‘Who’s going to take care of these people?’


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The hospital had already transferred out most of its patients and lost half its staff when the CEO called a meeting to take inventory of what was left. Employees crammed into Tina Steele’s office at Fairfax Community Hospital, where the air conditioning was no longer working and the computer software had just been shut off for nonpayment.

“I want to start with good news,” Steele said, and she told them a food bank would make deliveries to the hospital and Dollar General would donate office supplies.

“So how desperate are we?” one employee asked. “How much money do we have in the bank?”

“Somewhere around $12,000,” Steele said.

“And how long will that last us?”

“Under normal circumstances?” Steele asked. She looked down at a chart on her desk and ran calculations in her head. “Probably a few hours,” she said. “Maybe a day at most.”

The staff had been fending off closure hour by hour for the past several months, ever since debt for the 15-bed hospital surpassed $1 million and its outside ownership group entered into bankruptcy, beginning a crisis in Fairfax that is becoming familiar across much of rural America. More than 100 of the country’s remote hospitals have gone broke and then closed in the past decade, turning some of the most impoverished parts of the United States into what experts now call “health-hazard zones,” and Fairfax was on the verge of becoming the latest. The emergency room was down to its final four tanks of oxygen. The nursing staff was out of basic supplies such as snakebite antivenin and strep tests. Hospital employees had not received paychecks for the past 11 weeks and counting.

The only reason the hospital had been able to stay open at all was that about 30 employees continued showing up to work without pay, increasing their hours to fill empty shifts and essentially donating time to the hospital, understanding what was at stake. Some of them had been born or had given birth at Fairfax Community. Several others had been stabilized and treated in the emergency room after heart attacks or accidents. There was no other hospital within 30 miles of two-lane roads and prairie in sprawling Osage County, which meant Fairfax Community was the only lifeline in a part of the country that increasingly needed rescuing.

“If we aren’t open, where do these people go?” asked a physician assistant, thinking about the dozens of patients he treated each month in the ER, including some in critical condition after drug overdoses, falls from horses, oil field disasters or car crashes.

“They’ll go to the cemetery,” another employee said. “If we’re not here, these people don’t have time. They’ll die along with this hospital.”

“We have no supplies,” Steele said. “We have nothing. How much longer can we provide quality care?”







As emergencies rise across rural America, a hospital fights for its lifeAs emergencies rise across rural America, a hospital fights for its life


Maryland’s Experiment With Capitated Payments For Rural Hospitals: Large Reductions In Hospital-Based Care


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In 2010 Maryland replaced fee-for-service payment for some rural hospitals with “global budgets” for hospital-provided services called Total Patient Revenue (TPR).

A principal goal was to incentivize hospitals to manage resources efficiently. Using a difference-in-differences design, we compared eight TPR hospitals to seven similar non-TPR Maryland hospitals to estimate how TPR affected hospital-provided services. We also compared health care use by “treated” patients in TPR counties to that of patients in counties containing control hospitals.

Inpatient admissions and outpatient services fell sharply at TPR hospitals, increasingly so over the period that TPR was in effect.

Emergency department (ED) admission rates declined 12 percent, direct (non-ED) admissions fell 23 percent, ambulatory surgery center visits fell 45 percent, and outpatient clinic visits and services fell 40 percent.

However, for residents of TPR counties, visits to all Maryland hospitals fell by lesser amounts and Medicare spending increased, which suggests that some care moved outside of the global budget.

Nonetheless, we could not assess the efficiency of these shifts with our data, and some care could have moved to more efficient locations. Our evidence suggests that capitation models require strong oversight to ensure that hospitals do not respond by shifting costs to other providers.




The epidemic of rural hospital closures is threatening small towns such as Celina, Tenn. The town of 1,500 has been trying to position itself as a retiree destination but that task has grown more difficult since the March 1 closure of 25-bed Cumberland River Hospital.


