE, UNIVERSITY OF VIRGINIA HEALTH SYSTEM; 

PRESIDENT-ELECT, AMERICAN TELEMEDICINE

ASSOCIATION; MEMBER OF THE BOARD OF DIRECTORS, 

CENTER FOR TELEMEDICINE AND E-HEALTH LAW;

PRESIDENT, VIRGINIA TELEHEALTH NETWORK,

CHARLOTTESVILLE, VA 

Dr. RHEUBAN. Chairman McIntyre, Mr. Goodlatte and Members 

of the Subcommittee, thank you for the opportunity to testify today. 

I serve as Professor of Pediatrics, Senior Associate Dean for 

CME, and Medical Director of the UVA telemedical program, and 

I am President-elect of the American Telemedicine Association. 

Although all Americans face challenges in access, quality and 

cost of care, disparities attributable to a host of factors disproportionately impact the health of our rural citizens. Over and over 

99

again, I have seen the challenges faced by my own pediatric cardiology patients and countless others needing specialty care not locally available. The Institute of Medicine cites core health care 

services as being considerably less accessible in many rural communities. Access to specialty care presents an even greater challenge. When one considers the cost of overnight stays, lost time 

from work, and the increasingly high cost of fuel, travel for health 

care imposes great burdens on our rural families. 

Tomorrow I will join more than 200 UVA volunteers to participate in the Remote Area Medical Clinic held at the Virginia-Kentucky Fair Grounds, where more than 3,000 patients will receive 

free medical, dental and vision care, and cancer screenings. Patients arrive at all hours of the night to stand in line to obtain a 

ticket for entry to the clinic and then wait uncomplainingly, often 

in the hot sun, to receive health care provided in barns and in 

tents. For many participants, this is the only time they will see a 

physician or dentist. 

And since I am limited to only a few moments and since a picture is worth a thousand words, this is a photograph from one of 

our more recent Remote Area Medical Clinic expositions. 

For many decades, the University of Virginia has tried to address 

the challenges of access for our rural patients. We staff subspeciality outreach clinics in communities remote from our medical 

center. 

In 1995, with Federal and state grant support, we established 

our telemedicine program. We serve as the hub of a 60 site network 

in the Commonwealth of rural clinics, federally qualified health 

centers, community hospitals, Critical Access Hospitals, schools, 

prisons and health department sites. To date, we have facilitated 

more than 12,500 patient encounters in more than 30 different 

medical and surgical subspecialties that are provided on a scheduled basis or emergently using interactive videoconferencing. 

We also offer store-and-forward services, such as screenings for 

diabetic retinopathy, interpretation of cardiac ultrasound for critically ill newborns, and mobile digital mammography to screen for 

breast cancer. We have saved lives, supported timely interventions, 

and spared patients and their families needless travel and extensive transfer. 

We offer distance learning for health professionals. Telehealth 

spans the entire spectrum of health care and across the continuum, 

from prematurity to geriatric care. Cardiology, dermatology, ophthalmology, neurology, mental health and critical care are but a 

few of the many applications of telehealth. 

With the aging of our population and greater numbers of patients 

with chronic illness, home telehealth offers an effective mechanism 

to provide for early intervention, with improved outcomes and reduced hospitalization. 

Federal investment is critical to the development of telehealth 

networks across the nation. Sound Federal and state policies are 

required for the integration of telehealth into mainstream health 

care. Rural Virginians have benefited greatly from telehealth 

grants from the USDA and other Federal agencies. We applaud the 

Rural Utility Service for its definition of rural with regards to eligibility for telehealth grants. 

100

Despite a favorable revision of the Medicare telehealth rules following passage of BIPA 2000, the Benefits Improvement and Protection Act, many critical telehealth-facilitated services remain ineligible for Medicare reimbursement based on the location and/or 

type of consult origination site. CMS has interpreted the statute 

narrowly, and as a result, the opportunity to serve rural Americans 

in need has been limited. 

CMS recently reported that total Medicare expenditures for telehealth in the past 6 years were less than $5 million, far below the 

level of several hundred million dollars that Congress anticipated. 

Practitioners eligible for reimbursement for in-person services delivered in the home should be reimbursed for similar services 

through telehealth. Store-and-forward services are only available in 

Alaska and Hawaii. Many Medicaid programs still do not reimburse telehealth-facilitated care, and yet Medicaid funds the high 

cost of long-distance patient transportation and the serious consequences of delays and access to health care. 

Rural grants will be of much less value without reasonable Medicare and Medicaid reimbursement policies. Federal investment in 

our rural broadband infrastructure remains crucial to expanding 

and sustaining telehealth programs and health information exchange nationwide. The rural health care support mechanism of 

the Universal Service Fund is still fraught with statutory limitations that pose barriers to many programs. Finally, there are enormous opportunities to help patients with chronic illnesses, such as 

congestive heart failure, through programs that provide remote 

monitoring support. 

In conclusion, through robust investments in telehealth and expanded favorable Federal policy, Congress has the opportunity to 

greatly enhance access to quality health care services that improve 

the health of our rural Americans. 

Thank you. I would be happy to respond to any questions. 

[The prepared statement of Dr. follows:]

PREPARED STATEMENT OF DR. KAREN RHEUBAN, PEDIATRIC CARDIOLOGIST, SENIOR

ASSOCIATE DEAN FOR CONTINUING MEDICAL EDUCATION AND MEDICAL DIRECTOR, 

OFFICE OF TELEMEDICINE, UNIVERSITY OF VIRGINIA HEALTH SYSTEM; PRESIDENTELECT, AMERICAN TELEMEDICINE ASSOCIATION; MEMBER OF THE BOARD OF

DIRECTORS, CENTER FOR TELEMEDICINE AND E-HEALTH LAW; PRESIDENT, VIRGINIA

TELEHEALTH NETWORK, CHARLOTTESVILLE, VA 

Chairman McIntyre, distinguished Members of the Subcommittee, my name is Dr. 

Karen Rheuban. I am a Pediatric Cardiologist, and also serve as Senior Associate 

Dean for Continuing Medical Education and Medical Director of the Office of Telemedicine at the University of Virginia Health System in Charlottesville. I am also 

the President-elect of the American Telemedicine Association, a member of the 

Board of Directors of the Center for Telemedicine and E-health Law, and President 

of the Virginia Telehealth Network. 

It is an honor and a privilege to provide testimony that will address:

(a) the status of rural healthcare, and in particular, data regarding 

healthcare in rural Appalachian Virginia

(b) the role of telemedicine in the delivery of healthcare and educational services to rural Americans,

(c) the enormous benefits of Federal programs that support the development and deployment of telehealth technologies and networks, and

(d) opportunities to further expand innovation in telemedicine and ehealth so as to enhance the quality of life of all Americans.

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1Quality Through Collaboration, The Future of Rural Health, Institute of Medicine, National 

Academies Press, 2004. 2Peek, M.A., Disparities in Screening Mammography: Current Status, Interventions, and Implications, J. GEN. INTERN. MED. 2004 February; 19(2): 184–194. 3 Brustrum, J.E., Going the Distance: How Far Will Women Travel to Undergo Free Mammography? MILITARY MEDICINE, 2001, 166 (4), 347–349. 4 Cooper, R.A., Weighing the evidence for expanding physician supply, ANN. INTERN. MED. 

2004: 141:705–714. 5 Blumenthal D. New steam from an old cauldron: the physician supply debate, N. ENGL. J. 

MED.: 2004:350:1780–1787. 6 Cattell Gordon, D., ‘‘Healthy Appalachia’’, Report to the Southwest Virginia Health Facilities 

Authority, May 2008.

A. The status of rural healthcare 

Rural patients face challenges of access to quality healthcare. Twenty percent of 

our U.S. population resides in heterogenous rural communities which vary in character from towns adjacent to suburban areas to remote and/or frontier communities 

with extremely low population densities. Although all Americans face challenges in 

access, quality and cost of care, disparities attributable to a host of factors disproportionately impact the health of our rural populations. 

The Institute of Medicine, in its report, ‘‘The Future of Rural Healthcare’’, cites 

‘‘core health care services’’ of primary care, emergency medical services, long term 

care, mental health and substance abuse services, oral health and other services as 

being considerably less accessible in rural communities.1 Access to specialty care 

presents an even greater challenge. The implications of a lack of timely access to 

quality healthcare are well known, and include delayed diagnoses of preventable or 

treatable illnesses and a higher cost of care, when and if such care is received. 

Rural patients tend to be older, and participate in adverse health behaviors 

(smoking, lack of fitness, obesity) which leads to chronic diseases at rates higher 

than their urban counterparts. The challenges of a less robust infrastructure in support of economic development, lower educational levels of achievement, high rates 

of uninsured status, and the financial burdens of travel for healthcare all contribute 

to the health disparities of rural citizens. As an example, although nationally we 

have increased access to screening mammography over the last decade, due to the 

impact of distance, limited income, and uninsured status, women residing in rural 

areas are screened for breast cancer at significantly lower rates than women residing in urban areas, particularly if travel more than twenty miles for screening is 

required.2–3

It has been forecast that our nation faces a shortage of physician providers, in 

the range of 85,000 to 200,000 physicians by 2020.4–5 Lack of access in rural areas 

is exacerbated by the limited numbers of specialists who practice in rural communities and the limited resources generally available in those communities. Attracting 

health professionals to rural communities remains a daunting task; retaining those 

health professionals is equally difficult. Rural healthcare providers tend to work 

longer hours, see more patients, lack cross coverage opportunities and experience a 

greater sense of isolation than their urban counterparts. Rural health professionals 

have been slower to adopt electronic medical records in their practices. 

