Analysis Shows One-in-Five U.S. Rural Hospitals at High Risk of Closing Unless Financial Situation Improves

https://www.navigant.com/news/corporate-news/2019/rural-hospitals-analysis

https://www.beckershospitalreview.com/finance/1-in-5-rural-hospitals-at-high-risk-of-closing-analysis-finds.html?origin=cioe&utm_source=cioe

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Twenty-one percent of U.S. rural hospitals are at high risk of closing unless their finances improve, according to an analysis from management consultancy firm Navigant.

The study also found 64 percent, or 277, of high financial risk rural hospitals are considered essential to their communities.

The analysis — which examined the financial viability (operating margin, days cash on hand and debt-to-capitalization ratio) and community essentiality of more than 2,000 of the nation’s rural hospitals — suggests 21 percent or 430 rural hospitals in 43 states are at high risk of closing. These hospitals represent 21,547 staffed beds, 707,000 annual discharges, 150,000 employees and $21.2 billion total patient revenue, according to Navigant.

Of the 43 states, 34 have five or more rural hospitals at risk. 

Navigant cited payer mix degradation; declining inpatient care driving excess capacity; and inability to leverage innovation as factors putting the hospitals at risk. Medicare payment reductions, the age of many rural facilities and a lack of capital to invest in updated, innovative technology were specifically cited.

“While the potential for a rural hospital crisis has been known for years, this predictive data sheds light on just how dire the situation could become,” the study authors concluded. “Now, by being able to accurately assess the economic health of all rural hospitals in America, there is no choice but to pay attention. Local, state and federal political leaders, as well as hospital administrators, must act to protect the well-being of rural hospitals nationwide and the communities they serve.”

Read more about the analysis here

 

2 California hospitals face closure if sale delayed

https://www.beckershospitalreview.com/finance/2-california-hospitals-face-closure-if-sale-delayed.html?origin=cfoe&utm_source=cfoe

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Santa Clara County (Calif.) officials criticized California Attorney General Xavier Becerra at a press conference Jan. 24 for trying to block the county’s purchase of two bankrupt hospitals, according to The Mercury News.

In December, the bankruptcy court approved Santa Clara County’s $235 million offer to buy O’Connor Hospital in San Jose and St. Louise Regional Hospital in Gilroy from El Segundo, Calif.-based Verity Health, which entered Chapter 11 bankruptcy in August. Mr. Becerra appealed the bankruptcy court’s approval of the sale earlier this month, putting the deal in jeopardy.

Mr. Becerra is seeking to halt the sale because Santa Clara County has not agreed to conditions put in place in 2015 when private hedge fund Blue Mountain Capital acquired six hospitals owned by Los Altos, Calif.-based Daughters of Charity Health System. The deal and name change to Verity were approved, subject to several conditions.

“In this case, we have the responsibility to ensure any transfer of the hospital maintains previously imposed conditions,” Mr. Becerra’s office said in an emailed statement to The Mercury News. “The conditions include the requirement to have an emergency room, inpatient facility beds, intensive care services, and NICU. The Attorney General is fighting to ensure these conditions are enforced.”

At the Jan. 24 press conference, Santa Clara County CEO Jeff Smith, MD, said Mr. Becerra cares more about maintaining “power and control” over regulations than local residents’ access to public hospitals, according to the report.

A bankruptcy court hearing on Mr. Becerra’s request to halt the sale of the hospitals is set for Jan. 30. Dr. Smith said the outcome of the hearing could determine whether the hospitals shut down.

“If that stay is granted, that will delay the process … and it is highly likely those hospitals will close,” he said, according to The Mercury News.

O’Connor Hospital and St. Louise Regional Hospital are two of the six hospitals Verity operated when it filed for bankruptcy protection. On Jan. 18, Verity announced it had received a $610 million offer for the other four hospitals.

 

 

Healthcare Triage: Rural Hospital Closures Impact the Health of a Lot of People

https://theincidentaleconomist.com/wordpress/healthcare-triage-rural-hospital-closures-impact-the-health-of-a-lot-of-people/

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Rural hospitals in the United States are having an increasingly hard time staying in business. Which is not great for the health of people who live in areas that no longer have a hospital.

