As ru­ral hos­pi­tals strug­gle, so­lu­tions sought to pre­serve health­care ac­cess

Modern Healthcare - - NEWS - By Paul Demko

On March 31, for-profit Park­way Re­gional Hos­pi­tal in Ful­ton closed its doors af­ter more than two decades of busi­ness in south­west­ern Ken­tucky. Ru­ral Ful­ton County’s only hos­pi­tal em­ployed nearly 200 and ac­counted for as much as 18% of the town’s tax base.

But in­pa­tient ad­mis­sions had plum­meted 50% over the past four years and Com­mu­nity Health Sys­tems, which owned the 70-bed fa­cil­ity, de­cided it was no longer eco­nom­i­cally vi­able. “Our wheels haven’t stopped turn­ing since the day they an­nounced that the hos­pi­tal was closing,” said Cubb Stokes, Ful­ton’s city manager. “We have been hav­ing al­most daily meet­ings with some type of health­care provider.”

Park­way was far from alone among ru­ral hos­pi­tals strug­gling to sur­vive. Less than a year be­fore, Ni­cholas County Hos­pi­tal, an 18-bed fa­cil­ity in Carlisle in north-cen­tral Ken­tucky, shut its doors, cit­ing “in­sur­mount­able” fi­nan­cial chal­lenges. A re­port is­sued in March by Ken­tucky’s au­di­tor of public ac­counts found that 15 of the 44 ru­ral hos­pi­tals an­a­lyzed were in “poor” fi­nan­cial health. Those fa­cil­i­ties served more than 250,000 Ken­tuck­ians in fis­cal 2013, with about 60% of those pa­tients en­rolled in Medi­care or Med­i­caid.

Na­tion­wide, 51 ru­ral hos­pi­tals have closed since 2010, ac­cord­ing to the North Carolina Ru­ral Health Re­search Pro­gram at the Uni­ver­sity of North Carolina at Chapel Hill. The num­ber of an­nual clo­sures has in­creased each year dur­ing that pe­riod, with 16 ru­ral hos­pi­tals shut­ting down last year. South­ern states have been dis­pro­por­tion­ately af­fected by the spike, with nearly two-thirds of the closed fa­cil­i­ties lo­cated in that re­gion. Texas has lost 10 ru­ral hos­pi­tals in the past five years, while Alabama and Ge­or­gia each have lost five.

The Na­tional Ru­ral Health As­so­ci­a­tion has iden­ti­fied 283 more ru­ral hos­pi­tals across the coun­try that are in dan­ger of go­ing un­der— more than 10% of all such fa­cil­i­ties. The group found that the fi­nan­cial con­di­tions of the hos­pi­tals just hang­ing on are sim­i­lar to fa­cil­i­ties that al­ready have closed. More than a third of ru­ral hos­pi­tals op­er­ated at a deficit in 2013, ac­cord­ing to the as­so­ci­a­tion.

Many ru­ral hos­pi­tals “have been strug­gling on the cusp for a long time,” said Mark Holmes, direc­tor of the North Carolina Ru­ral Health Re­search Pro­gram.

In June, Adam O’Neal, the mayor of Bel­haven, N.C., plans to lead a walk from his town of 2,000 to Wash­ing­ton to raise aware­ness about the plight of ru­ral hos­pi­tals. He hopes to at­tract par­tic­i­pants from all 50 states for the nearly 300-mile jour­ney. O’Neal gar­nered na­tional me­dia at­ten­tion last year when he made the same trek af­ter the sole hos­pi­tal in Bel­haven was shut down by not-for-profit Vi­dant Health. “To think that in our coun­try, our gov­ern­ment is go­ing to sit back and watch 283 hos­pi­tals close blew my mind,” O’Neal said.

His view is not uni­ver­sally shared. Ex­perts say some ru­ral fa­cil­i­ties are not pro­vid­ing high-qual­ity care and that ru­ral com­mu­ni­ties would be bet­ter served by co­or­di­nat­ing care with larger re­gional fa­cil­i­ties and pro­vid­ing tar­geted out­pa­tient and emer­gency care through in­no­va­tive ap­proaches.

