Mergers, reduced services and expanding Medicaid are some ways to save rural hospitals; proposals for new funding models are stalled in Congress
By Parker Schorr, Wisconsin Watch
When Ryan Neville was brought on as the chief executive of Memorial Medical Center, the sole hospital serving Clark County, Wisconsin, it could not get a bank loan.
At that time, in 2013, rural safety net hospitals – those located more than 35 miles from another hospital – had a nationwide average of 69 days of cash reserves. But the Neillsville hospital lost $3 million that year and had enough reserves to pay its expenses for just four days.
The hospital needed new equipment to boost revenue. With few other options, it took the unusual step of seeking help from city hall, which helped the hospital get a $1.5 million loan.
“We are very thankful for that,” Neville says. “I think without that loan that the city helped us get or backed us on, we potentially could’ve closed or been significantly downsized.”
The hospital in central Wisconsin provides 24-hour trauma care in a county of 34,000 people spanning 1,200 square miles.
Had it closed, residents of the farming community would have had to drive 40 minutes to Marshfield or an hour to Eau Claire, turning some medical emergencies into catastrophes.
Nationwide, 155 rural hospitals have closed in the past 15 years, according to the North Carolina Rural Health Research Program. Nearly half of the remaining rural hospitals lose more money than they make, says Michael Topchik, national leader of the Chartis Center for Rural Health, a Chicago-based consulting firm.
Wisconsin has fared better than many states: Just one of its rural hospitals has closed in the past 10 years. Others have cut services or merged with larger systems to stay alive.
But as of 2017, 16 of Wisconsin’s 76 rural hospitals were operating in the red, according to a report from Chartis and iVantage Health Analytics. According to Navigant, another Chicago-based health care consultant, nine such hospitals were in danger of closing, including two — in Durand and Grantsburg — that are considered essential to the local community.
And a report from the Wisconsin Hospital Association Information Center found unpaid medical bills continue to climb as 150 Wisconsin hospitals reported $1.2 billion in “bad debt” and charity care in fiscal year 2018 — an increase of nearly $90 million from fiscal year 2017.
Rural hospital closures can be deadly: Mortality rates for time-sensitive conditions like heart attacks and strokes increased by nearly 6 percent after a rural community lost its hospital, according to a new report on California’s hospitals by University of Washington researchers.
Trapped under antiquated policies and infrastructure in communities with dwindling populations, some rural hospitals cannot afford to adapt to a rapidly evolving health care system.
Says Topchik: “There’s a lot of agreement that we need to do something … because otherwise you’re going to see a dust bowl vision … with all these small towns just drying up and blowing away like tumbleweeds.”
Keeping beds open — but empty
The federal Critical Access Hospital designation is vital for many small rural hospitals. If hospitals meet requirements, including 25 or fewer inpatient beds, 24-hour emergency care and located more than 35 miles from another hospital, Medicare reimburses them at 101% of allowable cost, although the number is closer to 90% in reality because of cutbacks and what is deemed allowable, Topchik says.
That higher reimbursement is the only thing keeping some rural hospitals open. But it also locks them into a model of inpatient-focused care that no longer makes sense, says Dave Mosley, managing director of Navigant Health Care.
Compared to urban hospitals, rural hospitals treat more patients with government insurance, which generally pays less than private insurance, or without any insurance at all.
In Wisconsin, a private insurer will pay the hospital nearly three times what Medicare would pay, according to a 2019 Rand Corporation study. Medicare pays hospitals 88 cents for every $1 spent, while Medicaid pays 90 cents on average. States set Medicaid reimbursement rates, and they can range from 81% to 130% of cost, according to a 2016 Medicaid and CHIP Payment and Access Commission report. And many uninsured cannot pay at all.
“So if you have Medicaid that pays less than cost, and you have Medicare that pays less than cost, in most cases, and then you have uninsured individuals, how exactly is the hospital supposed to make money? And the answer is: They very often cannot,” Mosley says.
Four patients a night
The Neillsville hospital, for example, serves a county where 18% of residents are uninsured — the highest rate in the state. The county has high rates of poverty, too: 22% of Clark County’s children live in poverty — significantly higher than the statewide average of 16%.
Hospitals spend money day-in, day-out on maintaining inpatient beds, running air conditioning and keeping the lights on regardless of whether they have any patients. Neillsville has 17 hospital beds that remain mostly empty; it has an average of just four patients a night, although the beds are used for other services during the day.
Topchik says hospitals with good management can face tough situations and still survive, but “You can only get so lean and so mean.”
For more of this story, visit https://www.wisconsinwatch.org/2019/09/rural_hospitals/