Seeking a Cure: What can be done to stop the rash of rural hospital closures?

Jennifer Hemmingsen October 1, 2019

The Mayo Clinic Health Systems’ clinic in Arcadia, Wis., is seen on Sept. 19, 2019. The area's hospital closed in 2011. This new clinic was built in 2016 to meet primary health care needs of the area's rural residents.

Small rur­al Mid­west com­mu­ni­ty hos­pi­tals, squeezed by finan­cial and reg­u­la­to­ry pres­sures, are scal­ing back on ser­vices, merg­ing with larg­er hos­pi­tal sys­tems and search­ing for oth­er cre­ative ways to sur­vive in the short term, an Insti­tute for Non­prof­it News inves­ti­ga­tion by 12 news orga­ni­za­tions in sev­en states revealed.

Rur­al health experts said the real chal­lenge in this qui­et trans­for­ma­tion will be to redesign rur­al health deliv­ery so that res­i­dents do not lose access to high qual­i­ty, time­ly care.

Usu­al­ly there are two sides to every sto­ry, but there are not real­ly in this one,” said Alan Mor­gan, chief exec­u­tive offi­cer at the Nation­al Rur­al Health Asso­ci­a­tion. Every­one real­izes we’re at a cri­sis point.”

Across-the-board cuts in Medicare pay­ments and reduc­tions in reim­burse­ments for uncol­lect­ed patient debt dis­pro­por­tion­ate­ly have impact­ed rur­al hos­pi­tals, whose patients are more like­ly to be enrolled in gov­ern­ment health programs.

Rur­al hos­pi­tals must sup­port fixed costs with few­er patients. They fre­quent­ly strug­gle to com­ply with reg­u­la­tions that are not designed for small facil­i­ties, or main­tain aging build­ings that date back to an era when hos­pi­tal stays were longer and inpa­tient care was more common.

Across the coun­try, 113 rur­al hos­pi­tals have closed in less than a decade, includ­ing 16 so far this year. Most hos­pi­tal clo­sures have been in South­ern states — par­tic­u­lar­ly states that reject­ed expand­ing Med­ic­aid to all low-income adults under the Afford­able Care Act. But even in the Mid­west, 16 per­cent of rur­al hos­pi­tals rank high or mid-high on a finan­cial stress index devel­oped by Uni­ver­si­ty of North Car­oli­na Cecil G. Sheps Cen­ter for Health Ser­vices Research.

Nav­i­gant, a con­sult­ing firm with clients that include hos­pi­tals and state hos­pi­tal asso­ci­a­tions, crunched the num­bers in a dif­fer­ent way — look­ing just at oper­at­ing mar­gins, cash on hand and debt — and con­clud­ed that 18% of rur­al hos­pi­tals in 12 Mid­west­ern states were at high risk of clos­ing unless their finances improved.

Some rur­al hos­pi­tals, like the Big­fork Val­ley Hos­pi­tal in north­ern Min­neso­ta, which hasn’t turned a prof­it since 2006, have man­aged to sur­vive by defer­ring main­te­nance, hold­ing off on equip­ment pur­chas­es and ask­ing tax­pay­ers — some­times repeat­ed­ly — for help.

Oth­ers, like Stur­gis Hos­pi­tal in south­west­ern Michi­gan, have made deep cuts, lay­ing off staff, cut­ting inpa­tient beds and clos­ing mon­ey-los­ing clin­ics and depart­ments like obstet­rics and oncology.

Across the region, many small inde­pen­dent hos­pi­tals are merg­ing with larg­er health sys­tems, trad­ing a degree of local deci­sion-mak­ing pow­er for the resources and secu­ri­ty of a large health net­work, the news orga­ni­za­tions found. In states like Wis­con­sin, where few­er than a dozen rur­al hos­pi­tals have not part­nered with or been absorbed by a larg­er hos­pi­tal, con­sol­i­da­tion can breathe new life into strug­gling facil­i­ties, as it did in Neillsville — a town of about 2,400 peo­ple 52 miles south­east of Eau Claire. In Iron­wood, a small town in Michigan’s Upper Penin­su­la, hos­pi­tal offi­cials say if it were not for a 2010 merg­er with a larg­er health sys­tem, the hos­pi­tal would not have survived.