To craft a strategy for improving the health of patients residing in the most rural 

and underserved regions of the Commonwealth of Virginia, in collaboration with 

Virginia Department of Health, the University of Virginia recently conducted an 

analysis of the health status, the health workforce and relevant economic indicators 

impacting the citizens of the Coalfields regions of western Appalachian Virginia.6

These rural regions of Virginia are: (1) economically depressed, (2) medically underserved, and (3) geographically isolated. The findings of that report showed that: 

• 20% of the residents of the region live below the poverty level as compared to 

10.2% for Virginia.

• Only 62% of the region’s population has completed high school and 11% completed college compared with 82% and 30% respectively for Virginia.

• Per-capita income levels in the region are a little more than half of the levels 

of state for 2000.

• The numbers of unemployed and those not in the work force is twice that of 

the rest of the Commonwealth.

• 19% of adults in the region do not have health insurance coverage.

• The death rate from cardiovascular disease is 1.7 times higher than that of the 

Commonwealth of Virginia.

• The death rate from solid tumors is 1.4 times greater than that of the state.

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7Williams, J.M. et al., Emergency medical care in rural America, ANN. EMER. MED. 2001: 

38(3):323–327. 8 Burgiss, S.G. et al., Telemedicine for dermatology care in rural patients, TELEMED. JOURNAL

1997; 3 227–33. 

• The probability of dying of chronic lung disease in this area is twice the probability of dying of the same cause elsewhere in Virginia.

• The mortality rate in the region from diabetes is nearly twice the mortality rate 

of the state.

Although University of Virginia physicians regularly staff specialty outreach clinics in many rural regions of the Commonwealth, the ongoing need for locally provided specialty services is very great. When one considers the cost of overnight 

stays, lost time from work, the increasingly high cost of fuel and other automotive 

expenses, travel for healthcare imposes great burdens on our rural families. 

Tomorrow, I will join two hundred of my University of Virginia Health System 

colleagues to participate in the Remote Area Medical (RAM) Clinic held at the Virginia-Kentucky Fairgrounds, a 6 hour drive from Charlottesville. At that annual 

weekend event, more than 3000 patients from Appalachian Virginia and surrounding states receive free medical care, dental care, vision care, patient education 

and cancer screenings. Patients arrive at all hours of the night to stand in line to 

obtain a ticket for entry to the clinic, and then wait uncomplainingly, often in the 

hot sun, to receive services. At that clinic, healthcare is provided in barns and in 

tents (see photograph, below).

Photograph: Remote Area Medical Clinic (courtesy St. Mary’s Health 

Wagon).

Rural Americans experience disproportionate disparities in healthcare as compared to their urban counterparts. 

B. The role of telehealth in the delivery of services to rural Americans: 

Telehealth can reduce many of the barriers of access to locally unavailable 

healthcare services. The societal integration of advanced technologies into everyday 

venues has profound implications for the development, support and delivery of a 

new paradigm of healthcare services in the digital era. The powerful tools of health 

information technologies are critical to the transition from a culture in which health 

related services are primarily delivered in a balkanized model on an episodic basis 

to an integrated systems approach focused on disease prevention, enhanced 

wellness, chronic disease management, decision support, quality, ease of access and 

patient safety. Through the incorporation of such tools and technologies, clinicians 

will be able to satisfactorily manage the exponentially expanding volumes of medical 

information, research and decision support analytic tools. 

The incorporation of telehealth technologies into integrated systems of healthcare 

offers tools with great potential to address the challenges of access, specialty shortages, and changing patient needs in both the rural and urban setting. Clinical services delivered via telehealth technologies span the entire spectrum of healthcare, 

and across the continuum from prematurity to geriatric care, with evidence based 

applicability to more than 50 clinical specialties and subspecialties. Cardiology, dermatology, ophthalmology, neurology, high risk obstetrics, pulmonary medicine, mental health, pathology, radiology, critical care, and home telehealth, are but a few of 

the many applications in general use, and for which a number of specialty societies 

have developed telehealth standards.7–11 These services can be provided in liveVerDate 0ct 09 2002 10:40 Nov 03, 2009 Jkt 041481 PO 00000 Frm 00106 Fmt 6633 Sfmt 6621 I:\DOCS\110-42\51222.TXT AGR1 PsN: BRIAN

11042097
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9 Chiang, Michael, Lu Wang; Mihai Busuioc; Yunling E. Du et al., Telemedical Retinopathy 

of Prematurity: Diagnosis, Accuracy, Reliability, and Image Quality Arch Ophthalmol, 2007: 125 

1531–1538. 10Flowers, C.W. et al., Teleophthalmology: rationale, current issues, future directions,

TELEMED. J., 1997: 3(1): 43–52. 11 Breslow, M.J., Effect of a multiple site intensive care unit telemedicine program on clinical 

and economic outcomes: An alternative paradigm for intensivist staffing, CRIT. CARE. MED. 2004 

32(1): 31–38. 12George W. Bush, Executive Order, Incentives for the Use of Health Information Technology 

and Establishing the Position of the National Health Information Technology Coordinator, April 

27, 2004. 13Schwamm, L.E. et al., Virtual telestroke support for the emergency department evaluation 

of acute stroke, ACAD. EMER. MED. 2004: 11(11) 1193–1197. 14 Vespa, P., Intensive care unit robotic telepresence facilitates rapid physician response to unstable patients and decreased cost in neurointensive care, SURG. NEUROL., 2007 (67) 331–337. 15Fessler, R., Michigan Stoke Network, An 18 month update, 3rd Annual Remote Presence 

Clinical Innovations Forum, Santa Barbars, CA, July 18, 2008. 16Field M.J. and Grigsby, J. Telemedicine and remote patient monitoring, JAMA 

2002:288(4):423–425. 17 Noel, H.C., Home telehealth reduces healthcare costs, TELEMEDICINE J. AND E. HEALTH, 

2004, 10(2): 170–183. 

interactive modes and some, asynchronously, using store and forward applications. 

Examples of the latter include the acquisition of digital retinal images of patients 

with diabetes by a trained nurse. These images can be sent for review by a retinal 

specialist to identify patients at risk for diabetic retinopathy, the number one cause 

of blindness in working adults. Digital images can be integrated into the patient’s 

electronic medical record to follow changes over time. In these and so many other 

applications, telehealth supports the goals of the Federal Healthy People 2010 initiative, and is aligned with the President’s 2004 Executive Order to ‘‘advance the 

development, adoption, and implementation of health care information technology 

standards nationally through collaboration among public and private interests’’.12

The aging of our population has already created increased demand for specialty 

healthcare services to address both acute and chronic disease in the elderly. Such 

a demand, in the face of anticipated provider shortages, requires a fundamental 

shift from the model of physician centered care to one focused on patient centered 

care using interdisciplinary teams, evidence based medicine, the use of informatics 

in decision support and telehealth technologies where specialty care services are either not locally available or for other consultative needs. As an example, nationally, 

only 2% of eligible (ischemic) stroke victims receive brain saving thrombolytic therapies, primarily because this treatment must be administered within 3 hours from 

the onset of an ischemic stroke under the direction of a trained neurologist. The use 

of telehealth technologies offers immediate access to stroke neurology and 

neurointensive care with improved outcomes, and an increase in the delivery of 

thrombolytic therapies to as many as 80% of eligible stroke patients.13–15

With the aging of the population and greater numbers of patients with chronic 

illness, home telehealth, home monitoring tools and biosensor devices offer an effective mechanism to improve health, and provide early intervention where appropriate. The evidence has demonstrated improved outcomes and reduced hospitalizations for patients with congestive heart failure, diabetes, and other chronic diseases 

through the use of home monitoring and home telehealth technologies.16–17

Telehealth technologies should be viewed as integral to rural development. Data 

from some telehealth providers have indicated that more than 85% of patients seen 

via telehealth technologies remain within their community healthcare environment, 

resulting in a reduction in unnecessary transfers, less hospital lost revenue, as 

might occur with patient transfers, and enhanced economic viability of the community hospital. A viable community healthcare environment and workforce ultimately 

provides incentives for the relocation of industry, thereby enhancing community economic development. The benefits of shared utilization of bandwidth for other applications in rural communities cannot be overstated. 

In an effort to address the significant rural-urban disparities in the Commonwealth of Virginia, we established the University of Virginia Telemedicine program 

in 1995, specifically to enhance access to specialty healthcare services and health 

related education for distantly located patients and health professionals using 

broadband telecommunications technologies. With Federal and state support, we 

have created and serve as the hub of a 60 site network of community hospitals, Critical Access Hospitals, a veteran’s hospital, veteran’s clinics, federally qualified community health centers, rural clinics, prisons, schools and state health department 

clinics located primarily in rural communities in western, southwestern, central and 

eastern Virginia. 