This episode was adapted from a column Austin wrote for The Upshot. Links to sources can be found there.

 

 

 

 

Hospital bankruptcies continue to skyrocket: 3 things to know

https://www.beckershospitalreview.com/finance/hospital-bankruptcies-continue-to-skyrocket-3-things-to-know.html?origin=ceoe&utm_source=ceoe

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More than 20 hospitals have filed for Chapter 11 bankruptcy since 2016, according to an Oct. 30 report from the law firm Polsinelli.

The Polsinelli-TrBK Distress Indices Report details how healthcare trends have affected the U.S. economy. Researchers determined that while the economy, specifically Chapter 11 bankruptcies across all industries and the real estate industry, have remained stable during the past several quarters, healthcare exhibited consistently high levels of distress during eight of the last 11 quarters.

To compile the report, researchers use Chapter 11 bankruptcy data as a proxy for measuring financial distress in the overall U.S. economy and breakdowns of distress specifically in real estate and healthcare.

Here are three things to know from the report:

1. Southwestern states have been hit the hardest by healthcare bankruptcy filings. For example, increased competition, insurance payer pressure and overexpansion contributed to Neighbors Legacy Holdings in Houston, a freestanding emergency facility operator with more than 30 facilities, to file for bankruptcy earlier this year.

2. While general Chapter 11 bankruptcies have decreased 53 percent from the 2010 benchmark, healthcare industry distress increased by 305 percent during the same period.

3. The law firm’s Health Care Services Distress Research Index was 405 for the third quarter of 2018, an increase of 65 points from the second quarter of 2018. The third-quarter figures represent a year-over-year increase of 82 points.

To learn more, click here.

A Sense of Alarm as Rural Hospitals Keep Closing

The potential health and economic consequences of a trend associated with states that have turned down Medicaid expansion.

Hospitals are often thought of as the hubs of our health care system. But hospital closings are rising, particularly in some communities.

“Options are dwindling for many rural families, and remote communities are hardest hit,” said Katy Kozhimannil, an associate professor and health researcher at the University of Minnesota.

Beyond the potential health consequences for the people living nearby, hospital closings can exact an economic toll, and are associated with some states’ decisions not to expand Medicaid as part of the Affordable Care Act.

Since 2010, nearly 90 rural hospitals have shut their doors. By one estimate, hundreds of other rural hospitals are at risk of doing so.

In its June report to Congress, the Medicare Payment Advisory Commission found that of the 67 rural hospitals that closed since 2013, about one-third were more than 20 miles from the next closest hospital.

study published last year in Health Affairs by researchers from the University of Minnesota found that over half of rural counties now lack obstetric services. Another study, published in Health Services Research, showed that such closures increase the distance pregnant women must travel for delivery.

And another published earlier this year in JAMA found that higher-risk, preterm births are more likely in counties without obstetric units. (Some hospitals close obstetric units without closing the entire hospital.)

Ms. Kozhimannil, a co-author of all three studies, said, “What’s left are maternity care deserts in some of the most vulnerable communities, putting pregnant women and their babies at risk.

In July, after The New York Times wrote about the struggles of rural hospitals, some doctors responded by noting that rising malpractice premiums had made it, as one put it, “economically infeasible nowadays to practice obstetrics in rural areas.”

Many other types of specialists tend to cluster around hospitals. When a hospital leaves a community, so can many of those specialists. Care for mental health and substance use are among those most likely to be in short supply after rural hospital closures.

The closure of trauma centers has also accelerated since 2001, and disproportionately in rural areas, according to a study in Health Affairs. The resulting increased travel time for trauma cases heightens the risk of adverse outcomes, including death.

Another study found that greater travel time to hospitals is associated with higher mortality rates for coronary artery bypass graft patients.

In many communities, hospitals are among the largest employers. They also draw other businesses to an area, including those within health care and others that support it (like laundry and food services, or construction).

A study in Health Services Research found that when a community loses its only hospital, per capita income falls by about 4 percent, and the unemployment increases by 1.6 percentage points.

Not all closures are problematic. Some are in areas with sufficient hospital capacity. Moreover, in many cases hospitals that close offer relatively poorer quality care than nearby ones that remain open. This forces patients into higher-quality facilities and may offset negative effects associated with the additional distance they must travel.