Celina became the 11th rural hospital in Tennessee to close in recent years — more than in any state but Texas. Both states have refused to expand Medicaid in a way that covers more of the working poor.

The closest hospital is now 18 miles away. That adds another 30 minutes through mountain roads for those who need an X-ray or bloodwork. For those in the back of an ambulance, that bit of time could mean the difference between life or death.

When a rural community loses its hospital, health care becomes harder to come by in an instant. But a hospital closure also shocks a small town’s economy. It shuts down one of its largest employers. It scares off heavy industry that needs an emergency room nearby. And in one Tennessee town, a lost hospital means lost hope of attracting more retirees.

Seniors, and their retirement accounts, have been viewed as potential saviors for many rural economies trying to make up for lost jobs. But the epidemic of rural hospital closures is threatening those dreams in places like Celina, Tenn. The town of 1,500, whose 25-bed hospital closed March 1, has been trying to position itself as a retiree destination.

“I’d say, look elsewhere,” said Susan Scovel, a Seattle transplant who arrived with her husband in 2015.

Scovel’s despondence is especially noteworthy given she leads the local chamber of commerce effort to attract retirees like herself. She considers the wooded hills and secluded lake to hold scenic beauty comparable to the Washington coast — with dramatically lower costs of living; she and a small committee plan getaway weekends for prospects to visit.

When she first toured the region before moving in 2015, Scovel and her husband, who had Parkinson’s, made sure to scope out the hospital, on a hill overlooking the sleepy town square. And she has rushed to the hospital four times since he died in 2017.

“I have very high blood pressure, and they’re able to do the IVs to get it down,” Scovel said. “This is an anxiety thing since my husband died. So now — I don’t know.”

She can’t in good conscience advise a senior with health problems to come join her in Celina, she said.

When Seconds Count, Delays In Care

Celina’s Cumberland River Hospital had been on life support for years, operated by the city-owned medical center an hour away in Cookeville, which decided in late January to cut its losses after trying to find a buyer. Cookeville Regional Medical Center executives explain that the facility faced the grim reality for many rural providers.

“Unfortunately, many rural hospitals across the country are having a difficult time and facing the same challenges, like declining reimbursements and lower patient volumes, that Cumberland River Hospital has experienced,” CEO Paul Korth said in a written statement.

Celina became the 11th rural hospital in Tennessee to close in recent years — more than in any state but Texas. Both states have refused to expand Medicaid in a way that covers more of the working poor. Even some Republicans now say the decision to not expand Medicaid has added to the struggles of rural health care providers.

The closest hospital is now 18 miles away. That adds another 30 minutes through mountain roads for those who need an X-ray or bloodwork. For those in the back of an ambulance, that bit of time could mean the difference between life or death.

“We have the capability of doing a lot of advanced life support, but we’re not a hospital,” said Natalie Boone, Clay County’s emergency management director.

The area is already limited in its ambulance service, with two of its four trucks out of service.

Once a crew is dispatched, Boone said, it’s committed to that call. Adding an hour to the turnaround time means someone else could likely call with an emergency and be told — essentially — to wait in line.

“What happens when you have that patient that doesn’t have that extra time?” Boone asked. “I can think of at least a minimum of two patients [in the last month] that did not have that time.”

Residents are bracing for cascading effects. Susan Bailey hasn’t retired yet, but she’s close. She has spent nearly 40 years as a registered nurse, including her early career at Cumberland River.

“People say, ‘You probably just need to move or find another place to go,'” she said.

Bailey and others are concerned that losing the hospital will soon mean losing the only three physicians in town. The doctors say they plan to keep their practices going, but for how long? And what about when they retire?

“That’s a big problem,” Bailey said. “The doctors aren’t going to want to come in and open an office and have to drive 20 or 30 minutes to see their patients every single day.”

Closure of the hospital means 147 nurses, aides and clerical staff have to find new jobs. Some employees come to tears at the prospect of having to find work outside the county and are deeply sad that their hometown is losing one of its largest employers — second only to the local school system.

