Nashville, TN (WorkersCompensation.com) – Even prior to the COVID-19 pandemic, rural hospitals were often in the news this last year for not paying employees, or even shutting down. However, those financial woes were due largely to cases of mismanagement, and in some cases alleged healthcare fraud.
According to a new report from consulting firm Guidehouse, rural hospital closures could increase, and the outlook for Tennessee is one of the worst in the nation. In fact, according to their recent report “2020 Rural Hospital Sustainability Index, Trends in Rural Hospital Financial Viability, Community Essentiality, and Patient Outmigration,” 25 percent of rural hospitals nationwide are already in danger of shutting down if revenue does not improve. Of that 25 percent, 81 percent of those rural hospitals are highly essential to their areas.
In Tennessee alone, there are 28 rural hospitals. According to the Guidehouse report, 19 of those hospitals are high risk for shutting the doors, which equates to 68 percent. The impact of revenue lost from those high risk hospitals totals $298.9M, in addition to 2,233 jobs.
Rural hospitals in Alabama, Oklahoma, Arkansas, Mississippi, and West Virginia all have a 50 percent or greater percentage of rural hospitals that are in danger of shutting down. Alaska, Arizona, New Hampshire, and Wisconsin all have a 10 percent or less percentage of hospitals in the high-risk category.
Of those with the highest percentage of high-risk facilities, 100 percent of those hospitals in Tennessee, Mississippi, Arkansas are considered essential care facilities. In Oklahoma, only 61 percent of the high-risk hospitals are considered essential hospitals. In Alabama, 89 percent of the high-risk hospitals are essential.
According to the Guidehouse report, patient and acuity levels have played a major role in lost revenue for rural hospitals. Rural areas are twice as likely to lose population in comparison to areas that have gained. Additionally, the report shows that three in four rural residents left their local hospital for treatment elsewhere. By comparison, only 23 to 35 percent of suburban and urban patients have chosen to go to another area for treatment. Services for general medicine made up 22 percent of the service lines for which people went elsewhere. Orthopedics accounted for 17 percent, general surgery accounted for 13 percent, cardiovascular accounted for 11 percent, neuroscience accounted for 10 percent followed by cardiothoracic surgery at 9 percent, and pulmonary medicine at 8 percent. The report noted that 68 percent of the patients that went elsewhere were lower severity cases and could have been treated at their local rural hospital.
The demographic of the population also seems to be a key player in payer mix for the rural facilities. According to the Guidehouse report, a loss of agriculture and manufacturing jobs has led to a higher number of very old or very young residents in the communities. Because of the age and revenue factor, rural communities tend to have a higher level of uninsured, Medicare, and Medicaid patients. On average, Medicare accounts for 46 percent of their overall revenue, which is often a lower reimbursement.
Other factors play into the financial struggles as well. Most rural hospitals were built after World War II when there was a much larger need for local care. Much of a hospital’s facilities and beds may not be used resulting in over staffing, in addition to higher maintenance costs. According Guidhouse’s research, rural hospitals average 50 beds with 321 employees in comparison to a daily intake of only 7 patients.
Most rural hospitals also fall behind in technology due to lack of resources. If a patient is seeking the latest technology in treatment, they will go where the technology is.
A shortage of clinical staff is also a contributing factor to high-risk rural hospitals. Rural regions account for 60 percent of Professional Shortage Areas. In urban areas, the average number of physicians per 10,000 people is 31.2. In rural areas, that ratio is less than half at 13.1.
Revenue management, as mentioned earlier, is said to be a key factor leading high-risk hospitals down the road of financial ruin. The report suggests that not only has poor management led to the demise of operating capital, but also failing to adapt their usual corporate focused financial strategy to the local population. Issues such as setting the collection threshold too high or triggering the collection process too early have had a detrimental effect.
The healthcare industry in general has been hit hard this past month. Nationwide, most elective surgeries have been cancelled resulting in some cases in an 80% reduction in revenue. Adding to that, the loss of revenue for a large percentage of the population and rural hospitals could be in an even bigger financial crisis. The question is what the overall impact will be once the pandemic is over, and whether or not many rural hospitals are sustainable.
You can download the full Guidehouse report on their website.