104

To date, we have facilitated more than 12,500 patient encounters linking remotely 

located patients and our University of Virginia health professionals representing 

more than 30 different medical and surgical subspecialties. These services are provided on a scheduled basis or emergently, as needed, at any time, day or night. We 

offer store and forward services such as screenings for diabetic retinopathy or breast 

and cervical cancer. We have provided more than fifty thousand radiographic interpretations through our teleradiology program. We provide live interactive consultations using traditional models of video-teleconferencing and critical care applications, such as acute stroke evaluation and treatment, using traditional 

videoconferencing and robotic ‘‘remote presence’’ technologies connecting emergency 

physicians with stroke neurologists. We have saved lives, supported timely interventions, and spared patients and their caregivers unnecessary travel and expensive 

transfer when feasible. 

At the Remote Area Medical Clinic in Wise, in addition to on-site clinical services, 

we offer telemedicine facilitated subspecialty consultations and mobile digital mammography services transmitted over broadband linkages for immediate interpretation by our radiologists. 

Through our telehealth network, we have broadcast thousands of hours of health 

professional, student and patient education programs otherwise not locally available. We offer access to cancer clinical trials for patients and collaborative tumor 

boards for health professionals serving those patients. 

C. The enormous benefits of Federal programs that support the development and deployment of telehealth technologies and networks (such as 

the USDA Rural Utilities Service Distance Learning and Telemedicine 

Grant Program). 

Federal funding has been critical to the development and deployment of telehealth 

technologies and networks across the nation. The University of Virginia Telemedicine network has benefited greatly from USDA funding through the Rural Utilities 

Service Distance Learning and Telemedicine (DLT) Grant Program and through the 

USDA Community Facilities Program. We have expanded services to more than a 

dozen healthcare facilities with USDA grants and recently have launched a major 

rural cancer outreach initiative with a 2007 grant from the USDA DLT program. 

Since the inception of the program in 1993, hundreds of RUS grants have been 

awarded to telemedicine projects similar to our own. This funding has been critical 

to the development of rural telemedicine networks nationwide. The USDA Rural 

Broadband Grant and Loan Program has supported the deployment of communications infrastructure which underpins successful telemedicine, E-health applications 

and health information exchange. 

We have also received critical funding from other Federal agencies including the 

Health Resources Services Administration (HRSA), the Department of Commerce, 

the Federal Communications Commission (FCC), the Dept. of Housing and Urban 

Development, and the Appalachian Regional Commission. 

We applaud the Rural Utilities Service for its process of identification of rurality 

re eligibility for the DLT program. These USDA definitions are simple and practical 

and are very much aligned with community gaps in specialty health professional 

services. Ironically, these definitions include communities otherwise deemed ineligible for other Federal telehealth-related services—such as reimbursement under 

Medicare or communications discounts in the FCC Rural Healthcare Support Mechanism of the Universal Service Fund. These issues will be addressed below but raise 

the concern that the long-term sustainability of telemedicine projects established 

through this program and other Federal telehealth programs may be at risk. 

We urge Congress to support greater levels of funding for USDA and other Federal programs that expand telehealth initiatives, and to facilitate policies that more 

broadly integrate telehealth into mainstream healthcare. 

D. The role of Congress in fostering greater deployment of telehealth technologies: 

The telehealth community is indebted to Congress for its commitment to foster 

an environment that enhances access to healthcare for all Americans, regardless of 

rural or urban location. 

Notwithstanding an initial climate of non-reimbursement from third party payers, 

high telecommunications costs, limited deployment of broadband services in many 

rural communities, high equipment costs, restrictive state licensure regulations and 

a general skepticism of the ability to provide quality care via such technologies, we 

and other telehealth providers have persevered in our efforts to offer our rural patients access to the same quality healthcare and educational services enjoyed by our 

urban citizens. 

105

Such programs have only been realized with the help of the Congress for the funding of telemedicine demonstration projects in all 50 states, in fostering a climate of 

competition in the telecommunications sector, in mandating reimbursement through 

the Medicare programs and as feasible, by encouraging states to do the same 

through their Medicaid programs. 

Despite a favorable revision of Medicare telehealth rules brought about by the 

Medicare Benefits Improvement and Protection Act of 2000 (BIPA), many critical 

telehealth facilitated services are still considered ineligible for Medicare reimbursement based on the location and the type of consult origination site. Indeed, Medicare 

expenditures for telehealth in the 6 years that followed BIPA were reported by the 

Center for Medicare and Medicaid Services (CMS) as less than $5 million. 

We applaud Congress for the passage of the very recent Medicare legislation that 

expands the eligible consult origination sites. Still there are many appropriate and 

worthy clinical sites from which telehealth consultative services are not reimbursed, 

such as non-hospital based dialysis facilities. Medicare will only reimburse telehealth services that originate in rural locations, based on a definition of rural far 

less inclusive than that of the USDA or even the FCC. Consults cannot be reimbursed by Medicare if that originating site is not located in a designated health professional shortage area, or a federally designated county wide metropolitan statistical area (MSA). 

Store and forward services are ineligible for Medicare reimbursement other than 

services provided in Alaska and Hawaii. Home telehealth technologies provide well 

documented improvements in health status, and should be reimbursable as a part 

of a comprehensive care program designed to reduce improve clinical outcomes and 

lower healthcare costs. Practitioners eligible for Medicare for in-person services delivered in the home should be reimbursed for similar services provided using telehealth technologies. 

We strongly commend Congress for the passage of the Telecommunications Act of 

1996, and its effect in bringing about a reduction in the cost of communications 

services and an increase in the deployment of broadband connectivity to our rural 

communities. In 1995, the monthly ongoing cost of a T1 connection from Charlottesville to Wise, Virginia was $5,800 per month. In 2008, with Universal Service Fund 

discounts, that same service now costs $200/month. And yet, the Rural Healthcare 

Support Mechanism, as mandated in the Telecommunications Act, still remains significantly underutilized, in part because statutory barriers prevent the program 

from achieving the goals envisioned by Congress. Many communities designated as 

rural by USDA standards do not qualify for Universal Service Fund support by virtue of uncoordinated agency definitions of rurality. 

The time limited Rural Healthcare Pilot Program, launched in November 2007, 

holds promise to expand the deployment of broadband services for purposes of telemedicine and e-health, however, this program is also fraught with limitations that 

pose barriers to its success. As an example, neither administrative costs of managing the project nor programmatic evaluation are eligible for support in the Rural 

Healthcare Pilot Program. 

Any effort to coordinate and facilitate greater utilization and cost-effective deployment of telemedicine initiatives will ultimately enhance the sustainability of rural 

telemedicine programs and by inference, the health of our rural citizens. Without 

coordination across all the agencies, we are at risk of engendering obsolescence in 

the Federal Government’s considerable investment in telemedicine programs. 

Conclusion: 

In conclusion, by

a. Increasing Federal funding for quality demonstration projects and 

grant programs,

b. Further reducing both statutory and regulatory barriers to telehealth in Medicare,

c. Aligning Federal agency definitions of rural with specialty

healthcare shortages, and in particular, using as a model, the definitions of rural applied by the USDA Distance Learning and Telemedicine Grant Program,

d. Encouraging the use of (and reimbursement for) store and forward 

telemedicine, and home telehealth, and

e. Further improving the Rural Healthcare Support Mechanism,

Congress has an opportunity by to improve access to locally unavailable quality 

healthcare services that reduce rural—urban disparities and improve the health of 

all Americans.

106

Thank you for this opportunity to offer testimony before the Committee today. I 

would be happy to respond to any questions.

The CHAIRMAN. Thank you. 

Thanks to each of you and for speaking right to the point. 

I want to invite Mr. Goodlatte, if he has any questions. 

Mr. GOODLATTE. Well, thank you, Mr. Chairman. I do, indeed. 

You are right, a picture is worth a thousand words. And you 

mentioned that clinic. Do you have any means of providing followup care to all those people when they come in and wait in line like 

that and get some initial advice? Is there a way to follow up? 

Dr. RHEUBAN. Absolutely. What we try to do is refer patients to 

a medical home in their community. So we refer patients to their 

federally qualified health centers and rural clinics. 

And since we make every effort to register every patient that we 

see as a UVA patient, they have an electronic medical record, and 

we can provide telehealth-facilitated follow-up care for those patients when they go to the community health centers and hospitals 

that are connected back to UVA. 

Mr. GOODLATTE. I imagine you find people of every kind of circumstance—some people who have minor problems, some people 

who have very major problems, some people have health insurance, 

some people who don’t, some people who are under Medicaid. Tell 

me about how you sort through all that. 

Dr. RHEUBAN. We actually see everyone, every comer; it doesn’t 

matter what their health insurance status is. And then, again, 

when they go to the community health centers, that is where the 

sliding scale applies for them. And we provide free care during 

those clinics. 

We bring a mobile digital mammography van. We do cancer 

screenings. We do sigmoidoscopies for patients who unfortunately 

have to be prepped using porta-potties at that clinic. It is a very 

dire situation, but we are there to serve. And no patient is ever 

turned away. 