Dr. John McMichen is an emergency physician who would travel to Celina to work weekends at the ER and give the local doctors a break.

“I thought of Celina as maybe the ‘Andy Griffith Show’ of healthcare,” he said.

McMichen, who also worked at the now-shuttered Copper Basin Medical Center, on the other side of the state, said people at Cumberland River knew just about anyone who would walk through the door. That’s why it was attractive to retirees.

“It reminded me of a time long ago that has seemingly passed. I can’t say that it will ever come back,” he said. “I have hopes that there’s still some hope for small hospitals in that type of community. But I think the chances are becoming less of those community hospitals surviving.”







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



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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


The benefits of bankruptcy? How one hospital found redemption in Chapter 11


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Filing for bankruptcy might make hospital finance executives cringe with desperation, if not failure, but strategically pursuing Chapter 11 can actually lay the foundation for a brighter future.

In fact, Morehead Memorial Hospital in Eden, North Carolina, actually owes its future to its leader’s decision to file for Chapter 11. Like so many rural hospitals, whose ranks are shrinking fast, Morehead faced common problems including flat or declining populations, migration of patients who find work in other communities and get care there, as well as the prevalence of Medicare and Medicaid in payer mixes that cause financial losses and vulnerabilities.

The albatross: Old debt

Morehead CEO Dana Weston’s original inclination was to look for a buyer, but after a year of searching a realization sunk in: the large amount of debt attached to the hospital was a liability akin to a brick wall between Morehead and a path forward.

Weston said they got consistent feedback that organizations felt it wasn’t in their current strategy to acquire a struggling rural hospital, since many systems already have more than one such facility under their umbrella. Most of the debt was at least a decade old, and addressing it was really the only way to make themselves attractive to potential buyers.

So Weston and the executive team did something that sounded more like an end than a beginning: Morehead filed for Chapter 11 bankruptcy on July 10.

Navigating Chapter 11, especially for a struggling rural hospital with limited resources and personnel must be done properly for the strategy to succeed.

And Morehead had some unique complexities, according to Ron Winters, managing director of hospital and healthcare services management firm Healthcare Management Partners. Winters has followed Morehead’s case and pointed out that the hospital is near a state border so they deal with different insurers from other states and are within 90 minutes of several larger competing hospitals, which didn’t help. Even worse, the size and scope of the their complex debt picture, including a $34 million U.S. Department of Housing and Urban Development loan that offered limited flexibility on repayment, really limited their options, Winters said.

“You couldn’t just go to HUD and say let’s make a deal,” Winters explained. “You needed the bankruptcy code to make a transaction happen.”

That’s because when a hospital enters bankruptcy, Winters said it is effectively drawing a line in the sand on the very day it files. Chapter 11 code dictates that any obligation incurred after the petition date is superior to anything owed prior to the petition date. So new debt legally takes priority over old in terms of what will be covered by proceeds from a transaction. Moreover, bankruptcy rules state that any buyer that acquires an entity that went through chapter 11 proceedings is assured no creditor can come after them for the acquired hospital’s debt. They only pay what they agreed to for the transaction, providing security and alleviating risk.

Eliminating the risk of old debt is the precise upside Morehead leveraged to make itself attractive to a prospective buyer.

Common misperceptions

The phrase Chapter 11, and this is true in any industry, hits an organization’s reputation pretty hard.

The legalese is hard to translate to employees and the community, and Weston said the sale of assets, which is how their bankruptcy transaction is referred to, caused quite a stir because it sounded like a liquidation.

“People had this picture in their mind of an auction where the furniture, equipment, everything was just gonna be sold off to the highest bidder,” Weston said. “That’s not the case at all.”

She insisted that the board’s decision to file for Chapter 11 was the right one because it removed one of the major barriers to interest in buying Morehead by addressing the debt through bankruptcy and shedding that liability.

Without a partner, Morehead simply had no future.

