The Future of Rural Hospitals
How to remain relevant and sustainable by meeting challenges with change.
At rural hospitals coast to coast, business practices that hospital leaders once counted on as tried-and-true are uncertain or unreliable. Today, a renaissance of fresh approaches and change is occurring. Since the landscape is so different for rural hospitals today, it’s time to consider innovative ways to serve communities. In this interview, Jim Kendrick, president and CEO of Community Hospital Corporation, urges rural hospital leaders to rethink community healthcare. His insights come from his time with CHC and a career spent working with community hospitals across the country.
How is the role of rural hospitals changing?
JK: Metaphors commonly used to describe rural and community hospitals underscore their importance to the regions they serve. They are known as economic engines or cornerstones of the community. They tend to be one of the top employers in town, so when one closes, there are more consequences than traveling farther for hospital care. With that said, rural America’s demographics are changing. Population decline in some places may not support a hospital. In places where an inpatient hospital was critical, the prevailing need today may be for local outpatient care and emergency services.
How can a hospital keep pace with the times?
JK: Hospitals should identify cost savings and revenue enhancement opportunities to be in the best possible position for what may come next. Measuring and optimizing productivity can make a big impact because labor is a hospital’s greatest expense. As the second highest expense, supply costs are another important area of focus for cost reduction. Even reconciliation of the hospital’s annual Medicare cost report could have far-reaching impact and positive returns if the hospital has been underpaid for reimbursable services.
To identify areas ripe for innovation, start by looking at services being provided. Changes in rural America make it even more important to regularly assess market dynamics. A closure in an adjacent market could provide a chance for a new clinic, for example. Population and payer mix data can be used to drive a strategic approach for new service offerings, such as wound care, geriatric counseling or pulmonary rehabilitation. Of course, it may be necessary to discontinue a service line due to saturation or to redirect resources to a promising new service.
If patients are out-migrating to an area competitor, hospital leaders could talk with the largest employers and health plans about reducing the out-of-pocket amount employees pay for hospital services. This effort may encourage a return of patients and an increase in volumes, while reducing the healthcare costs of the local employer.
What types of models are augmenting or replacing rural hospitals?
JK: Virtual officevisits and telehealth solutions enable patients in remote areas to seek medical care without traveling to the provider. The pop-up concept (popular in retail) allows for the establishment of alternative clinic locations—for example during flu season—where community members tend to gather.
More transformative models repurpose or replace an existing hospital. Examples include micro-hospitals, freestanding emergency departments or emergency medical centers.
How can a hospital foster a culture of change?
JK: It is necessary to be prepared for change—to be able to adapt long before it comes to an evolve-or-perish situation. To stay prepared amid a changing healthcare environment, planning activities and development of an annual business plan are essential. Though it may not sound revolutionary, it can be evolutionary by offering leaders greater security and flexibility to manage change. Stakeholders should have a place at the table during plan development, and everyone involved should understand that assessing, adjusting and planning are not just annual agenda items but a new mindset.
Keep in mind that monthly reviews of financial performance indicators should take place since a close look at these metrics will form the basis of strategic planning. Conducting monthly reviews ahead of annual planning helps to ensure that planning is strategic and not driven by short-term, crisis-mode thinking; the latter tends to focus only on cutting costs. Since distressed hospitals are lean to begin with, opportunities for revenue and market share growth must also be explored. The success of rural hospitals of the future will depend on top-line growth, which is dictated by their ability to identify and deliver needed healthcare services for their community.