Mr. GOODLATTE. So, do you have a whole array of people back 

at UVA or other hospitals that are waiting to take a look at them, 

as they are trying to do their other jobs back at the hospital at the 

same time? 

Dr. RHEUBAN. We do provide follow-up at UVA, and———

Mr. GOODLATTE. No, I mean during the———

Dr. RHEUBAN. Oh, we do telemedicine, yes, sir. We provide telehealth encounters in this clinic, but we bring a host of subspecialists with us to participate in that clinic. And the Virginia Dental 

Association brings 60 dental chairs and provides dental care, as 

well, from VCU dentists. 

So we do do telehealth for what we don’t have onsite, but we 

bring a lot of specialists as well. 

Mr. GOODLATTE. What would you say is the biggest challenge 

that you face in providing more telemedicine, telehealth services? 

Dr. RHEUBAN. The largest challenge that we face, quite frankly, 

is the lack of reimbursement. We do not turn away any patient. We 

see everyone via telehealth. I think telehealth would exponentially 

increase nationwide if consultant physicians would be able to be 

paid for the services we provide. And there are provisions through 

Medicare, but as I articulated, it is not nearly enough. 

107

Mr. GOODLATTE. And has this continued to grow exponentially, 

or is it leveling off? Where would you say it is? 

Dr. RHEUBAN. Telehealth is continuing to grow. And, certainly, 

we are very grateful for the infrastructure grants that we get from 

HRSA, from USDA. But it would be very important to orchestrate 

policies across the various agencies so that we can further facilitate 

the use of telehealth, such as the rural definition, such as reimbursement, such as the cost of telecommunications services. 

Mr. GOODLATTE. Other than the cost, maybe that is the biggest 

problem with the broadband programs, but are there things that 

need to be retooled with regard to broadband programs to do a better job in enhancing what you can do with telemedicine? 

Dr. RHEUBAN. We are very grateful for the rural health care support mechanism. And if you polled all the telehealth providers 

around the country, each one of them would say, without that discount program, our programs would go away. It would still be 

unaffordable. We still have many areas in the Commonwealth of 

Virginia where there is no competition, and so we rely on that program. 

That being said, there are statutory barriers in that program 

that could be improved by Congress, if and when you are willing 

to relook at the Telecommunications Act, so that we can serve more 

individuals through telehealth. 

Mr. GOODLATTE. Good. 

Dr. Myers, do you believe that health information technology legislation that has been drafted in other committees—it is not our jurisdiction—accommodates the concerns specific to rural areas? 

Dr. MYERS. I am sorry to say that I don’t believe that I am comparatively well enough versed in the materials in those. We can 

certainly work on that and get you a report in a very few days. But 

I would hesitate to answer off the top of my head. 

Mr. GOODLATTE. Sure. I have been in that situation myself when 

a question comes right out of left field. 

Anybody else have any thoughts on that subject? 

Mr. FLUHARTY. Just quickly, I would say overwhelmingly the reimbursement challenge is the issue. I think that is something that 

could be statutorily addressed. It is the overwhelming challenge. 

Mr. GOODLATTE. Very good. 

Mr. Chairman, thank you very much. I think my time has just 

about expired. 

And I want to thank all of our panelists. 

The CHAIRMAN. Thank you, Mr. Goodlatte. Good to have you 

with us. 

Mr. Pomeroy? 

Mr. POMEROY. I just observed the Ranking Member may not 

have had well-formulated answers to off-the-wall questions, but it 

never stopped him from trying to———

[Laughter.] 

Mr. GOODLATTE. Never. 

Mr. POMEROY. Thank you, panel. This is a very interesting panel. 

Extraordinary, Dr. Rheuban, I represent very rural areas in 

North Dakota. But you are dealing with some issues that are new 

to my understanding of rural health care in that region of the 

country. 

108

One of the things we are talking about in the context of health 

reform is information technology as a means to improve our collective understanding of what works, what doesn’t work in medicine. 

It seems to me we have been very slow on the uptake on moving 

to more data-based medicine in this country. It was a topic that 

was often discussed when I was an insurance commissioner, and I 

haven’t been an insurance commissioner since 1992. So we have 

really been slow at getting moving here. 

But it is going to take some considerable infrastructure investment. And we are worrying about rural practices that are going to 

have a harder time costing this out because they don’t see as many 

patients. 

I am wondering, Mr. Fluharty, if you have looked at this area. 

Dr. Myers, you might want to comment on what it is going to 

take to have the rural sector fully participating in health IT in 

ways that aren’t financially punishing to our practitioners. 

Mr. FLUHARTY. I would also just like to commend UVA. It is a 

phenomenal program. I think it also points to the unbelievable 

need that exists in our current institutional challenge. 

Congressman, while you are here, I would just simply say for the 

Congressman that asked before, the Rural Access Center at North 

Dakota has indeed everything online that was asked for, Mr. 

Chairman. And our colleague, Mary Wakefield, who is a constituent of the Congressman’s, heads that center. And in response 

to that question, that is an example of how technology is starting 

to move in the field. 

Let me simply say the Senate language that would have looked 

at, within the Agriculture Committee, infrastructure for IT development, quality control and information systems as a potential infrastructure grant to USDA under the Agriculture Committee, we 

felt was very good legislation. 

The challenge is going to be in the small grants program at HHS, 

securing sufficient capital to move that infrastructure design into 

the field at a scalable level. And that is going to be one of the challenges, who will step up with the infrastructure commitment? Is it 

Federal, is it state, is it the private sector? 

And, when we move to the quality considerations that is going 

to drive CMS and we look at e-prescription, we have a huge disconnect, Congressman, in the capacity of all our rural providers. 

And I am sure the rest of the panel would like to comment on that. 

Mr. POMEROY. Dr. Myers? 

Dr. MYERS. I think I would add that the different silos in information technology and telecommunicated health care are converging, in a way, and yet we still operate in some patterns that 

were set up way back in the 1970s and 1980s. And by that I mean 

that imaging; all your X-rays are now digitized the same as an 

electronic medical record. And the way you abstract those for quality studies are all in the same medium now. But we tend to think 

of those in different boxes. 

I personally believe that we could use help resolving the interoperability issues so that different small shops work for each other. 

If you are running a half-billion-dollar enterprise, you can figure 

out those interoperability problems. But if you are a little place out 

in the country, you really can’t. 

109

So I see technical assistance—and that is not to undervalue the 

Office of Telemedicine Coordination. I have the title wrong, and I 

am sorry. But the technical assistance issues and coordination 

issues are very important. And for a success story, we could look 

at Denmark and Scandinavia for putting all these things together. 

Mr. POMEROY. Final point: I want to thank you, Dr. Myers, by 

the way, an aside, for your work on behalf of the National Rural 

Health Association, Co-Chair of the Rural Health Care Alliance. I 

think it has gotten a lot accomplished for rural medicine, and we 

appreciate your work, sir. 

Dr. MYERS. Thank you. 

Mr. POMEROY. This is to Mr. Fluharty. 

As you look at rural health policy, we are always talking about, 

gosh, you have to pay us more, you have to pay us more, you have 

to pay us more fairly, this differential doesn’t cut it. Those are 

standard rural arguments relative to Medicare reimbursements. 

More recently, I have become intrigued with the notion of advancing the argument that we ought to pay for systems that are 

achieving better results at lower cost. And we have tried to learn 

from the financial—we should reverse financial incentives that 

drive care to costly inefficient places even at the expense of quality. 

Where we pay more and get less, by way of quality outcome, than 

systems that you are more likely to see in rural America that are 

primary care medicine-based and achieve better value, better outcome, lower cost. 

Is there anything within your body of work and the substantial 

research capacity within your organization that can help us flesh 

out some of this? 

Mr. FLUHARTY. Congressman, you know the work probably already, given all of your service on the caucus. But there is a body 

of work, and we would be glad to forward some things. I would 

make two or three comments. 

The research is very, very clear that there are a set of quality 

indicators in which our rural practitioners are advantaging patients vis-a`-vis urban areas. Our overall concern is the development 

of innovation systems of care that think about return on investment but use population health as an indicator. And you have 

named it essentially, Congressman. 

I will simply say in our next SEBAS work with RUPRI—and we 

are building that system for USDA—looking at community facilities, we are trying to indigenize, essentially, population care dynamics with a return on investment that talks about new quality 

of care systems. If we can do that, it is going to advantage the Agriculture Committee because there are many ways in which a rural 

presentation of a problem is resolved at a lower cost and a higher 

quality outcome. We just don’t have those numbers yet. It is difficult. But we clearly need to move to those systems. 

When we do that, what Dr. Myers raises is the real question. If 

we think about continuum of care, we are going to have to have 

some jurisdiction say, it may be linked to a system outside of our 

county, and how do we build that? And many states are already 

doing that. UVA is but one example. North Carolina is doing great 

work. 

110

But if this Committee would stay on that from a viability standpoint within USDA, we might move the SEBAS facility assessment 

to beginning to make those investments so that the indicators are 

more than just economic return on investment. 

Mr. POMEROY. I know my time has expired. I think that would 

be very, very helpful. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Yes, that sure would be. Thank you. Thanks very 

much. 

