In rural America, some hospitals find a way to prosper and grow
To succeed in a tough environment, hospitals are expanding outpatient services and relying on creative partnerships.
Rural hospitals are in crisis, facing demographic changes, declining inpatient volumes and reduced federal support. Since 2010, 80 rural hospitals have closed and 673 are at risk of closing — 210 at “extreme risk,” according to iVantage Health Analytics. Economic pressures have caused populations to decline, leaving a smaller patient base and less revenue. Those who remain are often elderly and uninsured.
Meanwhile, President Donald Trump, in his fiscal year 2018 budget proposal, is calling for massive cuts to Medicaid funding amounting to $627 billion over a decade, a potentially lethal hit for rural hospitals with large low-income populations. The Affordable Care Act has already reduced Medicare reimbursement and subsidies for the uninsured.
Despite these challenges, however, some hospitals are surviving and even prospering by acknowledging the shift to value-based care and aligning themselves with quality-driven, cost-conscious trends in healthcare.
Making a comeback in rural Nebraska
One of those hospitals is Lexington Regional Medical Center in south central Nebraska. In 2010, the critical access hospital was experiencing a negative 2.8 total margin, but by 2013, after adding new service lines, an urgent care center and outpatient surgical services, had turned that around to a positive 8% total margin. Officials also ensured they were in line with Meaningful Use regulations so that they could benefit from the incentives for that program. Today, the hospital is at the breakeven point, due to debt it took on for a new primary care clinic, but anticipates moving back into the black as the new clinic takes on more patients.
Like many rural hospitals, Lexington Regional has a large self-pay population. About 34% of the residents in Lexington and the smaller communities it serves are uninsured or under-insured. The largest employer in the city proper is a meat packing plant. The area has a large Latino population, as well as refugees, mostly Somalis. Farming is the mainstay in the surrounding communities.
As a result, social determinants of health are poor, many residents lack cars and there are cultural challenges, such as some Somalis' incorrect belief that immunizing young children against measles can cause autism.
That said, one of the first things Lexington Regional did was add urgent care, says CEO Leslie March. “We had lot of ER visits that were not emergent and our bad debt in the ER was 12%,” she tells Healthcare Dive. Within the first year of opening the urgent care, more than 30% of patients who had been using the ER had shifted to the outpatient facility.
Creating better work/life balance to attract physicians
The hospital had also experienced difficulty in recruiting providers. To tackle that problem, it increased hiring nurse practitioners and physician assistants. To offer new physicians a better work-life balance that included not having to be on call in the ER, it also contracted with physician practice management firm EmCare to help staff the ER. And it partnered with Bryan Health, a nonprofit health system in Nebraska, to establish an eHospitalist program that also provides nighttime assistance.
By having eHospitalists, patients can talk remotely with doctors and, if they need immediate attention, there are physicians in the ER who can see them, March says. “It is really effective in making sure that people could remain local and are able to get into the hospital if they need a hospital, stay in the hospital and receive the appropriate level of care.”
Another thing Lexington Regional did was to secure a federal loan to help fund its outpatient projects. Officials worked with the U.S. Department of Agriculture to get a 2.75% interest loan and also took advantage of the New Market Tax Credit program at both the state and federal levels. The latter brought in about $15 million, which will become equity after a seven-year compliance period, March notes. The money went toward creating an outpatient service area.
Partnering to share costs and resources
Meanwhile, to increase inpatient services, Lexington Regional partnered with a group that brings surgeons to the hospital to perform operations. The mix of new inpatient and outpatient services has paid off. Revenues are currently about $32 million, up from about $20 million in 2010.
The hospital also developed a transition team to assess and stratify patients’ risk when they come into the ER and worked with Nebraska Hospital Association’s Health Engagement Network to support patients after discharge. If patients need extra care after leaving the hospital, community health workers are called in to help out. The result: readmissions have dropped about 71% since 2010, according to March.
Finally, Lexington Regional partnered with other critical access hospitals in the region to gain economies of scale and bargaining power. “We can’t afford a data analyst, but five hospitals together afford and share a data analyst,” she says. The coop is now looking into becoming an accountable care organization, though that would require some legislative action, March adds.
Bucking the odds in Indiana
Margaret Mary Health in Batesville, Indiana, is also bucking the rural hospital trend. The 25-bed critical access hospital, located about an hour away from Cincinnati and Indianapolis, has been financially sound for several years. In 2016, net operating revenue was $92.5 million with total operating expenses of $83.7 million, according to the hospital’s most recent annual report.
Like Lexington, much of that is due to a focus on outpatient services. While the hospital tallies about 450 to 500 newborn deliveries and 19,000 emergency department visits annually — about 83% of revenue comes from outpatient work.
That focus has been long-term, says CEO Tim Putnam. The conversion to critical access in 2006 allowed officials to face the fact that the hospital only had so many inpatient beds and would only be able to grow so far as an inpatient facility. “Therefore, our growth opportunity was much more on the outpatient side,” he tells Healthcare Dive.
Increasing access to specialty services
Margaret Mary concentrated on where to place clinics in the community and finding opportunities to partner with other organizations so that they could do the high-end inpatient work and allow Margaret Mary to focus on less-intensive inpatient services and outpatient care. Current collaborations include the University of Cincinnati Stroke Team, which assists via telehealth technology in treating stroke patients, and The Christ Hospital, which provides cardiac care for Margaret Mary patients.
The hospital, which serves about 65,000 residents in three counties, also offers a range of services through primary care clinics and an outpatient and cancer center, which began offering advanced radiation therapy in January.
Besides its outpatient focus, Putnam attributes Margaret Mary’s strength and stability to being able to retain good physicians. “One of the biggest challenges is getting the kind of talented people that we need to work in these facilities,” he says, adding a particular challenge is recruiting and retaining experts in billing and IT.
While many see the shift to value-based care, with its lower reimbursements and added regulations, as compounding their woes, Putnam see a positive. “What I didn’t realize and what a lot of my colleagues are finding out is how much peripheral benefit there is to the value-based programs, especially for community hospitals that don’t bear high-end procedures and really can focus on keeping people healthy,” he says.
By focusing on preventative care, such as annual wellness visits and colonoscopies, smaller hospitals can help to prevent the major illnesses are treated at tertiary care centers and benefit financially in doing so.
Given external financial pressures and the uncertainty around federal funding for Medicaid and the ACA cost-sharing subsidies, rural hospitals will continue to be stressed. “There’s a lot of doom and gloom about rural,” March concedes. “But if we’re allowed to be creative and do some fun things like the ACO, then there’s a lot we can do to maintain local healthcare for our communities.”