Fraying fabric

State’s rural hospitals at risk

Since 2010, 44 rural hospitals have closed in states surrounding Arkansas. Unfortunately, closure No. 45 in the region hit home when the De Queen Medical Center recently shuttered after months of financial problems, yanking a loose string in the state’s rural hospital fabric.

The closure in De Queen could be an isolated event. According to news reports, leadership turnover and mismanagement have plagued the hospital. Parent company EmpowerHMS recently experienced difficulty meeting utility and payroll obligations at facilities it owns in other states, and owes nearly $2 million in taxes across seven states.

In the end, the De Queen hospital may have just had a bad dance partner in EmpowerHMS. After all, financial problems even for urban hospitals like the University of Arkansas for Medical Sciences and CHI St. Vincent have been well documented in recent years. Plus, urban and rural hospitals across the nation are tackling with varying success new payment and service delivery models, most of which reward clinicians for helping patients reduce hospital visits.

On the other hand, the closure in De Queen could signal the end of a reprieve for our state’s rural hospitals following the 2014 expansion of Medicaid coverage to low-income adults through the Health Care Independence Program and its 2017 successor, Arkansas Works. Reductions in uncompensated care costs and revenue from services provided to newly insured adults temporarily shored up rural hospital finances and, in some cases, allowed innovation in service delivery. Some hospitals even expanded facilities, added locations, or enhanced service availability.

Six years removed from the initial decision to expand Medicaid, however, there is some evidence that the rural hospital fabric may be unraveling. Two hospitals owned by Allegiance Health Management—River Valley Medical Center in Dardanelle and Eureka Springs Hospital—have reported significant financial woes. The Eureka Springs Hospital Commission voted in December to allocate $50,000 to cover clinical staff wages to keep the hospital’s emergency department open. In court filings seeking to place the Dardanelle hospital in receivership, attorneys indicated the hospital was in an operational and financial crisis.

A February 2019 analysis of the financial viability of rural hospitals by consulting firm Navigant listed Arkansas among the states with the highest percentages of rural hospitals at high risk of closing. This is not surprising given the challenges faced by rural hospitals. There is significant outmigration of younger populations from rural areas, leaving rural hospitals to care for fewer—but older and sicker—patients. And rural hospitals are doing so with fewer resources than their urban counterparts, coping with aging facilities, work-force recruitment

challenges, and an inability to keep up with new technology.

Most rural hospitals in Arkansas are among the roughly 1,300 federally designated “critical-access hospitals” nationwide. These are facilities with no more than 25 acute care beds that are in communities where the nearest hospital is typically more than 35 miles away. Critical access hospitals receive cost-based reimbursement—meaning they are paid based on the actual cost of care provided to patients—with the goal to reduce their financial vulnerability and ensure availability of essential services.

Despite this support, many critical-access hospitals operate on thin margins. That they are struggling in a period of strong economic growth and in states that expanded Medicaid is added cause for concern. Congress has responded in recent years with proposed legislation to loosen licensure requirements, reverse reimbursement cuts for bad debt, and create a new rural hospital classification for enhanced Medicare payments. However, those efforts to date have stalled.

Efforts in other states have included one-time infusions of funds, enhanced Medicaid reimbursement above costs (Arkansas Medicaid already provides reimbursement at 100 percent cost), and development of rural health networks to leverage access to resources and coordinate services. Many previously unaffiliated rural hospitals are banding together to increase efficiency of care delivery, invest in shared technology and other services, and address widespread effects of food insecurity, social isolation, and substandard housing that lead to poor health. Local champions, as well as support from state and federal governments, are essential to these efforts.

Whether the demise of De Queen Medical Center is an isolated event or a red flag in desperate need of attention, one thing is certain: Hospital closures—like school closures—are devastating for small communities. A hospital closure brings not only the loss of an access point for health care but also the loss of well-paying jobs and threats to recruitment of economic development opportunities. Local leaders in the De Queen area recognize the value of local health care access, and have committed to new construction under local ownership.

Community and political leaders across the state should commit to a strategic planning effort to secure health-care access for Arkansans regardless of where they reside. Only through an informed and intentional strategy will rural communities continue to have necessary services to secure their economic viability.