As we redesign our healthcare system, the unique role of rural hospitals must be front of mind for our policymakers.
By Kerry Harvey

Once again, the healthcare community finds itself waiting for dramatic change from policymakers in Washington. This is not new. Indeed, the one constant is that healthcare policy is always in a state of flux. Given the rapidly changing demographics of our population, constantly evolving technology and ever-shifting menu of resources, change is inevitable. Yet, as Congress considers whether to repeal the Affordable Care Act and how to replace it, the stakes are unusually high.

Change always produces winners and losers and those will be sorted out by the end of 2017. Rural healthcare providers, particularly hospitals, have much to gain or lose in the current policy debate. Perhaps more importantly, millions of Americans served by rural hospitals have a huge stake in the outcome.

More broadly, it is not an overstatement to suggest that many of the communities served by rural hospitals may very well live or die based on the result of the current policy debate. Here’s hoping that our policymakers recognize the unique challenges already facing rural hospitals and sufficiently appreciate the essential benefits these fragile facilities bring to our nation. If we get it right, rural hospitals can survive and even thrive in the new environment. On the other hand, failure to provide sufficient protection for these facilities will, in many cases, lead to their disappearance, with far-reaching damage to the communities they exit.

Unique Challenges

Rural hospitals serve tens of millions of Americans; approximately 25 percent of our population. Under the best of circumstances, financial management of any hospital is a tough proposition – it’s a high-volume, low-margin business with enormous capital requirements, functioning in a heavily regulated environment. Rural hospitals face unique challenges, however, in addition to the difficult environment for any healthcare provider.

Rural hospitals serve a uniquely challenging population. That population tends to be older, sicker, poorer and less educated. The population is often less compliant and the incidence of chronic, long-term illness has its own challenges.

Rural hospitals are disadvantaged by the cross subsidies inherent in the system. Often, rural hospitals cannot take advantage of the higher compensated specialty services to offset a disproportionate number of patients who access emergency care or medical floors because of chronic illness. Recruiting physicians is, of course, more difficult for rural hospitals. They may have to pay more to recruit physicians and often find it impossible to recruit specialists.

Our smaller hospitals serving smaller communities are often on the razor’s edge of viability. It is imperative that our policymakers do nothing to hurt this vital cog in the healthcare machinery and, indeed, should explicitly strengthen the position of rural hospitals. Small hospitals and the communities they serve should have a seat at the table as Congress formulates a replacement for the Affordable Care Act. This is not a matter to take lightly. If we get it wrong, the results are devastating.

The 1983 transition from cost-base reimbursement to a prospective payment system had a significant unintended adverse consequence for rural hospitals. Although adjustments were later made to mitigate the hardships created, it was too late for many important facilities across the country. We must learn from this experience and determine that it will not be repeated.

Lose-Lose Situation

The cost of losing a rural hospital is substantial and extends well beyond worsening health outcomes. When we lose a community hospital, the whole community loses in a myriad of ways.

Obviously, healthcare outcomes are likely to suffer. The populations served by rural hospitals tend to be poor and less mobile. For many, an hour’s drive to reach a larger medical center is too much; the healthcare system will not be accessible. Health outcomes will suffer as a significant portion of the population will forgo preventive care and the community will lose wellness initiatives. Physicians and associated professionals are likely to leave the community and the chances of recruiting replacements are significantly diminished. Losing a rural hospital often means disrupting associated services such as home health, transitional care and long-term care.

When the hospital leaves, the community loses its most valuable advocates for better health outcomes. Wellness initiatives diminish, and preventive care and diagnostic services are less accessible. Community health will invariably suffer.

Moreover, small communities are big losers in other ways when the local hospital leaves. The economic effect can be devastating.  Losing the local hospital will severely diminish the ability of that community to recruit new businesses from out of town. Economic development professionals know that businesses looking for a new location will carefully assess the local infrastructure which will always include the healthcare culture of the community. A community without a hospital is severely disadvantaged in the economic development competition.

In small communities, the local hospital is almost always one of the top employers. This is true not only in terms of the number of jobs, but the quality of jobs. The local hospital will have several relatively highly compensated employees and will almost always offer a generous benefit package, including health insurance. Unemployment and underemployment rises when a hospital leaves a small community. Unlike urban areas, these jobs often cannot be replaced with comparable opportunities.

The ripple effects of the closure of a local hospital are substantial. Community hospitals are good customers for local vendors who provide goods and services. When the hospital goes away, these vendors and their employees suffer. Local governments suffer as well, as the tax base diminishes. The community often loses leaders who contribute in various ways. It’s not unusual to find those associated with a community hospital on school boards, city councils, Chamber of Commerce boards and the like. In short, community hospitals are a critical component of the fabric of the communities they serve. When they are lost, the entire community loses. As opposed to urban areas, the losses to smaller communities are often unrecoverable.

Rural Hospital Closings in Kentucky

More than 75 rural hospitals in the United States have closed. Of the 25 states that have seen at least one rural hospital close since 2010, those with the most closures are in the South, according to research from the North Carolina Rural Health Research Program. In Kentucky, the following rural hospitals have closed between January 2010 and November 2016:

• New Horizons Medical Center (Owenton)
• Nicholas County Hospital (Carlisle)
• Parkway Regional Hospital (Fulton)
• Westlake Regional Hospital (Columbia)

Currently, 673 additional facilities are vulnerable and could close, representing more than one-third of rural hospitals in the U.S., according to the Hospital Strength INDEX.

 -Kerry Harvey is a member with Dickinson Wright, PLLC in Lexington, Ky.