All right. Mr. Spade, you had mentioned that Congress can improve collaboration by creating incentives for rural health providers 

to work together with their rural communities. Can you just list for 

us what types of incentives you are talking about to make sure 

that collaboration happens? 

Mr. SPADE. Sure. For instance, the alignment of quality of care 

incentives between physicians and hospitals would be a great example, where physicians are now moving into an incentive-based 

system, pay for performance, if you will, and hospitals as well. 

Right now those are not aligned. You know, physicians have different ways that they are receiving reimbursement for their hospitalized patients versus the hospitals. The hospitals are going to 

be incentivized on quality performance. The physician working that 

needs to also be in alignment. 

Outpatient settings, as well: If you think about, let’s say, evidence-based practice in diabetes or asthma care, those need to be 

aligned with federally qualified health clinics, community health 

centers, migrant health centers, as well as the private practice of 

medicine, Medicaid programs for instance. So that is one example. 

Another example would be in the FQHC and community health 

clinic program where more funding is being put into creating those. 

But, in North Carolina, we have had to work quite a bit to try to 

engage across the health care settings to bring community health 

clinics and FQHCs into the local health care environment, to be a 

part of working with a hospital, as part of working with private 

physicians. 

So those types of things are key. For instance, in that program, 

you could incentivize it in their grant program, make it a much 

stronger incentive piece. Make it very clear what collaboration is 

in those organizations. 

So there is a ton of opportunity. Also, you had the—this is a 

great question that Representative Pomeroy asked. Community 

care of North Carolina is an award-winning program that is using 

Medicaid to bring together physicians, hospitals and public health 

to operate a health care system, an integrated health care system, 

based on quality and preventing disease for Medicaid clients and 

uninsured residents of North Carolina. 

The cool thing about that program and the reason it is award- winning is it saved $230 million over a 2 year period of time. It 

drove incentives together where we improved the care, saved 

money for the government program, and had increases of health 

status of the clients being served. 

Those are the kind of opportunities we need to find, where we 

are saying, across the health care spectrum, we are working together—public health, federally funded health centers, private 

111

medicine plans, health care plans that are also engaged in this 

work and activity. And that is the kind of alignment we need to 

see. 

The CHAIRMAN. Thank you very much. 

Dr. Myers, you mentioned that current loan program guarantees 

for rural health care facilities are a burdensome process. What specific changes would you recommend to make sure that the costly 

application requirements in these cumbersome requirements would 

not be put on the applicant? 

Dr. MYERS. I would say, starting out, that I don’t think anybody 

in the field would undervalue the work that Under Secretary Dorr 

has put into doing his best, given the terrain he was dealt, to make 

that process work better. 

One of the real problems just is sheer duration, and part of the 

duration goes into proving that you are not really able to get private money. And so you have to accumulate three, four, five failures before you can go forward with access to the USDA money. 

It might be possible to devise an annually negotiated formula 

that would specify eligibility rather than going through a repetitive 

failure process to qualify for some of that loan money. 

People that have worked with this far more than I may have 

other suggestions, but that would be one for starters. 

The CHAIRMAN. If you could, please follow up with how you 

would suggest doing that. Because I know with the network you 

have in the National Rural Health Care Association and since you 

are here on behalf of that association, would you go back to their 

staff and ask them specifically to make a recommendation? 

Because if it is a burdensome process, we do want to make specific changes or make suggestions for those changes. And we would 

welcome, with the great respect that the National Rural Health Association has, we would welcome your input. And if you could do 

that, that would be most helpful. 

Dr. MYERS. Absolutely. 

The CHAIRMAN. I know we are going to be going into votes momentarily. I want to thank all of you for your attendance today at 

this important hearing. 

Under the rules of the Committee, the record of today’s hearing 

will remain open for 10 additional calendar days to receive additional material and supplementary written responses, as we have 

specifically asked of witnesses today. 

We would ask you to please submit those within 10 calendar 

days from today. 

This hearing of the Subcommittee on Specialty Crops, Rural Development and Foreign Agriculture is now adjourned. 

I want to thank you all for your attendance and support. May 

God bless you in the very important work you are doing to help 

rural citizens in America. Thank you very much. 

The meeting is adjourned. 

[Whereupon, at 4:10 p.m., the Subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

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SUBMITTED QUESTIONS

Responses from Hon. Thomas C. Dorr, Under Secretary for Rural Development, U.S. Department of Agriculture 

Question Submitted by Hon. John Barrow, a Representative in Congress from Georgia 

Question. Please provide a response to the concerns expressed regarding Medicare 

C payment disparity. I recognize that this is not your jurisdiction, but Mr. Dorr indicated that he would get back to him on this. 

Answer. The scope of the concern raised at the hearing is not within USDA’s jurisdiction. We respectfully defer to HHS to answer this question. 

Question Submitted by Hon. Henry Cuellar, a Representative in Congress from Texas 

Question. Please provide list of the different rural health care programs for all 

agencies within the Working Group and plan for creating a ‘‘one-stop shop’’/web 

link, along with information on what is available on distance learning/telemedicine. 

Same request made to HHS. 

Answer. The USDA Rural Development Telecommunications Program manages 

the Distance Learning and Telemedicine Program (http://www.usda.gov/rus/

telecom/dlt/dlt.htm). The American Telemedicine Association has a link to the 

USDA Distance Learning and Telemedicine Program on its website (http://

www.americantelemed.org/news/links.htm). The Federal Communications Commission also links to the USDA site (http://www.fcc.gov/cgb/rural/ and http://wireless.fcc.gov/outreach/index.htm?job=broadbandlhome). We have coordinated with 

the Dept. of HHS on their Health Information Technology initiative and with the 

FCC on their telehealth pilot program. The www.grants.gov website provides information on grant programs available from Federal agencies, and there is a search 

capability. 

USDA Rural Development welcomes any further suggestions concerning websites. 

Question Submitted by Hon. Mike McIntyre, a Representative in Congress from 

North Carolina 

Question. How telemedicine would best be accomplished in states, using medical 

universities and research centers. 

Answer. The Telecommunications Program’s Distance Learning and Telemedicine 

(DLT) loan and grant programs provide funding for telemedicine projects throughout 

rural America. We do not believe that there is one ‘‘best’’ model for deploying telemedicine services. Flexibility, innovation, and the ability to adapt delivery mechanisms to local circumstances are important considerations. As technology advances, 

we are prepared to explore new options. 

Many medical universities and research centers have participated in the telemedicine program. Participation may evolve over time as institutions gain experience 

with the program and identify new opportunities for deployment. 

DLT grantees have included for-profit and nonprofit organizations, universities, 

private hospitals, clinics, etc. Program staff interacts with telemedicine industry associations and organizations to stay current on best practices and approaches. Information on grant projects is available on the Rural Development website, with 

project descriptions and contacts. Headquarters and field staff provide information 

and support to prospective applicants, including how to apply workshops. Outreach 

activities are conducted at the national, state and local level. 

Responses from Tom Morris, Acting Associate Administrator, Office of 

Rural Health Policy, Health Resources and Services Administration, 

U.S. Department of Health and Human Services 

Question Submitted by Hon. John T. Salazar, a Representative in Congress From 

Colorado 

Question. A list of the different programs, including retention programs, HHS has 

directed toward rural areas. 

Answer. Below is a list of HHS rural and retention programs:

• Health Center Program—Health Centers are community-based and patientdirected organizations serving populations with limited access to care. Health 

Centers are open to all regardless of ability to pay. Moreover, the Health Centers provide comprehensive primary care service on a sliding fee based on the 

patient’s income. Health Centers improve the health status of underserved populations living in isolated rural communities, where residents often have no 

where else to go. To meet this need, over half (53 percent) of Health Centers 

serve rural populations. (HRSA)

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• National Health Service Corps (NHSC)—The NHSC Scholarship Program 

awards scholarships to health professions students committed to a career in primary care and service in underserved communities of greatest need. Awards are 

targeted to individuals who demonstrate characteristics that are significantly 

related to a probable success in a career of service to the underserved. The 

NHSC Loan Repayment Program offers fully trained primary care clinicians the 

opportunity to receive assistance to pay off qualifying educational loans in exchange for service in a HPSA of greatest need. Both NHSC scholars and loan 

repayers are equally ready to serve. This service commitment is for a minimum 

of 2 years in an underserved community. (HRSA)

• Nursing Education Loan Repayment Program (NELRP)—This is a competitive program that repays 60 percent of the qualifying loan balance of participating registered nurses in exchange for 2 years of service at a critical shortage 

facility. Participants may be eligible to work a third year and receive an additional 25 percent of the qualifying loan balance. (HRSA)

• Nursing Scholarship Program (NSP or ‘‘Nursing Scholarship’’)—This is 

a competitive program for individuals attending schools of nursing. The scholarship consists of payment for tuition, fees, other reasonable educational costs, 

and a monthly support stipend. In return, the students agree to provide a minimum of 2 years of full-time clinical service (or an equivalent part-time commitment, as approved by the NSP) at a health care facility with a critical shortage 

of nurses. (HRSA)

• National Rural Recruitment and Retention Network (3RNet)—This network links together rural health care provider recruitment experts in 45 states. 