Avoiding bankruptcy’s downside

Winters warned that there is a risk to bankruptcy and two main drawbacks are costs and the consequences of not being prepared with a plan. First, a debtor must hire a bankruptcy lawyer and other experts such as a patient care ombudsman to monitor the care provided to patients and look after patient rights. If a hospital doesn’t have available assets to pay for those things, that’s a problem.

“It’s ideal to have some unpledged assets to use as liquidity for the proceedings or have a buyer lined up the very first day,” Winters said.

Having a buyer lined up on the first day would seem an ideal scenario, and is called a stalking horse purchaser. Bankruptcy code provides that a debtor must create protections so that the stalking horse can’t be easily outbid or outbid at all. A winning bidder that beats the stalking horse must do so by a minimum amount, for instance, and reimburse them for costs related to establishing stalking horse status.

Without a buyer ready to go or other financing plans laid out, creditors get worried, Winters said. “With financing, your creditors should be satisfied that all obligations following the bankruptcy petition will be satisfied.”

Hospitals would do well to start thinking about options like seeking a partner or bankruptcy while they still have some amount of liquidity and unpledged assets. “When you have none left you’re not going to be able to drive an attractive transaction and you run the greatest risk of collapsing,” Winters said.

The new future

Weston’s plan worked and Morehead’s survival is now all but assured.

On Nov. 13, a federal bankruptcy judge chose UNC Health Care as the winning bidder for Morehead, setting a course for emergence from Chapter 11 for early 2018.

The closing is expected to take 60 days, and Morehead will operate as usual during the transition. UNC personnel will be visiting Morehead in the coming weeks to start building relationships with hospital staff and the community.

Collapsing was never an option, according to Weston. The first-time CEO said there was far too much at stake. She said what keeps her up at night are the employees at Morehead and the community it serves. The hospital is vitally important to its hometown and to Rockingham County. It’s the biggest employer in Eden and the 4th or 5th largest in the county.

“The most valuable thing for me in this role is for the 700 who work here to trust that I am in this with them,” Weston said. “This community is my family.”

Medicaid Is Great, but Rural Maine Needs Hospitals, Too

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This week Maine voted to become the 32nd state to expand Medicaid despite opposition by Gov. Paul LePage, who had vetoed five previous expansion bills passed by the state legislature and has now threatened to block the results of the ballot initiative. Unless Mr. LePage succeeds, about 80,000 more Mainers will be eligible for coverage, a victory in an unsettling year for health care in America.

With the Affordable Care Act under constant threat from the Trump administration and out-of-pocket costs rising faster than wages, health care topped the list of the most important issues facing Americans this year.

However, Maine and other rural states face a health care crisis that Medicaid expansion can’t fix on its own. It’s not about affordable coverage; it’s about access: For too many rural areas, doctors and hospitals are scarce.

In the postwar era, America made hospital construction and modernization a priority. On Aug. 13, 1946, Harry Truman signed the Hill-Burton Act,giving communities grants and loans for hospital construction. By 1975, almost one-third of American hospitals owed their creation to the law. Financing for Hill-Burton health care construction ended in 1997, but one rule from the original bill still applied: These hospitals had to give free or reduced care to people who couldn’t afford services. As rural areas aged and the population shrank because of manufacturing’s decline and the rise of a technology-driven economy centered on urban areas, hospitals struggled to stay in operation.

Under the Affordable Care Act, hospitals started shutting down at worrisome rates because of an increase in financial penalties for noncompliance with A.C.A. mandates, the cost of tighter reporting standards and smaller reimbursements for certain procedures. Since the A.C.A. became law in 2010, over 80 rural hospitals have closed nationwide. Maine alone has lost three hospitals in that time, about 10 percent of its rural total.

If closings continue at this rate, 25 percent of America’s rural hospitals will have disappeared in the decade after Obamacare’s passage. This does not take into account facility deterioration, doctor departures or department closures.