Perhaps for these reasons, one study published in Health Affairs found no effect of hospital closures on mortality for Medicare patients. Because it focused on older patients, the study may have missed adverse effects on those younger than 65. Nevertheless, the study found that hospital closings were associated with reduced readmission rates, which is regarded as a sign of increased quality. So it seems consolidating services at larger hospitals can sometimes help, not harm, patients.

“There are real trade-offs between consolidating expertise at larger centers versus maintaining access in local communities,” said Karen Joynt Maddox, a cardiologist and health researcher with the Washington University School of Medicine in St. Louis and an author of the study. “The problem is that we don’t have a systematic approach to determine which services are critical to provide locally, and which are best kept at referral centers.”

Many factors can underlie the financial decision to close a hospital. Rural populations are shrinking, and the trend of hospital mergers and acquisitions can contribute to closures as services are consolidated.

Another factor: Over the long term, we are using less hospital care as more services are shifted to outpatient settings and as inpatient care is performed more rapidly. In 1960, an average appendectomy required over six days in the hospital; today one to two days is the norm.

Part of the story is political: the decision by many red states not to take advantage of federal funding to expand Medicaid as part of the Affordable Care Act. Some states cited fiscal concerns for their decisions, but ideological opposition to Obamacare was another factor.

In rural areas, lower incomes and higher rates of uninsured people contribute to higher levels of uncompensated hospital care — meaning many people are unable to pay their hospital bills. Uncompensated care became less of a problem in hospitals in states that expanded Medicaid.

In a Commonwealth Fund Issue Brief, researchers from Northwestern Kellogg School of Management found that hospitals in Medicaid expansion states saved $6.2 billion in uncompensated care, with the largest reductions in states with the highest proportion of low-income and uninsured patients. Consistent with these findings, the vast majority of recent hospital closings have been in states that have not expanded Medicaid.

In every year since 2011, more hospitals have closed than opened. In 2016, for example, 21 hospitals closed, 15 of them in rural communities. This month, another rural hospital in Kansas announced it was closing, and next week people in Kansas, and in some other states, will vote in elections that could decide whether Medicaid is expanded.

Richard Lindrooth, a professor at the University of Colorado School of Public Health, led a study in Health Affairs on the relationship between Medicaid expansion and hospitals’ financial health. Hospitals in nonexpansion states took a financial hit and were far more likely to close. In the continuing battle within some states about whether or not to expand Medicaid, “hospitals’ futures hang in the balance,” he said.

 

 

GAO: rural hospital closures increasing, South hardest hit

https://www.healthcaredive.com/news/gao-rural-hospital-closures-increasing-south-hardest-hit/538604/

Dive Brief:

  • Hospitals across the U.S. are being battered by financial headwinds, and rural hospitals are vulnerable because they don’t have capital or diversified services to fall back on when the going gets rough. Between 2013 and 2017, 64 rural hospitals closed due to financial distress and changing healthcare dynamics, more than twice the number in the previous five years, a new Government Accountability Office analysis shows.  
  • Rural hospital closures disproportionately occurred in the South, among for-profit hospitals and among organizations with a Medicare-dependent hospital payment designation.
  • One potential lifeline was Medicaid expansion. According to GAO, just 17% of rural hospital closures occurred in states that had expanded Medicaid as of April 2018.

Dive Insight:

Declining inpatient admissions and reimbursement cuts have taken a toll on rural hospitals. Since 2010, 86 rural hospitals have closed, and 44% of those remaining are operating at a loss — up from 40% in 2017.

CMS Administrator Seema Verma released a rural health strategy in May aimed at improving access and quality of care in rural communities. Among its objectives are expanding telemedicine, empowering patients in rural areas to take responsibility for their health and leveraging partnerships to advance rural health goals.

The agency also expanded its Rural Community Hospital Demonstration from 17 to 30 hospitals. The program reimburses hospitals for the actual cost of inpatient services rather than standard Medicare rate, which could be as little as 80% of actual cost.

Such initiatives can be helpful, but if a hospital can’t make ends meet on its Medicare and Medicaid businesses and has only a modicum of privately insured patients, “that’s just not a balance that works financially,” Diane Calmus, government affairs and policy manager at the National Rural Health Association, told Healthcare Dive recently.