Ru­ral hos­pi­tals have dis­pro­por­tion­ately strug­gled with empty beds in re­cent years. In 2013, ru­ral hos­pi­tals with fewer than 100 beds had an oc­cu­pancy rate of only 37%, drop­ping 5.6% since 2006, ac­cord­ing to the Medi­care Pay­ment Ad­vi­sory Com­mis­sion. That com­pared with a 63% oc­cu­pancy rate for ur­ban fa­cil­i­ties.

The fi­nan­cial prob­lems plagu­ing ru­ral hos­pi­tals have many causes. The un­will­ing­ness so far of 21 states, dis­pro­por­tion­ately in the South, to ex­pand Med­i­caid to low-in­come adults un­der the Af­ford­able Care Act is a ma­jor fac­tor, said Terry Hill, a se­nior pol­icy ad­viser at the Na­tional Ru­ral Health Re­source Cen­ter. Roughly three-quar­ters of the 51 ru­ral hos­pi­tal clo­sures na­tion­ally since 2010 have been in states that didn’t ex­pand Med­i­caid.

An anal­y­sis by Deutsche Bank found that among the in­vestor-owned hos­pi­tal chains that it tracks, from July 2013 to July 2014 unin­sured dis­charges de­clined 50% at hos­pi­tals in Med­i­caid­ex­pan­sion states com­pared with a 16%

drop in non-ex­pan­sion states.

“You’re go­ing to see a pre­dom­i­nance of clo­sures in the next year or so in those states that have not ex­panded their Med­i­caid el­i­gi­bil­ity,” Hill said.

An­other dy­namic is re­duc­tions in Medi­care pay­ment rates. In par­tic­u­lar, the bud­get se­quester cuts Congress passed in 2013 re­duc­ing rates by 2% across the board have caused prob­lems. That’s be­cause most ru­ral fa­cil­i­ties al­ready were op­er­at­ing on thin mar­gins and they typ­i­cally have a larger share of Medi­care en­rollees in their pa­tient mix than other hos­pi­tals.

Ru­ral providers are also wary of the move­ment to­ward risk-based pay­ment mod­els for Medi­care. They fret that they don’t have the ex­per­tise or re­sources to meet the de­mands of emerg­ing mod­els such as accountable care or­ga­ni­za­tions and bun­dled-pay­ment ini­tia­tives.

“The vi­sion for the health­care sys­tem of to­mor­row is one that re­quires scale and net­works and co­or­di­na­tion, and it’s go­ing to be chal­leng­ing to free-stand­ing com­mu­nity hos­pi­tals, es­pe­cially those in ru­ral ar­eas,” said Eric Zim­mer­man, a prin­ci­pal with McDer­mot­tPlus Con­sult­ing, which lob­bies on be­half of ru­ral hos­pi­tals in Wash­ing­ton, D.C.

Kim Moore, pres­i­dent of the United Methodist Health Min­istry Fund, a Kansas-based char­i­ta­ble foun­da­tion, said many ru­ral hos­pi­tals have been re­sis­tant to change. “Ru­ral Amer­ica has been schooled to be­lieve that change equals loss,” Moore said.

Other chal­lenges that ru­ral hos­pi­tals face are in­her­ent in be­ing ru­ral. Be­cause they are smaller fa­cil­i­ties, they typ­i­cally can’t take ad­van­tage of economies of scale that can re­duce costs. In ad­di­tion, at­tract­ing top tal- ent is chal­leng­ing in ru­ral com­mu­ni­ties, which means they of­ten must pay more to land health­care pro­fes­sion­als. They also tend to have a dis­pro­por­tion­ate share of pa­tients who are on Medi­care or Med­i­caid or are unin­sured.

Some states have taken steps to try and re­verse the trend. In Fe­bru­ary, a com­mit­tee ap­pointed by Ge­or­gia Gov. Nathan Deal pro­posed to make larger re­gional hos­pi­tals com­mu­ni­ca­tion hubs that di­rect pa­tients in a ru­ral net­work to the most ap­pro­pri­ate places for care. It also would of­fer more am­bu­lances and school clin­ics set up with tele­con­fer­enc­ing ca­pa­bil­i­ties to ac­cess med­i­cal ex­perts. The idea is to of­fer re­lief to ru­ral fa­cil­i­ties that have a hard time of­fer­ing the full range of costly med­i­cal ser­vices.

