Hospitals of all sizes and in all regions must find ways to become more fiscally efficient as reimbursements from government and commercial payers continue to decline. But while larger health systems typically have a greater financial cushion, many independent rural and community hospitals have increasingly found themselves imperiled in the current healthcare climate.
Unfortunately, extreme financial distress has led to the closure of many smaller hospitals, which serve as crucial safety nets in their communities. The consequences can be severe. Rural communities often depend on one acute care hospital to provide all inpatient services, with the next nearest option a long drive away. For low-income families without convenient transportation, otherwise manageable emergencies could turn into dire tragedies.
Half of all states experienced at least one rural hospital closure from 2010 through 2016, according to research from the North Carolina Rural Health Research Program. Southern states saw the most closures, with Texas logging 13 shuttered hospitals. Tennessee had eight hospitals close since 2010 and Georgia had six.
Amid industrywide efforts to improve population health and ensure access to timely and convenient care, the staggering rate at which hospitals are closing could completely offset progress.
What is the solution?
Every struggling hospital's situation is different, and it's virtually always due to local circumstances. In some cases, it makes sense for a large health system to acquire and help turn around a distressed community or rural hospital, but that is not always the case. Sometimes the best course of action is for the smaller hospital to reengineer its role in the community.
During times of crisis, the most important thing is for leaders of ailing community and rural hospitals to be open to change. Many of these institutions have served as centerpieces of their communities for decades or even a century, but they will fail if they allow history to constrain their ability to evolve. The best decision — and sometimes the only option — for a struggling hospital may be to transform into an outpatient or ambulatory center. Or leaders may decide to close a certain department or clinical service due to low volume and inadequate revenue. Perhaps a hospital could benefit from replacing certain services with telemedicine.
If it's determined that the hospital needs to maintain inpatient services to to support local communities, another option is for the hospital to seek a strategic partnership with a larger hospital operator or health system. Aside from acquisitions, large systems can lend various assets — such as quality improvement programs, IT systems, group purchasing and general management assistance — to help restore the hospital's health.
In the event that a struggling community or rural hospital is acquired, they must still be receptive to change. Northwell Health has acquired at least 10 financially struggling hospitals over the past three decades. With most of these transactions, we had to work with the hospital leaders and their boards to determine how to transform the hospital's business model to achieve long-term sustainability and integrate appropriately with ours. In some cases this involved us converting the acquired hospital into mostly an outpatient care center and relocating its inpatient services to our other nearby hospitals. In another case we enhanced the cardiology services of a hospital and converted it to a tertiary campus. Now that hospital is booming and is one of the best open-heart surgery and trauma centers on Long Island. If its leaders weren't open to change, it probably would have been forced to shut down.
Financially ailing hospitals don't have the luxury of being resistant to change. It's possible to preserve their unique identities and character while transforming to bend under the cost and operational pressures of the current healthcare environment. Those two goals are not mutually exclusive.
Lawmakers must work to help — not harm — these hospitals
The federal regulations and policies that have intensified the financial pressure on rural and community hospitals cannot be ignored.
The No. 1 thing our elected officials could do to protect distressed rural and community hospitals is to vote against legislation that is currently making its way through the U.S. Senate. The House-approved American Health Care Act would be disastrous for hospitals that are serving low-income communities or are in poor financial shape. And if Congress slashes the Medicaid budget, as congressional Republicans have pledged to do, many of these hospitals undoubtedly will go under, which would severely limit access to care for local residents.
The government must not implement measures that will harm the delivery systems that serve these vulnerable communities. There is lots of talk about protecting the insurance companies, but what about those who deliver care? When hospitals and outpatient facilities are harmed, communities suffer.
Ultimately, hospitals in this position face very difficult choices, and they have little control over the policies coming out of Washington. Their leaders deserve credit for working hard and trying to do the right thing. These are tough situations, and it may be difficult to think differently and innovate. But their survival depends on their ability to continue driving into the future, even if it's down a different road.