The 3RNet links providers in search of rural practice opportunities with rural 

communities in need of practitioners. More information on the 3RNet is available at http://www.3rnet.org. (HRSA)

• Capacity Building to Develop Standard Electronic Client Information 

Data System (http://www.raconline.org/funding/fundingldetails.php?fundinglid=1754)—Funding to organizations funded under 

Part A–D of the Ryan White HIV/AIDS Treatment and Modernization Act of 

2006 to promote the development of standard electronic client information data. 

(HRSA)

• Community Economic Development Program Operational Projects

(http://www.raconline.org/funding/fundingldetails.php?fundinglid=516)—

Grants to provide technical and financial assistance for community economic development activities designed to address the economic needs of low-income individuals and families through the creation of employment and business opportunities. (ACF)

• Empowering Older People to Take More Control of Their Health 

Through Evidence-Based Prevention Programs: A Public/Private Collaboration (http://www.raconline.org/funding/fundingldetails.php?fundinglid=1267)—These grants are designed to mobilize the 

aging, public health and nonprofit networks at the state and local level to accelerate the translation of HHS funded research into practice. (AoA)

• Faculty Loan Repayment Program (FLRP) (http://www.raconline.org/

funding/fundingldetails.php?fundinglid=314)—A loan repayment program 

for individuals from disadvantaged backgrounds who serve as faculty at eligible 

health professions schools for a minimum of 2 years. (HRSA)

• Office of Child Support Enforcement Special Improvement Project 

(SIP) Grants (http://www.raconline.org/funding/fundingldetails.php?fundinglid=325)—Funding for special improvement projects 

which further the national child support mission, vision, and goals. (ACF)

• Projects of National Significance: Family Support 360 for Military Families (http://www.raconline.org/funding/fundingldetails.php?fundinglid=1896)—Grants to plan and implement up to three 

Family Support 360 Centers for military families of children with developmental disabilities. (ACF)

• Rescue & Restore Victims of Human Trafficking Regional Program

(http://www.raconline.org/funding/fundingldetails.php?fundinglid=1681)—

Grants to continue and expand the efforts through regional grantees who will 

serve as the focal point for an intensification of local outreach to and identification of victims of severe forms of trafficking in persons. (ACF)

• Take Action: Healthy People, Places, and Practices in Communities 

Project (http://www.raconline.org/funding/fundVerDate 0ct 09 2002 10:40 Nov 03, 2009 Jkt 041481 PO 00000 Frm 00118 Fmt 6621 Sfmt 6621 I:\DOCS\110-42\51222.TXT AGR1 PsN: BRIAN
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ingldetails.php?fundinglid=1452)—Funding to evaluate activities in local 

communities across the HHS regions that support and promote healthy lifestyles. (OPHS)

• Delta Health Initiative Cooperative Agreement (http://

www.raconline.org/funding/fundingldetails.php?fundinglid=1183)—This Cooperative Agreement Program is to provide funding to an alliance to address 

longstanding unmet rural health needs (access to health care, health education, 

research, job training and capital improvements) of the Mississippi Delta. 

(HRSA)

• FLEX Critical Access Hospital Health Information Technology Network 

Implementation Grants (CAHHITN) (http://www.raconline.org/funding/

fundingldetails.php?fundinglid=1610)—Funding for up to 15 grantees to support the development of one (1) Flex CAH–HIT Network pilot programs in each 

state that is awarded a grant. Only current Flex Grantees may apply. (HRSA)

• In Community Spirit—Prevention of HIV/AIDS for Native/American Indian and Alaska Native Women Living in Rural and Frontier Indian 

Country Program (http://www.raconline.org/funding/fundingldetails.php?fundinglid=1190)—To support collaborative efforts to provide 

accurate prevention education to Native/American Indian and Alaska Native 

(AI/AN) women living in rural and frontier Indian Country. (OWH)

• Medicare Rural Hospital Flexibility Program (http://www.raconline.org/

funding/fundingldetails.php?fundinglid=1609)—Grants to improve and sustain access to appropriate healthcare services of high quality in rural America 

by supporting conversion of small rural hospitals to critical access status, helping develop rural health care networks, and strengthening rural EMS. (HRSA)

• Medicare Rural Hospital Flexibility Program Evaluation-Cooperative 

Agreement (http://www.raconline.org/funding/fundingldetails.php?fundinglid=1864)—The evaluation project will continue to assess the effectiveness of implementing the grant program in states and in rural 

communities and to provide recommendations for increasing the impact of the 

program to improve healthcare in rural America. (HRSA)

• One-Year Rural Health Research Grant Program (http://

www.raconline.org/funding/fundingldetails.php?fundinglid=679)—Grants to 

conduct and disseminate policy-relevant research on issues of national significance in the area of rural health services. (HRSA)

• Targeted Rural Health Research Grant (TRHR)—This grant provides funding for policy-oriented research projects which address critical issues facing 

rural communities in their quest to secure affordable, high quality health services. (HRSA)

• Rural Health Care Services Outreach Grant Program (http://

www.raconline.org/funding/fundingldetails.php?fundinglid=60)—The emphasis of this grant program is on health care service delivery through creative 

strategies requiring the grantee to form a consortium with at least two additional partners. (HRSA)

• Rural Health Network Development Grant Program (RHND) (http://

www.raconline.org/funding/fundingldetails.php?fundinglid=61)—This grant 

program is designed to support organizations that wish to further ongoing collaborative relationships among health care organizations to integrate systems 

of care administratively, clinically, financially, and technologically. (HRSA)

• Rural Health Network Development Planning Grant Program 

(RHNPGP) (http://www.raconline.org/funding/fundingldetails.php?fundinglid=218)—This Rural Health Network Development 

Planning Grant Program supports 1 year of planning to develop integrated 

health care networks in rural areas. (HRSA)

• Rural Health Research Center—Cooperative Agreement Program

(http://www.raconline.org/funding/fundingldetails.php?fundinglid=361)—

Grant awards for Rural Health Research Centers. (HRSA) 

• Rural Policy Analysis Cooperative Agreement (http://www.raconline.org/

funding/fundingldetails.php?fundinglid=1572)—Grant to support research 

and analysis into key policy issues affecting rural communities. (HRSA)

• Small Rural Hospital Improvement Grant Program (SHIP) (http://

www.raconline.org/funding/fundingldetails.php?fundinglid=64)—This program provides funding to small rural hospitals to help them do any or all of 

the following: pay for costs related to the implementation of PPS, comply with 

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provisions of HIPAA and reduce medical errors and support quality improvement. (HRSA)

• State Rural Health Coordination and Development Cooperative Agreement (http://www.raconline.org/funding/fundingldetails.php?fundinglid=947)—Grants to build and sustain rural health 

infrastructure in states. (HRSA)

• Targeted Rural Health Research Grant Program (http://

www.raconline.org/funding/fundingldetails.php?fundinglid=1824)—Grants 

for Rural Health Research studies on a selected number of topics. (HRSA)

• Research on Emergency Medical Services for Children (http://

www.raconline.org/funding/fundingldetails.php?fundinglid=831)—Grants to 

improve the quality and quantity of research related to emergency medical services for children (EMSC). (HHS)

• Frontier Extended Stay Clinic Program (FESC)—Cooperative agreement 

demonstration program to examine the effectiveness and appropriateness of a 

new type of provider, the FESC, in providing health care services in certain remote clinic sites. The FESC is designed to address the needs of patients who 

are unable to be transferred to an acute care facility because of adverse weather 

conditions, or who need monitoring and observation for a limited period of time. 

(HRSA)

• State Offices of Rural Health Grant Program (SORH)—Grants to 

strengthen rural health care delivery systems by creating a focal point for rural 

health within each state. (HRSA)

• Delta States Rural Development Network Grant Program (Delta)—The 

purpose of this grant program is to fund organizations located in eight Delta 

States (Alabama, Illinois, Kentucky, Louisiana, Mississippi, Missouri, and Tennessee) which address unmet local health care needs and prevalent health disparities through the development of new and innovative project activities in 

rural Delta communities. (HRSA)

• Rural Access to Emergency Devices (RAED)—This grant program provides 

funding to rural community partnerships to purchase automated external 

defibrillators (AEDs) that have been approved, or cleared for marketing by the 

FDA; and provide defibrillator and basic life support training in AED usage 

through the American Heart Association, the American Red Cross, or other nationally-recognized training courses. (HRSA)

• Small Health Care Provider Quality Improvement Grant Program 

(Rural Quality)—This grant program supports rural public, rural nonprofit, or 

other providers of healthcare services, such as Critical Access Hospitals or rural 

health clinics. The purpose of the program is to improve patient care and chronic disease outcomes by assisting rural primary care providers with the implementation of quality improvement strategies, with a focus in quality improvement for chronic disease management. (HRSA)

• Radiation Exposure Screening and Education Program (RESEP)—

RESEP supports healthcare organizations to improve the knowledge base and 

health status of persons adversely affected by the mining, milling, or transporting of uranium and the testing of nuclear weapons for the nation’s weapons 

arsenal. (HRSA)