Not all ru­ral hos­pi­tals are strug­gling,

how­ever. The 35-bed North Sun­flower Med­i­cal Cen­ter in Ruleville, Miss., achieved a 33% op­er­at­ing mar­gin in fis­cal 2014 on $68 mil­lion in op­er­at­ing rev­enue. The in­de­pen­dent hos­pi­tal saw its rev­enue in­crease 9.5% from fis­cal 2013 and its clinic vol­ume grow 42.8%.

Joanie Perkins, the hos­pi­tal’s chief devel­op­ment of­fi­cer, said her fa­cil­ity has been in­no­va­tive in at­tract­ing both pa­tients and grant fund­ing. It has ex­panded the hours at its ru­ral clin­ics so pa­tients can be seen in the most cost­ef­fec­tive set­ting. Its clin­i­cians go into schools in some of the state’s poor­est ar­eas to vac­ci­nate chil­dren. It con­tracts with nurs­ing homes to pro­vide den­tal care. It has a tele­health pro­gram in place with the Uni­ver­sity of Mis­sis­sippi Med­i­cal Cen­ter in Jack­son. And it formed a part­ner­ship with Gen­eral Elec­tric Co. to pro­vide tablet com­put­ers to di­a­betic pa­tients so doc­tors can re­motely mon­i­tor their blood sugar.

In 2010, the hos­pi­tal built an $8.6 mil­lion well­ness cen­ter, in­clud­ing a fit­ness cen­ter. Peo­ple who join the gym for $20 a month have a per­sonal trainer as­signed to them. “Our pa­tients like us and use us again,” Perkins said.

Some mem­bers of Congress are pay­ing at­ten­tion to ru­ral hos­pi­tals’ strug­gles. Sen. Chuck Grass­ley (R-Iowa) is work­ing on leg­is­la­tion de­signed to pro­vide greater fi­nan­cial se­cu­rity to ru­ral hos­pi­tals. Grass­ley’s of­fice said he isn’t ready to di­vulge spe­cific de­tails of the plan, but it will in­volve es­tab­lish­ing a new Medi­care pay­ment track for ru­ral fa­cil­i­ties that pro­vide only emer­gency and out­pa­tient care.

That’s a strat­egy al­ready be­ing tested by some ru­ral hos­pi­tal op­er­a­tors. Last Oc­to­ber, No­vant Health an­nounced it was re­duc­ing in­pa­tient beds for acute care at Franklin Med­i­cal Cen­ter, in Louis­burg, N.C., from 70 to two. The rea­son was that 65 beds were empty on an av­er­age day and the fa­cil­ity was on pace to lose $6.1 mil­lion in 2014.

Brock Slabach, the Na­tional Ru­ral Health As­so­ci­a­tion’s se­nior vice pres­i­dent for mem­ber ser­vices, sees a need for a new Medi­care pay­ment model that will bet­ter serve ru­ral hos­pi­tals. Those pay­ment sys­tems were es­tab­lished in the 1980s and 1990s and “may not be suit­able for the en­vi­ron­ment we find our­selves in to­day,” Slabach said.

Any such changes will come too late for Park­way Re­gional Hos­pi­tal. Res­i­dents of Ful­ton County now have to travel at least 15 miles and cross the Ten­nessee bor­der to ac­cess most med­i­cal ser­vices.

Stokes, Ful­ton’s city manager, is wor­ried about the added cost of trans­port­ing pris­on­ers from the Ful­ton County Detention Cen­ter in the county seat of Hick­man to the near­est hos­pi­tal. The jail is now the big­gest eco­nomic en­gine in the county. “If we don’t pro­vide that jail with med­i­cal fa­cil­i­ties, then those pris­on­ers will be shipped out to other prisons in the state and it will be a tremen­dous eco­nomic blow to the county,” he said.

But he ex­presses con­fi­dence that his ru­ral com­mu­nity will get past the hos­pi­tal’s closing. “We’ve been just tremen­dously pleased with the out­pour­ing of sup­port that we’ve got­ten,” he said. “We’ll sur­vive this.”

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