Negative financials, low population growth, and excess inpatient capacity cited as reasons communities—especially rural areas—may lose their independent hospitals, including access to valuable precision medicine services that could improve outcomes in vulnerable populations
For almost three decades, leaders of hospitals and health systems have seen hospital acquisitions lead to consolidation, standardization, and regionalization of the service lines inside hospitals. Often these organizational restructurings mean layoffs within these service lines.
Could America’s independent rural hospitals actually disappear altogether? Metrics compiled by multiple healthcare monitoring organizations suggest that, with the increase in mergers and acquisitions of health networks, it’s a distinct possibility. No wonder mergers and consolidations are among the burning issues facing hospital and health system executives.
Among the worries: What will happen to rural patients who cannot get to larger health networks located in urban settings. Also concerning: Will these patients miss out on the potential benefits that precision medicine is bringing elsewhere? Precision medicine services can play an integral role in helping meet the healthcare needs of those residing in rural areas, as recently noted by the National Rural Health Association and American Public Health Association.
Hospital Closings Create Risks for Rural Communities
Experts say rural hospitals—especially providers serving small populations in southern and midwestern states—are in precarious positions going forward.
Kaiser Health News (KHN) reported in August that more than 100 rural hospitals have closed since 2010, and these closures have serious implications for patients, such as a lengthy transport to another hospital’s emergency department. Additionally, as we recently reported in “Answer These Questions Before Embarking on a Precision Medicine Journey,” September 9, 2019, precision medicine and its potential benefits are spreading in major metropolitan areas, offering the promise of improved outcomes in long-neglected vulnerable populations in these areas. But what of similarly vulnerable populations in rural communities?
“Across America, rural patients spend more time in an ambulance than urban patients after a hospital closes,” Alison Davis, PhD, Professor of Agricultural Economics at the University of Kentucky, and Executive Director of the Community and Economic Development Initiative of Kentucky, told KHN. Her team analyzed ambulance call and transport time data and found that a trip can grow from an average of 14 minutes before a hospital closed to 25 minutes after, KHN reported. (Photo copyright: Northern Kentucky Tribune.)
430 Rural Hospitals Likely to Close!
Rural hospitals usually do not have many nearby competitors. So, what brings so many of them to the brink of closure? According to a Navigant (NYSE:NCI) analysis of more than 2,000 rural hospitals, “21% are at high risk of closing based on their total operating margin, days cash-on-hand, and debt-to-capitalization ratio. This equates to 430 hospitals across 43 states that employ 150,000 people!
Navigant identifies the following as factors in the decline of these struggling rural hospitals:
- “Low rural population growth;
- “Payer mix degradation;
- “Excess hospital capacity due to declining inpatient care; and
- “An inability for hospitals to leverage technology due to lack of capital.”
Navigant goes on to state that, “Further review of the community essentiality (trauma status, service to vulnerable populations, geographic isolation, economic impact) of rural hospitals at high financial risk suggests 64% or 277 of these hospitals are considered highly essential to their community’s health and economic well-being. In 31 states, at least half of these financially distressed rural hospitals are considered essential.”
After reviewing the 2,000 rural hospitals, Navigant’s analysts concluded that, unless trends reverse, one-in-five rural hospitals (21%) risk closing, a news release stated. And these hospitals are “essential” to the area’s residents.
“We show that two in three of these hospitals are considered highly essential to their communities: that’s 277 hospitals nationwide,” wrote David Mosley, Navigant’s Managing Director, in a STAT blog post. “Furthermore, if these hospitals close, already fragile rural economies will crumble while residents will be forced to travel long distances for emergency and inpatient care.”
Fierce Healthcare noted that “Of Montana’s 12 at-risk rural hospitals, all of them are considered essential to their communities. Kansas has 29 total at-risk rural hospitals with 25 of them—or 86%—considered essential to their communities. Georgia and Mississippi have seen 77% and 61% of their essential rural hospitals at financial risk, respectively.”
Navigant lists the states with highest percentage of rural hospitals at risk of closing include:
- Alabama: 21 hospitals (50%)
- Mississippi: 31 hospitals (48%)
- Georgia: 26 hospitals (41%)
- Maine: eight hospitals (40%)
- Alaska: six hospitals (40%)
- Arkansas: 18 hospitals (37%)
- Oklahoma: 17 hospitals (29%)
- Kansas: 29 hospitals (29%)
- Michigan:18 hospitals (25%)
- Kentucky: 16 hospitals (25%)
- Minnesota: 19 hospitals (21%)
Comparing Independent Hospitals to Health Networks
But it’s not just rural independent hospitals that are struggling. Modern Healthcare Metrics reports that 53% of all stand-alone hospitals in the US have suffered operating losses during each of the last five years (2012 to 2017). Conversely, about one-fourth (26%) of health system-affiliated providers have lost money.
Statistics compiled by the American Hospital Association (AHA) show there are approximately 5,000 non-federal acute care community hospitals in the US. In 2017, about 75% of them were part of multi-hospital systems, an increase from 70.4% in 2012, Modern Healthcare Metrics data indicated.
Modern Healthcare reported that during the period 2012 to 2017:
- Average length of stay increased 6.4% at independent hospitals, while it decreased at health system hospitals by 23.5%;
- Occupancy rates fell to 43.6% from 53.9% at independent providers, compared to rates falling to 53.7% from 61% at system-owned hospitals;
- Independent hospitals seem to rely on patients having longer lengths of stay;
- Hospices and skilled nursing facilities compete with stand-alone hospitals.
Precision Medicine “Haves” and “Have-Nots”?
Change is coming to parts of the nation that depend on independent hospitals, and it’s not good. Widespread financial problems are a major reason why so many hospitals are not in a position to invest the resources and hire clinical expertise required to launch and offer precision medicine services. For all the upside that precision medicine has to offer, closures of independent and rural hospitals have the potential to create a world of haves and have-nots when it comes to personalized medicine.
Hospital and health systems executives are advised to prepare for serving patients who do not have access to the same genetic tests and services available elsewhere. On a positive note, independent hospitals that consolidate within healthcare systems could bring available precision medicine expertise—provided they have it—adding value to their networks.