• Black Lung Clinics Program (BLCP)—This program seeks out and provides 

miners (active or inactive) with the intention of minimizing the effects of respiratory impairment or improving the health status of miners or coal miners exposed to coal dust as a result of employment and to increase coordination with 

other services and benefits programs to meet the health-related needs of this 

population. (HRSA)

• Program of All-Inclusive Care for the Elderly (PACE)—The PACE program provides a range of services to help certain Medicare and Medicaid beneficiaries who meet their state’s standards for nursing home care to continue living safely at home rather than be institutionalized. (CMS)

• Telehealth Network Grant Program (TNGP)—Grant program that provides 

grants to health care networks to develop and evaluate the use of Telehealth 

technologies to improve access to underserved communities. The TNGP focuses 

on providing innovative telehealth services to rural areas. From March 2007 

through February 2008, nearly 140 thousand telehealth visits for 46 different 

specialty services were provided to patients in rural communities under this 

Program. (HRSA)

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• Telehealth Resource Center Grant Program—HRSA supports five regional 

and one national telehealth resource centers to provide technical assistance to 

rural communities interested in providing or receiving telehealth services. The 

five regional centers work together to make available technical assistance from 

the nation’s experts on practical approaches to creating a successful telehealth 

program, whereas the national center focuses on technical assistance to address 

the legal and regulatory barriers to sustaining successful programs. (HRSA) 

Question Submitted by Hon. Jim Costa, a Representative in Congress from California 

Question. Information on rulemaking status and effects on rural areas. 

Answer. HRSA received many substantive comments on the February 29, 2008 

Proposed Rule on the Designation of Medically Underserved Population and Health 

Professional Shortage Areas and will consider these comments. 

Question Submitted by Hon. John Barrow, a Representative in Congress from Georgia 

Question. A response to the concerns expressed regarding Medicare C payment 

disparity. 

Answer. We understand that in 2006 and 2007 there were complaints from Critical Access Hospitals (CAH) that Medicare Advantage (MA) plans were not making 

timely payments and were requesting certain documentation in order to receive payment. Most of these complaints were related to payments from non-network private 

fee-for-service (PFFS) plans. The Centers for Medicare & Medicaid Services (CMS) 

has provided instructions to contracted MA plans on making appropriate payments 

to contracted and non-contracted CAHs. 

MA comprises a number of different health plan options, from traditional managed care HMOs to PFFS options that provide a wide range of providers. In PFFS 

plans that use ‘‘deeming’’ to obtain services for their beneficiaries at providers with 

whom the plan has no contract, the plan is required to pay the CAHs based on 

standard Medicare FFS rules—in other words, 101% of their costs—just as FFS 

does—even if they are used by the PFFS plan’s members on a non-emergent basis. 

CAHs that choose to contract with an MA plan to become part of its network are 

reimbursed at the rate that was agreed upon between the CAH and the MA plan. 

Since there is no Federal guarantee of supplemental payments to CAHs, CAHs that 

contract with any type of MA plan must negotiate the most advantageous rate to 

the best of their ability. CMS is prohibited from interfering in the contracting process between MA plans and providers. 

We also understand there have been complaints that MA plans are not cost settling with CAHs, in order to be paid like Medicare. Although CAHs may cost settle 

with their Fiscal Intermediary (FI) for FFS claims, MA plans are not required to 

cost settle. FIs work directly with CAHs during the course of the CAH’s fiscal year 

to set estimated (a.k.a. ‘‘interim’’) payment rates amounts based on their costs; 

therefore, in order to pay the interim rate to the CAH, MA plans may ask a billing 

CAH to submit a copy of their most recent interim rate letter from their FI. The 

interim rate is sufficient compensation for cost-reimbursed providers. Sometimes the 

CAH ‘‘wins’’ when the cost settlement is downward, sometimes the MA plan ‘‘wins’’ 

when the cost settlement is upwards. Interim rates may change one or more times 

during the year, therefore, it is important plans are aware of the correct rate, since 

they must reimburse the CAH for the rate that is in effect at the time of service. 

Question Submitted by Hon. Henry Cuellar, a Representative in Congress from Texas 

Question. A list of the different rural health care programs for all agencies within 

the Working Group and plan for creating a ‘‘one-stop shop’’/web link, along with information on what is available on distance learning/telemedicine. 

Answer. A list of HHS programs is provided above (Rep. Salazar list). HRSA does 

not maintain a list of rural programs across the Federal Government. However, 

HRSA funds the Rural Assistance Center (RAC) which offers rural residents onestop shopping on health-related rural issues. The RAC collects information about 

rural health funding opportunities from across the Federal agencies. The link to the 

website is www.raconline.org.

Question Submitted by Hon. Mike McIntyre, a Representative in Congress from 

North Carolina 

Question. How telemedicine would best be accomplished in states, using medical 

universities and research centers. 

Answer. University medical centers play a critical role in developing telemedicine 

programs throughout the country, usually acting as the pioneers in establishing 

telemedicine networks and documenting the contribution of these networks to imVerDate 0ct 09 2002 10:40 Nov 03, 2009 Jkt 041481 PO 00000 Frm 00121 Fmt 6621 Sfmt 6621 I:\DOCS\110-42\51222.TXT AGR1 PsN: BRIAN
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proving access to care. However, the role of the universities differs dramatically 

from state-to-state. 

The University of California, Davis is a prominent example of a university and 

state that invest heavily in telemedicine. UC Davis launched one of the earliest programs in 1992, focusing on fetal monitoring in rural communities. Over the years, 

UC Davis created the Telemedicine Learning Center, providing educational programs for health professionals, administrators, and technologies on how to develop 

a sustainable telemedicine program. It is a key provider of telemedicine services to 

rural communities within the state. In 1996, California was the first state to pass 

a law that required providers to be reimbursed for delivering services via telemedicine and in 2006, the legislature allocated $200 million for designing, building and 

equipping facilities in the University of California system that enhance medical education, with an emphasis on telemedicine. 

Universities not only play key roles in service provision and educating/advocating 

for telemedicine, they are often the nexus in statewide initiatives to obtain funding. 

For example, in both Virginia and Arkansas, universities were pivotal players in obtaining significant funds to support the development of pilot programs under the 

FCC’s Rural Pilot program to improve the telecommunications infrastructure for 

telehealth services in rural areas. 

Response from Wayne Myers, M.D., Trustee, Maine Health Access Foundation; Past President, National Rural Health Association 

Question Submitted by Hon. Bob Goodlatte, a Representative in Congress from Virginia 

Question. How would health information technology legislation that has been 

drafted in other committees accommodate concerns specific to rural areas? 

Answer. Representative Goodlatte, thank you for your leadership on issues addressing the high-tech needs of America. 

The main concern of rural health providers is their financial ability to both purchase and then maintain health information technology systems. In most of the HIT 

bills that have been introduced, Congress has sought to address these concerns in 

one of two ways—incentive payments as a percentage of the Medicare payment or 

competitive grant programs to purchase equipment. Rural providers need more. 

Rural facilities have less volume than their urban counterparts. Most of the purchase cost of HIT equipment has a single fixed cost. No matter how many patients 

a provider sees, such equipment is still going to cost approximately the same basic 

amount both to purchase and maintain. So while incentive payments may seem to 

help defer some of the maintenance costs or seem to reward facilities that use the 

technology the most, the neediest rural facilities will not ever be able to use these 

payments to make such purchases. 

Alternatively, grant programs have the promise of providing the upfront cost of 

purchasing HIT equipment. Unfortunately, the grant programs proposed in a number of Congressional HIT bills do not carve out rural providers with a separate pot 

of money or help to weigh rural providers appropriately. Our experience with competitive grants is that it is the largest providers that have the staffing needed to 

compete for such monies. And, even if rural providers end up receiving these grants, 

there is not follow up funding to help them operate these systems. Often ongoing 

maintenance costs exceed the purchase cost within a very short time frame. 

Obviously, some combination of the two with a rural emphasis would be helpful 

to increase HIT utilization in rural America. 

One last thing that I would note, Congress has introduced a variety of different 

programs over the years that have been housed in a number of Federal agencies—

the Department of Agriculture, Department of Health and Human Services, Federal 

Communications Commission—we would strongly recommend using a single lead 

agency to advance these potential initiatives, such as the Office of the National Coordinator for Health Information Technology. Doing so makes it much easier for 

rural providers to access the adequate assistance than dealing with a variety of Federal agencies. 

Response from National Rural Health Association by Charles A. Wells, Jr., 

President, Healthcare Financial Advisers, Inc. 

Question Submitted by Hon. Mike McIntyre, a Representative in Congress from 

North Carolina 

Question. What changes would you recommend to make sure that application requirements for loan guarantee programs are less burdensome and costly for the applicant? 

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Answer. The following comments about the suitability of the USDA loan programs 

for rural hospitals are based on my 30 years of experience working as a financial 

and strategic adviser in this market. During that time, I have assisted several clients in pursuing USDA financing, although none of these transactions have occurred in the last 3 years. 

As an aside I’ve had relatively good experience with USDA on smaller nursing 

home financings, as these projects are typically much smaller and significantly less 

complex. 