This is a big problem for Maine, which has the highest percentage of rural residents in the country, according to the most recent census data. Calais Regional Hospital in Down East Maine recently oversaw its last childbirth. The obstetrics department closed in late summer, forcing women in labor to drive 50 minutes to deliver their babies. Despite an opioid crisis that increases the chance of high-risk pregnancies, this same privately owned hospital shut down its pediatrics wing and intensive care unit in recent years, because of financial pressure from the management company halfway across the country in Tennessee.

This was hardly an isolated example in Maine. The town of Jackman closed its 24-hour emergency room in September, and Boothbay lost its only hospital in 2013. Rangeley, where my wife’s family lives, is an hour away from the nearest hospital and has no doctor in town.

Meanwhile, Maine Med in Portland, Maine’s largest city, is about to break ground for a $512 million addition just a few years after it finished a $40 million renovation. While rural Maine’s hospitals and departments are closing because of large losses, Maine Med had, for 2016, a $61 million surplus.

Medicaid expansion is a welcome source of new revenue to rural hospitals in Maine because more insured patients mean fewer uncompensated treatments. Still, it comes nowhere close to fixing the problem or, politically, putting any meaningful points on the Democratic scoreboard.

In 2016, Donald Trump won Maine’s rural congressional district by a 10-point margin and rural counties in America at large by a 26-point marginon a message of repealing and replacing Obamacare. As Maggie Elehwany of the National Rural Health Association said in an NPR interview this year, rural Americans voted for Mr. Trump in part because of health care. “They see their hospitals closing,” she noted. “And one hospital C.E.O. described it as a three-pronged stool. It’s the churches, the hospitals and the schools. If you lose one of those legs of that stool, the whole community collapses.”

Since President Trump hasn’t been able to deliver on any meaningful legislation to support rural voters, it is the Democrats’ time to deliver. One good step is a bill sponsored by the Democratic senators Tim Kaine of Virginia and Michael Bennet of Colorado called Medicare-X. It would give a public option to Americans in rural counties where limited competition has yielded higher-priced health insurance options.

It still doesn’t solve the heart of the rural problem. Democrats can’t just lower premiums and expand Medicaid. We must strengthen rural communities by making access to high-quality health care services a priority of any proposal. In any future legislation, we should demand grants for new hospitals, funds to modernize crumbling ones and financial incentives for top doctors to work in these areas. This will not only make rural communities healthier, but also more welcoming for growth and new business.

No person suffering from a heart attack should die because a hospital is too far. No pregnant mother should have to risk the health of her baby because she can’t make it to a delivery room in time. As Democrats, we believe that health care is a right. It would be a big mistake to expand health care insurance but offer no place to use it.

A state-by-state breakdown of 71 rural hospital closures


More than 70 rural hospitals have closed since 2010 — and many more may be headed down the same path.

Rural hospitals are facing a myriad of financial challenges, and those in states that have not expanded Medicaid are feeling the most financial pressure. Sixty-three percent of hospitals vulnerable to closure are in states that have not expanded Medicaid, according to a report from iVantage Health Analytics, a firm that compiles a hospital strength index based on data about financial stability, patients and quality indicators.

Here are 25 states that have closed at least one rural hospital since 2010, according to research from the North Carolina Rural Health Research Program. For the purposes of its analysis, the NCRHRP defined a hospital closure as the cessation in the provision of inpatient services. Although all of the facilities listed below no longer provide inpatient care, many of them still offer services, including outpatient care, imaging, emergency care, urgent care, primary care or skilled nursing and rehabilitation services.

The rural hospital closure crisis: 15 key findings and trends


Vulnerability Index

Click to access Rural-Vulneravbility-2016_FINAL.pdf

12 hospital closures so far in 2016


OR Efficiencies

Hospitals across the nation face a myriad of financial challenges, including underpayments from Medicare and Medicaid and new reimbursement cuts.

These financial challenges, combined with other issues such as declining patient volumes, have caused more than 60 rural hospitals to close over the past five years.

Below are 12 hospitals closures reported so far this year.