In Iowa, as in oth­er Mid­west­ern states, small hos­pi­tals strike agree­ments with larg­er providers to host vis­it­ing spe­cial­ists week­ly or month­ly, bring­ing out­pa­tient care clos­er to home.

Arrange­ments such as the share care” obstet­rics pro­gram at Hansen Fam­i­ly Hos­pi­tal in Iowa Falls allow patients to access rou­tine pre­na­tal care at local hos­pi­tals before trans­fer­ring to larg­er facil­i­ties for late-term care and delivery.

Low patient vol­ume, recruit­ment chal­lenges and red ink have led rur­al hos­pi­tals around the coun­try to shut­ter obstet­rics ser­vices. As of 2014, few­er than half the nation’s rur­al coun­ties had in-coun­ty hos­pi­tal ser­vices, accord­ing to a 2017 analy­sis by aca­d­e­mics at the Uni­ver­si­ty of Min­neso­ta Rur­al Health Research Cen­ter. Near­ly three dozen small Iowa hos­pi­tals have stopped deliv­er­ing babies over the past two decades. Eight hos­pi­tals elim­i­nat­ed obstet­rics last year, state pub­lic health records show.

But con­sol­i­da­tion is no panacea. Cen­tral Kansas’ Hills­boro Com­mu­ni­ty Hos­pi­tal lead­ers thought they had found an answer to the hospital’s finan­cial trou­bles when it was tak­en over by a Flori­da group, Empow­er HMS, but bills piled up at the 15-bed facil­i­ty, staff went unpaid, and employ­ees held fund-dri­ves just to feed their patients. The hos­pi­tal was forced into receivership.

Even when it makes sense on paper, region­al­iza­tion can be a hard sell, con­sul­tant Dr. Daniel DeBehnke, Navigant’s man­ag­ing direc­tor for Health­care, said.

I think it’s relat­ed a lot to the fact that those rur­al hos­pi­tals have been the main­stay of those com­mu­ni­ties for many, many years,” said DeBehnke, who as CEO of Nebras­ka Med­i­cine devel­oped part­ner­ships with small rur­al facil­i­ties, seek­ing economies of scale on back-end ser­vices such as elec­tron­ic records. Gen­er­a­tions of fam­i­lies have been born in that hos­pi­tal. The real­i­ty, though, is that there has to be some degree of change.”

In rur­al com­mu­ni­ties, where hos­pi­tals are typ­i­cal­ly the largest or sec­ond largest employ­er, clo­sures have imme­di­ate eco­nom­ic effects. Indi­rect­ly, florists, groundskeep­ers, hotels, restau­rants and oth­er busi­ness­es also may feel a pinch, said Mark Holmes, direc­tor of UNC’s Cecil G. Sheps Cen­ter for Health Ser­vices Research.

Then there’s a broad­er ameni­ty effect,” said Holmes, whose research includes hos­pi­tal finance, rur­al health, work­force and health pol­i­cy. Towns with­out ready access to hos­pi­tals can have a hard time recruit­ing and retain­ing young pro­fes­sion­als. Man­u­fac­tur­ers look for near­by hos­pi­tals when sit­ing new facil­i­ties. Retirees want easy access to care.

Although all rur­al hos­pi­tals face sim­i­lar pres­sures, rur­al com­mu­ni­ties are not homoge­nous. Experts agree that pro­tect­ing rur­al health will require a vari­ety of near- and long-term fix­es that can be tai­lored to spe­cif­ic com­mu­ni­ties. They also agree: Empha­sis must be on pre­serv­ing and enhanc­ing ser­vices, not the sta­tus quo.

Short-term pro­pos­als include increas­ing or refin­ing Medicare reim­burse­ments to bet­ter tar­get hos­pi­tals at greater risk for finan­cial dis­tress. They include expand­ing cost-based reim­burse­ment to rur­al hos­pi­tals that are too big for Crit­i­cal Access Hos­pi­tal sta­tus, reform­ing health insur­ance to increase com­pe­ti­tion in rur­al areas and bad debt relief.

Oth­er pro­pos­als seek to mod­i­fy reg­u­la­tions to bet­ter accom­mo­date small facil­i­ties and small bud­gets, such as a pro­pos­al which would allow hos­pi­tals to share recep­tion, pub­lic restrooms, cor­ri­dors and oth­er com­mon areas with oth­er health­care providers.

