Capturing a $100M rural reimbursement opportunity

According to Chartis,^[1] 18 rural hospitals closed or converted to an operating model that excludes inpatient care over the past year, bringing the total to 182 rural hospital closures or outpatient-only conversions since 2010. Chartis’ most recent analysis shows that 46 percent of all remaining rural hospitals have a negative operating margin, with at least 432 vulnerable to closure.^[2] 

Nearly 10 years ago, while serving as CEO of Mission Health in western North Carolina, I faced a similar challenge with our own critical access hospitals (CAHs). Wanting to preserve important care for these valued communities, I decided to focus on a persistent but often invisible problem: underreported Emergency Department Part A (standby) time. While seemingly small in scope, this issue has enormous financial impact, costing hospitals millions in unrealized reimbursement every year.

Like many CAHs, for years my team had performed manual time-and-motion studies to determine standby time. Unfortunately, that approach produces two forms of harm:

1. Inconsistent measurements that create significant audit risk 
2. Understated Part A cost report filings that fail to capture the true scope of provider standby activity. 

To improve compliance and generate critical resources for patient care, I partnered with a nimble, innovation-focused team to co-develop an automated, location-aware time tracking system that eliminated all ambiguity and manual effort. ^[3,4] The solution became the foundation for VersaBadge. A decade later, more than 250 rural hospitals rely on VersaBadge to accurately measure standby time. This approach directly impacts the bottom line by generating significant new reimbursement that helps sustain access to care in communities that so desperately need their local hospitals to remain open.

Financial impact of emergency department standby time

For CAH emergency departments (EDs), CMS cost report reimbursement depends on accurately documenting provider time across both Part A (standby) and Part B (direct care) classifications. For CAHs, underreported standby time directly translates into substantial lost reimbursement that compounds year over year. Traditional time studies — whether self-reported logs or periodic audits — are inherently inconsistent, inaccurate, and difficult to defend in compliance reviews. The result is not just underpayment but also increased audit exposure. Moreover, the need to generate self-reported logs irritates clinicians and takes their attention away from their core patient care focus. Proven real-time location-based solutions tailored to this reimbursement challenge can materially improve documentation accuracy, with VersaBadge’s deployments accounting for more than $23 million in additional Medicare reimbursement in 2024 alone.

Recent federal legislation, including the One Big Beautiful Bill Act (OBBBA) or H.R.1, injected even greater uncertainty into Medicaid funding and hospital reimbursement. Much of OBBBA’s projected $900 billion in savings^[5] depends on stricter eligibility enforcement, increased enrollee cost-sharing, and reductions in supplemental payments — all of which disproportionately impact CAHs where Medicaid patients comprise a larger share of their payer mix.

At the same time, proposed federal budget reductions — potentially exceeding $1.5 trillion in health care-related spending^[6] — are prompting cuts to Medicaid programs, often among states’ largest budget line items. For many CAHs, even a 10 percent reduction in Medicaid reimbursement would result in millions of dollars in annual losses. While these dark storm clouds gather, rural EDs are seeing rising patient volumes as primary care provider shortages continue, especially for patients with behavioral health needs. Behavioral health patients often remain in the ED for prolonged periods while awaiting scarce placement options. For hospitals relying on more conservative time study methods like EHR logs, substantial standby hours can go unrecognized. In these cases, reimbursement for legitimate provider availability risks being lost entirely.

Simply put, failure to accurately document Part A time poses a dual threat: loss of eligible reimbursement and heightened audit risk. Hospitals lacking detailed, verifiable time study data face potential denials or lost reimbursement – and those missed hours have direct consequences for maintaining essential services, retaining staff, and even keeping inpatient facilities open.

Beyond reimbursement: RTLS as critical infrastructure for CAHs

An RTLS platform has proven to be a powerful, multipurpose operational asset in rural hospitals nationally. Once deployed, the simple infrastructure enables functions that further enhance safety, efficiency, and quality, including:

• Staff duress alerting allows personnel to discreetly summon help during escalating events, reducing response time to help keep team members safe.
• Hand hygiene monitoring passively tracks handwashing events without manual audits.
• Asset tracking helps locate equipment quickly, reducing inventory waste and loss.
• Provider-patient interaction reporting utilizes live rounding dashboards that can improve satisfaction, care quality, and workflow efficiency.
• Cost allocation reporting data supports the allocation of staff time across cost centers (hospitalists, RHC, EMT, EVS, etc.).
   

For CAHs with limited staffing and capital challenges, this platform delivers measurable ROI across multiple departments. The system literally pays for itself while improving compliance, enhancing staff safety, and supporting quality initiatives — all with minimal IT overhead.

As leaders responsible for preserving and expanding care in rural communities, it’s incumbent upon each of us to take all steps to preserve resources and protect staff. As financial pressures intensify and expectations rise, tools that combine automation, compliance integrity, and operational intelligence will define the future of sustainable rural care.

NRHA adapted the above piece from VersaBadge, a trusted NRHA partner, for publication within the Association’s Rural Health Voices blog.
 

Ronald A. Paulus, MD, is president and CEO of RAPMD Strategic Advisors, providing advisory services to health system boards, CEOs, technology companies and others. He has served on numerous diverse boards, including a public company, private equity backed enterprises, health systems and academic institutions. Dr. Paulus also is the immediate past president and CEO of Mission Health, a $2 billion integrated health system serving all of western North Carolina.

Sources

[1] The Cecil G. Sheps Center for Health Services Research, University of North Carolina at Chapel Hill, January 8, 2025. https://www.shepscenter.unc.edu/programs-projects/rural-health/rural-hospital-closures/