Background 

Prior to 2003/2004 there was very limited access to capital for rural hospitals 

(Critical Access Hospitals in particular). Accordingly, the USDA and HUD programs 

were in the forefront of options under consideration. Then the ‘‘conventional’’ tax exempt bond markets (sold primarily to institutional investors such as bond funds, 

banks, and insurance companies) and the underwriting firms who sell to those 

sources warmed up to the cost reimbursement elements of Critical Access Hospitals, 

and the situation improved dramatically. The period from 2004–August 2007 was 

the best time in my working lifetime (1970–2002) for rural hospitals to access capital through conventional, non-governmental sources. From my vantage point, during this period, the governmental programs were non-competitive. 

When USDA and HUD were the only games in town, the deficiencies in their offerings were tolerated, but now the market has changed. However, the last 12 

months have been very tumultuous in the tax exempt markets for rural hospitals, 

and USDA and HUD could once again become relevant. 

When I first encounter a new client situation with a rural hospital (critical access 

or otherwise), I do a fairly quick assessment of their financial history and prospects 

to determine where they might access capital under the most favorable terms. For 

the past 4–5 years, the only clients I would recommend pursuing USDA or HUD 

would be those that I am absolutely certain would be turned down by the conventional markets. 

The following summarizes some of the reasons for this viewpoint:

Direct Loan Program

Loan Size Limitations/Inter-creditor agreement complexities

To my knowledge, the largest USDA direct loan ever made to a hospital was $7 

million (for a CAH in Iron County, MO). Most USDA direct loans are in the range 

of $2–$4 million. Most major replacement projects for Critical Access Hospitals will 

require funding in excess of $20 million. This means that the USDA Direct loan 

must be married with another debt instrument. At the conversational level, the 

USDA people will say ‘‘no problem, we’re happy to do a loan on a parity basis with 

another lender(s).’’ However, it has been my experience that this can be a troublesome once the USDA attorneys become involved, resulting in USDA seeking a preferred position. This is an enormously important ‘‘detail.’’ Whatever savings might 

occur with the lower rate on $5 million of a USDA direct loan will be offset by increases in the costs of the remaining $15+ million.

Prevailing Wage

If a hospital accepts governmental money, it will subject the entire project to ‘‘prevailing wage’’ (which I believe is part of the Davis-Bacon Act). For example, in a 

recent rural Illinois project this meant that unskilled laborers were making $41/hr 

to push a broom on the construction site. This can add 3%–7% to overall construction costs. This can also upset the local labor market significantly.

Time Required for the Application Process

Almost all decisions on the direct loan program are made in August–September 

(the end of the government’s fiscal year is 9/30). One typically submits an application in June seeking preliminary approval in August with final approval in either 

September or October. For applications not funded through the state allocation, the 

next step is to access the ‘‘pooling’’ process to see if there are unused funds from 

other states. This could delay acceptance until October/November or rejection at 

that time. In order to file this application, you will need an ‘‘examined’’ forecast 

versus the ‘‘compiled’’ forecast. This typically increases the hospital’s cost by $25,000–$50,000. 

Hospital projects that don’t fit the government’s calendar are at a disadvantage 

and are faced with the decision to either slow down their efforts or seek other, more 

flexible sources of capital. 

The most cumbersome part of the application process is that the construction 

drawings must be substantially complete so USDA architects can review the plans. 

The practical implications of this are that the hospital must spend several hundreds 

of thousands of dollars in architectural fees without having any assurance that their 

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project will be funded. In contrast, in the commercial market the underwriters give 

reasonable assurances about the viability of the financing much earlier in the process (after the ‘‘schematic’’ design is complete) and before the hospital then undertakes the major expense of completing ‘‘detailed design’’ and ‘‘construction drawings.’’ In addition I know several, capable hospital architects who have been through 

this, and find that the USDA architectural review is very cumbersome and can result in many expensive, unnecessary changes. 

There is also a requirement to receive a letter from a lender saying ‘‘we won’t lend 

money on this deal.’’ In theory, the USDA programs are supposed to be for the deals 

conventional lenders will pass on. 

Based on personal, and painful experience with clients in the pre 2003 era, there 

is a distinct possibility that you can go through this expensive, time-consuming 

process and receive a rejection. On a $20 million project, assuming 10% inflation, 

wasting 6 months chasing USDA can erode a hospital’s borrowing power by $1 million.

USDA Loan Guarantee Program

If turned down in the direct loan program, USDA will often promote their ‘‘loan 

guarantee’’ program which shares all of the undesirable qualities of the Direct program, but with added disincentive of high, taxable interest rates (usually over 7.5% 

and usually variable). 

The loan guarantee program is even more cumbersome than the direct. This application process involves finding a bank willing to make the loan with the guarantee. 

It is also worth noting that the USDA guarantee doesn’t take effect until the project 

is completed and the hospital is certified for occupancy. The lender then has to bear 

the full risk of the construction phase of the loan, thus increasing the cost of capital.

Additional Borrowing Covenants

One of the worst aspects of a USDA loan relates to covenants. Conventional bonds 

have ‘‘additional borrowing’’ covenants that specify ‘‘you meet these financial criteria, then you can issue additional debt on a parity basis with the current bonds.’’ 

The USDA covenant says ‘‘you can issue additional debt with our permission.’’ This 

can be a very perilous trap and forces the hospital to either refinance, or go through 

an entire re-application process, with a significant chance of getting ‘‘no’’ for an answer.

State Differences

USDA is organized by districts within states. It has been my experience that some 

states have staff that understand rural hospitals, such as Missouri, and some states 

that don’t.

Questions for the USDA Representative

During the past few months I have had conversations with the USDA representatives in Kansas and Iowa who are responsible for promoting the ‘‘Loan Guarantee’’ 

program in their states. I asked each the following questions:

How many such deals have been done in your state? Answer: ‘‘None’’.

What interest rates might my clients expect through this program? Answer: 

‘‘Don’t know.’’

Can you get me a list of rates/banks from any transactions from other states? 

Answer: ‘‘I don’t have access to that information.’’

What banks have the most experience in working with USDA on this program? 

Answer: ‘‘I don’t know.’’

What is your underwriting criteria? And if my client meets that criteria what 

is the probability of getting approval? Answer: ‘‘I don’t know.’’

I can assure you that those promoting other financing options for rural hospitals 

are better informed about their offerings.

Recommendations

As of today rural hospitals that are reasonably strong have several non governmental options in accessing capital and have little reason to consider USDA. Weaker 

hospitals could benefit from an improved USDA offering. I would, however, be 

gravely concerned if improvements in the USDA program were such that the result 

was the diminution of the private capital markets from this market. Then we would 

be back to the pre 2003 era. 

Here’s a quick list of some suggested changes USDA might consider to improve 

their offerings:

Process:

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—Establish reasonable underwriting standards to give applicants a reasonable 

idea whether their application will be accepted before undertaking a lengthy 

process. For those meeting the criteria provide a written approval subject to certain conditions. As a practical matter those of us who live and breath rural hospitals can undertake this analysis in a matter of hours from readily available 

data. Much of the information required on the USDA application is of no value 

in assessing the creditworthiness of the loan.

—Eliminate the requirement to have detailed construction drawings before approving a loan.

—Eliminate the requirement for USDA architects to review the plans. Every 

project will be reviewed by the state’s architect, the state fire marshal, and Medicare certifying authorities. The USDA architect’s review adds little value and in 

some cases reduces value.

—Accept a compiled forecast vs. examined.

—Change loan covenants to make them more competitive with conventional tax 

exempt bonds, specifically pertaining to the topic ‘‘additional borrowing’’ on a 

parity basis.

—In the case of the direct loan program revise USDA thinking about parity 

‘‘Inter-creditor’’ agreements on a parity basis. There are many excellent examples 

of how this can be accomplished by borrowing from the private markets. There 

is no need to reinvent this ‘‘wheel’’.

—Allow hospitals to use ‘‘guaranteed maximum price’’ contracts with construction 

managers. Currently USDA requires that all construction be done on a ‘‘hard 

bid’’ basis. The advantage of GMPs is that it speeds up the process.

Loan guarantee program:

—Expand the guarantee to cover the construction period. Banks typically view 

construction loans as distinct from permanent financing, with major differences 

in the credit analysis. Many banks consider the construction period to be much 

higher than the post construction period and they price their capital accordingly. 

In contrast, tax exempt revenue bonds issue combine the two components. For the 

USDA program to be successful they need to act more like the conventional tax 

exempt markets.

The greatest improvement that could be made to the loan guarantee would be to 

allow the loans to be tax exempt, but I am also aware of the complex dynamics associated with a change of this nature. A change of this nature could have an adverse 

affect on other sources of capital for the rural hospitals.

Summary

I grew up in a small town, have worked with several hundred rural hospitals, and 

have traveled many blue highways. I am a passionate believer in the value of rural 

hospitals to their communities, and I would welcome the chance to assist in anything that would increase their access to capital under favorable terms. I am also 

quite aware of the unintended consequences that can result from good intentions. 

I would be guardedly optimistic about the potential for good to occur from significant revisions in the way USDA approaches the rural hospital market. I hope these 

thoughts are helpful. I’d be happy to discuss this topic further at any time.

CHUCK WELLS.

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