By Rick Wagner
November 02, 2017
More than 70 rural hospitals have closed since 2010. The current environment is challenging for these vital but vulnerable hospitals. And, although they haven’t closed, many other rural hospitals face financial difficulties and countless pressures from a myriad of changes in recent years. It’s estimated that there are more than 200 hospitals in significant financial stress that are threatened with closure.
Pressures affecting a rural hospital include:
If any or all of these sound familiar, you’re not alone. Retail competitors have entered the health care market, like Walmart, Walgreens, CVS, Teledoc, ambulatory surgical centers, etc., bringing new pressures to the entire health care system. The system is changing from volume to value as Medicare and other major payors are working on modifying the fundamentals of how you’ll be paid for caring for patients in the future.
Four categories of facilities
Successful rural hospitals are handling change by reinventing themselves and adapting to the wants and needs of their community. For some, that may mean no inpatient facility at all. But not all hospitals are responding so successfully. We see versions of the following four scenarios playing out across the country:
What should you do?
If you identify with the first category — successful facilities — more than likely you’ve already started facing changes and addressing issues in recent years that have allowed you to get where you are today. But it’s important to continue to be aware of trends, understanding changing payor models and demographics, and avoiding complacency.
Here’s how other rural hospitals can survive:
The urgency of needing a plan in place to survive and thrive is apparent. The basic question to start with is: What is really needed to support the health needs of your community — given its demographic and economic future — and how can your organization positively impact the broader health of the community and save lives that might not otherwise be saved? If you start with the attitude of “How do we save the hospital as it exists today,” you may be doomed to fail. It’s important to be open to the possibility of a new strategy that looks different than your current operating plan.
It’s a smart time for you to review your operations and the community you serve to make necessary changes to adapt. There are many success stories of positive changes to operational efficiency and strategy of care delivery. Spend time in strategic planning understanding your options. Once you have a plan, be ready to adapt to meet that plan and continually look at your operations from both a revenue generation and cost-efficiency standpoint. Be ready for workforce reductions or a shift in staffing plans.
Threatened facilities and adaptable facilities
If your hospital falls in one of the last two categories, swift action is required to survive. Work to quickly understand your needs, community demographics and realistic options. Don’t be afraid to make quick, but informed choices changing strategy or pursuing remedies. Reach out to partners to assist you in your analyses, like business advisors or other potential affiliates. Many communities have moved to affiliate with, sell or transfer sponsorship of their organization to larger integrated health systems to help support health care in the community.
When properly executed, affiliation in various forms can be successful, but it needs to be fully vetted before the deal is done. Many communities could have benefitted from clearly articulating their goals and needs before entering deals. Often, there is a disconnected from what the local board thought they would be getting from the deal versus what the system intended to provide.
The current market pressures have presented some scenarios that require facilities to consider drastic actions, such as reorganization and bankruptcy. These actions can provide the organization with the necessary time and resources to develop a reorganization plan. Facilities in these situations need to seek out experienced legal counsel familiar with hospitals and reorganization proceedings.
We have found one of the critical success factors to using these options as an effective path to reorganization is to have a plan in place outlining how your organization will emerge from the process before the instigation of any proceedings.