Pilots and demon­stra­tion projects are explor­ing ways to posi­tion rur­al hos­pi­tals at the cen­ter of healthy com­mu­ni­ties, hubs con­nect­ing patients not only to out­pa­tient ser­vices but with local pub­lic and behav­ioral health ser­vices, meals pro­grams and oth­er com­mu­ni­ty part­ners. Glob­al bud­get­ing — lump-sum allo­ca­tions to hos­pi­tals rather than fee-for-ser­vice pay­ments — are get­ting off the ground.

It aligns the eco­nom­ics with actu­al health, as opposed to sick­ness,” DeBehnke said. It’s the right align­ment of mon­ey, strate­gi­cal­ly, with the out­comes we want.”

The Rur­al Emer­gency Acute Care Hos­pi­tal (REACH) Act, rein­tro­duced in 2017 by Sens. Chuck Grass­ley (R‑Iowa), Amy Klobuchar (D‑Minn.), and Cory Gard­ner (R‑Colo.), would cre­ate a new Medicare clas­si­fi­ca­tion — the Rur­al Emer­gency Hos­pi­tal — that would free small rur­al hos­pi­tals from the require­ment to main­tain inpa­tient beds. The new cat­e­go­ry could help com­mu­ni­ties keep emer­gency med­ical depart­ments and core out­pa­tient and pri­ma­ry care ser­vices if they devel­op strong pro­to­cols for time­ly patient transfer.

The idea has gained wide sup­port among rur­al health care advo­cates, but failed to gain any trac­tion in Con­gress, where it died in committee.

It’s a real­ly good bill, and we think it would fix a lot of the issues, but it’s been caught up in nation­al pol­i­tics,” DeBenke said.

I think the stick­ing point’ is Con­gress,” Mor­gan said. He said he is opti­mistic that once things start work­ing again on Capi­tol Hill, the bills will move.

A new health cam­pus in Rock Rapids in far north­west­ern Iowa pro­vides a good exam­ple of what this new mod­el of care could look like. The $28.9 mil­lion hos­pi­tal and clin­ic facil­i­ty, which opened in May, was bankrolled through a com­bi­na­tion of com­mu­ni­ty dona­tions, hos­pi­tal asso­ci­a­tion fund­ing and a loan from the U.S. Depart­ment of Agri­cul­ture. It includes space for vis­it­ing spe­cial­ists, telemed­i­cine ser­vices, same-day pri­ma­ry care appoint­ments and well­ness ameni­ties includ­ing a ther­a­py gym.

Oth­er efforts are under­way to recruit the next gen­er­a­tion of doc­tors, nurs­es, tech­ni­cians and oth­er med­ical pro­fes­sion­als to under­served rur­al areas. A Uni­ver­si­ty of Mis­souri sys­tem Rur­al Track Pipeline pro­gram includes schol­ar­ships for stu­dents from rur­al areas, rota­tions at rur­al hos­pi­tals and a week-long immer­sion pro­gram designed to intro­duce stu­dents to small-town life.

Find­ing cre­ative solu­tions to fill the gaps left by dis­ap­pear­ing rur­al hos­pi­tals is vital.

It’s not real­ly a ques­tion of how we keep rur­al hos­pi­tals open,” Mor­gan said. It’s a ques­tion of how do we keep rur­al Amer­i­cans alive?’”

Sara Kon­rad Bara­nows­ki, Natal­ie Krebs, Mark Mahoney, Dan Mar­golies, Shamane Mills, Michaela Ramm, Ted Roelofs, Park­er Schorr and Mark Zdech­lik con­tributed to this report as part of a col­lab­o­ra­tion includ­ing the Insti­tute for Non­prof­it News and INN mem­bers IowaWatch, KCUR, Bridge Mag­a­zine, Wis­con­sin Watch, Side Effects Pub­lic Media and The Con­ver­sa­tion; as well as Min­neso­ta Pub­lic Radio, Wis­con­sin Pub­lic Radio, Iowa Pub­lic Radio, The Gazette (Cedar Rapids, IA), Iowa Falls Times Cit­i­zen and N’west Iowa REVIEW. The project was made pos­si­ble by sup­port from INN, with addi­tion­al sup­port from the Solu­tions Jour­nal­ism Net­work, a non­prof­it orga­ni­za­tion ded­i­cat­ed to rig­or­ous and com­pelling report­ing about respons­es to social problems. 

For more sto­ries vis­it hos​pi​tals​.iowawatch​.org

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