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Staying Alive—or Living on a Prayer? 4 Survival Strategies for Rural Hospitals
posted on April 18, 2019

More than one out of five rural hospitals are at high risk of closing unless their financial situations improve, a recent study found. It’s a situation that impacts 430 hospitals nationwide—and the challenges these hospitals face are daunting.

Since 2010, 102 rural hospitals have closed. The impact of closure is substantial: A 2018 Government Accountability Office report found access to care for elderly and low-income rural residents is especially impacted when rural hospitals close. 

What’s putting rural hospitals at high risk? Declining inpatient admissions, shrinking reimbursement, and the unique economics of providing rural health care all have taken a deep toll on rural hospitals’ financial health. These hospitals also feel the stress of fragmented care delivery in rural areas, lack of access to specialty services and providers, and a diminishing rural healthcare labor pool, a Centers for Medicare & Medicaid Services (“CMS”) report found. As a result, 44 percent of rural hospitals are operating with negative margins. 

How can rural hospitals bolster their chances for survival? Here are four strategies to consider. 

Strategy No. 1: Don’t try to do it all alone. Look for opportunities for provider-to-provider partnerships or partnerships with payers, vendors, or community service agencies to provide vital services for your community. Carefully consider which services your hospital performs well and where it could specialize, based on the needs of the community you serve. Then, seek partnerships that could help fill gaps in vital healthcare services for your community.

Partnerships can take many forms. In Alabama, for example, three rural hospitals have entered into management agreements with a large academic medical center (“AMC”). The AMC provides managerial expertise and operational support to these rural hospitals, such as assistance with supply chain logistics, physician recruiting and staffing, and revenue cycle management. It also uses data from community needs assessments to advise the hospitals on which services to provide. It’s an approach that helps keep care in rural communities while enabling the AMC to focus on the most serious cases.

Meanwhile, rural hospitals in Nebraska leveraged relationships with community organizations to support increased access to affordable medications; reduce hospital readmissions, hospital transports, and emergency department (“ED”) visits; integrate rehabilitation and fitness services; proactively manage students’ behavioral health issues; and more. And across the nation, rural hospitals are partnering with leaders of schools, churches, and other community institutions to address social determinants of health, such as homelessness, poor nutrition, drug and alcohol abuse, and deteriorating housing.

Strategy No. 2: Explore opportunities to advance telehealth. Telehealth holds strong potential to improve access to care in rural areas with insufficient resources, according to the CMS Rural Health Council. It’s also a proven strategy for reducing readmissions and unnecessary emergency department visits. But while 27 percent of rural providers say they would implement telehealth if they had the resources or budget, uncertainty or skepticism around reimbursement is a barrier to adoption, a recent study shows. Providers also fear rural residents won’t engage with telehealth technologies. As a result, rural hospitals hesitate to explore the potential of telehealth to meet the care needs of the communities they serve, the study shows.

The CMS Rural Health Council has identified advancing telehealth and telemedicine as one of its top five objectives. In recent months, CMS has sought to reduce the barriers to telehealth adoption by expanding coverage of telehealth under the Medicare Physician Fee Schedule and Medicare Advantage. Given increased opportunities for telehealth reimbursement, it’s important to consider:


  • What types of telehealth services would appeal to the community you serve? For example, would virtual check-ins that give patients immediate access to expert advice appeal to older patients while reducing healthcare costs? Would remote patient monitoring following hospital discharge empower patients and caregivers while reducing readmission rates?

  • Could partnerships improve access to telehealth? For example, in Alabama and Georgia, support from not-for-profit organizations have advanced the use of telehealth in rural areas. In Arkansas, which used to lead the nation in deaths from stroke, a government partnership has extended expert telemedicine stroke response to rural and urban providers across the state.



Source: Compton-Phillips, A., MD, and Mohta, N.S., MD, Care Redesign Survey: Lessons Learned From and For Rural Health, NEJM Catalyst, October 2018.


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Hammond Hanlon Camp LLC

Strategy No. 3: Redesign services to keep populations healthy. For example, a 25-bed critical access hospital in rural Pennsylvania reassigned a clinical dietitian from its food services department to work one-on-one with patients with diabetes and other chronic conditions. The goal: Teach these patients how to eat healthier—a move that could make a substantial impact on their ability to manage their disease. The hospital also hired a health coach to help patients quit smoking and added a care manager to its ED to reduce unnecessary ED visits. Innovations such as these not only have the potential to improve individual outcomes, but also the health of the population as a whole. 

Take a look at the data from community needs assessments to pinpoint small changes in service redesign that could make a big difference in the health of rural populations. Additionally, leverage payer data and feedback from physicians and clinicians to determine where gaps in care and service exist for high-cost populations. This insight will help shape your approach to service redesign. Focus on economical changes that could make a big difference for your community.

By thinking outside the box and pursuing new ways to solve familiar challenges, rural hospitals can strengthen their ability to meet their community’s health needs—and boost their prospects for survival.

Strategy No. 4: Consider a merger or partnership with a regional health system. Rural hospitals treat populations that are older, sicker, and poorer, on average, than those of urban hospitals, and their payment mix primarily comprises Medicare and Medicaid. Larger hospitals and systems, on the other hand, typically are in a stronger position to negotiate higher reimbursement rates with private payers. They also tend to have greater access to capital—critical for rural hospitals, many of which are in need of facility upgrades or new equipment, according to the American Hospital Association. For these and other reasons, an increasing number of small hospitals in both rural and urban areas are betting on partnership for survival

Weighing Your Options? H2C Can Help

If your hospital is struggling under the weight of reimbursement challenges, declining admissions, lack of resources, and more, H2C’s Restructuring Services team can provide insight and guidance. Contact us for more information.

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