CMS Issues New Rule for Rural Health Clinics

CMS Issues New Rule for Rural Health Clinics

Medicare beneficiaries who live in rural and underserved areas of the United States would be able to continue to get their health care services from rural health clinics whose services are tailored to meet their individual needs under new rules proposed by the Centers for Medicare & Medicaid Services (CMS).

“These proposed changes to the rural health clinic program would ensure that Medicare beneficiaries in rural underserved areas have ready access to high quality primary health care from physicians and certain non-physician providers,” Kerry Weems, acting CMS administrator, said in a press release.

The proposed regulation would require rural health clinics to establish quality assessment and performance improvement programs. It would also establish location requirements necessary for a clinic to continue to participate as a rural health clinic, which would ensure that the rural health clinics program kept pace with demographic changes in the service areas and best met the needs of underserved beneficiaries. The regulation also would provide opportunities for existing rural health clinics to apply for exceptions from location requirements, and would provide rural health clinics with greater flexibility in staffing requirements and sharing resources with fee-for-service providers in the facility.

In line with statutory requirements, the rule also would limit payments for rural health clinics to 80% of reasonable costs, minus beneficiary coinsurance and deductible amounts. The proposed rule would implement statutory requirements that all rural health clinics be located in areas that were non-urban and demonstrated that there was a shortage of health care services. Existing rural health clinics that do not meet the location requirements but are still providing needed services in rural and underserved areas could be granted an exception as an essential provider if they met criteria established by the rule.

Additionally, the rule would improve access to health care services in rural areas by providing more flexibility in staffing requirements by allowing an rural health clinic to contract with non-physician practitioners, such as physician assistants, nurse practitioners and certified nurse midwives – as long as one was directly employed by the clinic.

“With the regulation we are proposing, these providers will have better guidance on how to qualify as a rural health clinic,” Weems said. “Medicare will be better able to ensure that qualified rural clinics are able to seek cost-based payment under the rural health clinic program.”

The proposed regulation may be viewed at

Hanger Announces Second Quarter Results

Officials from the Hanger Orthopedic Group Inc. announced net sales of $181.2 million for the second quarter of 2008 an increase of 13% from $160.4 million in the previous year’s comparable quarter. Net income increased by $2.9 million, or 57.2%, to $8 million in the second quarter 2008 from $5.1 million in same quarter last year.

Pro forma net income applicable to common stock was $8 million, or $0.25 per diluted share (a 47% increase), for the second quarter compared to net income applicable to common stock of $5 million, or $0.17 per diluted share, in the second quarter of last year. The pro forma results for the second quarter 2008 assume that a one-time, in-kind preferred stock dividend occurred and the preferred stock was converted to common stock at the beginning of the period.

Net sales for the second quarter increased by $20.8 million, or 13%, to $181.2 million from $160.4 million in the previous year’s comparable quarter. The sales growth was the result of a $12.7 million, or 8.9%, increase in same-center sales in our patient care business, a $3.2 million, or 20.6%, increase in sales of the company’s distribution segment, and a $4.9 million increase related to acquired entities. Gross profit for the second quarter of 2008 increased by $11.5 million, to $93 million, or 51.3% of net sales compared with $81.4 million, or 50.8% of net sales in the second quarter of 2007. The increase in gross margin was due principally to the increase in sales, which allowed us to leverage our relatively fixed labor costs.

Income from operations of $21.4 million in the second quarter was $3.6 million, or 20% higher than that of the same period of the prior year, principally due to the aforementioned increase in gross profit, offset by $7.6 million of higher selling, general and administrative expenses. Selling, general and administrative expenses increased due to a $2.6 million increase in variable compensation accruals, $1.8 million of increased personnel costs related primarily to employee benefits, a $1.4 million increase related to acquisitions, a $1 million increase in professional fees and other expenses (some of which are one-time expenses), $0.8 million in merit increases, and $0.6 million of additional investment in growth initiatives, offset by a $0.6 million decrease in bad debt expense.

Net interest expense for the first 6 months of 2008 decreased $2.2 million, or 11.7%, from the same period in the previous year, primarily due to lower variable rates. Net income for the first 6 months increased $4.7 million, or 68.3%, to $11.6 million from $6.9 million for the prior year’s period.

Cash flow from operations was $20 million in the second quarter compared to the prior year period of $18 million. For the first 6 months of 2008, cash flow from operations was $12.6 million compared to the previous period of $20.1 million.

Thomas F. Kirk, president and chief executive officer of Hanger Orthopedic Group, said in a company press release, “I am pleased with our second quarter results, the tenth consecutive quarter in meeting or exceeding First Call consensus estimates. Same-center growth in our patient care division continues to drive a large portion of our business with sales growth of 8.9%. Our distribution business also accelerated its sales growth with an increase of 20.6% in the second quarter, and now it represents 11.6% of our total sales for the quarter. We continue to gain leverage on our infrastructure costs due to our business model and our ongoing efforts to monitor expenses.”

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