In all, 49 rural hospitals closed in the South, or 77% of rural hospital closures from 2013 through 2017, according to GAO. Texas had the most closures with 14, followed by Tennessee with eight and Georgia and Mississippi, each with five. By contrast, there were eight rural hospital closures in the Midwest and four each in the West and Northeast.

GAO also looked at closures by Medicare rural hospital payment designation. Critical access hospitals made up 36% of rural hospital closures, 30% were hospitals receiving Medicare standard inpatient payment, 25% had Medicare-dependent hospital designation and 9% were sole community hospitals.

To aid rural hospitals and ensure access for patients, NRHA has urged CMS to adopt a common sense approach to the “exclusive use” standard and lobbied lawmakers to pass legislation eliminating the 96-hour condition of payment requirement, two policies that are particularly hard on rural providers.

Another bill, the Save Rural Hospitals Act, would reverse reimbursement cuts to rural hospitals, provide other regulatory relief and establish the community outpatient hospital, a new provider type offering 24/7 emergency services plus outpatient and primary care.

 

 

 

 

 

450 hospitals at risk of potential closure, Morgan Stanley analysis finds

https://www.bloomberg.com/news/articles/2018-08-21/hospitals-are-getting-eaten-away-by-market-trends-analysts-say

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More than 15 percent of U.S. hospitals have weak financial metrics or are at risk of potential closure, according to Business Insider, which cited a recent report from Morgan Stanley.

Morgan Stanley analyzed data from more than 6,000 hospitals and found 600 of the hospitals were “weak” based on criteria for margins for earnings before interest and other items, occupancy and revenue, according to Bloomberg. The analysis revealed another 450 hospitals were at risk of potential closure, according to Business Insider

Texas, Oklahoma, Louisiana, Kansas, Tennessee and Pennsylvania had the highest concentration of hospitals in the “at risk” pool, according to the report.

Industry M&A may be no savior as the pace of hospital closures, particularly in hard-to-reach rural areas, seems poised to accelerate.

Hospitals have been closing at a rate of about 30 a year, according to the American Hospital Association, and patients living far from major cities may be left with even fewer hospital choices as insurers push them toward online providers like Teladoc Inc. and clinics such as CVS Health Corp’s MinuteClinic.

Morgan Stanley analysts led by Vikram Malhotra looked at data from roughly 6,000 U.S. private and public hospitals and concluded eight percent are at risk of closing; another 10 percent are considered “weak.” The firm defined weak hospitals based on criteria for margins for earnings before interest and other items, occupancy and revenue. The “at risk” group was defined by capital expenditures and efficiency, among others.

The next year to 18 months should see an increase in shut downs, Malhotra said in a phone interview.

The risks are coming following years of mergers and acquisitions. The most recent deal saw Apollo Global Management LLC swallowing rural hospital chain LifePoint Health Inc. for $5.6 billion last month. Apollo declined to comment on the deal; LifePoint has until Aug. 22 to solicit other offers. Consolidation among other health-care players, such as CVS’s planned takeover of insurer Aetna Inc., could also pressure hospitals as payers push patients toward outpatient services.

There are already a lot of hospitals with high negative margins, consultancy Veda Partners health care policy analyst Spencer Perlman said, and that’s going to become unsustainable. Rural hospitals with a smaller footprint may have less room to negotiate rates with managed care companies and are often hobbled by more older and poorer patients.

Also wearing away at margins are technological improvements that allow patients to get more surgeries and imaging done outside of the hospital. They are also likely to be forced to pay more to attract and retain doctors in key areas, Bloomberg Intelligence analyst Jason McGorman said.

They “are getting eaten alive from these market trends,” Perlman cautioned.

Future M&A options could be too late — buyers may hesitate as debt laden operators like Community Health Systems Inc. and Tenet Healthcare Corp. focus on selling underperforming sites to reduce leverage, Morgan Stanley’s Zachary Sopcak said.

The light at the end of the tunnel is some hospitals are rising to the occasion, Perlman said. Some acute care facilities are restructuring as outpatient emergency clinics with free-standing emergency departments. “Microhospitals,” or facilities with ten beds or less, are another trend that may hold promise.