3 Reasons Rural Hospitals Struggling to Compete Should Consider Affiliation

Many rural hospitals are struggling in the new health care marketplace. Reimbursement from government and (soon) private payors is now more dependent on providing a collaborative and leaner process that rewards reducing variations in patient care and treatment in the appropriate setting. Additionally, hospitals in states that have opted out of receiving Affordable Care Act (ACA) funding face increased costs with no funding to cover them. 

In Mississippi, Dr. Tim Alford of Kosciusko, past president of the Mississippi State Medical Association, calls the situation “dire” for rural hospitals in the state and the “single most significant economic tragedy of the decade” in a story in the Jackson Clarion-Ledger. Mississippi rejected ACA funding and state officials stand behind that decision, citing the big tax burdens it would put on the population. But in this transitional period, the decision has left hospitals without the increased funding benefit that comes with a larger insured patient population.

Rural hospital struggles are not just confined to the Southeast. And according to a report by Mississippi State Auditor Stacey Pickering, most of the state’s publicly owned rural hospitals have finances at or above the national average. Just weeks ago, North Adams Regional Hospital in Massachusetts which was founded in 1884, announced that it was filing for bankruptcy and closing its doors. North Adams had tried to affiliate with a larger organization during an earlier bankruptcy in 2011. But the negotiations reportedly fell apart with Berkshire Medical Center over bond debt and union contracts. Berkshire is now purchasing North Adams in the liquidation process and plans to reopen the facility shortly. 

North Adams is a good example of why smaller outposts need to find their niche  sooner rather than later, whether it is with affiliation with larger health care organizations, or other strategies. Here are 3 reasons why an affiliation strategy can keep rural hospitals competing and relevant. 

1. Capital Investments 

Small hospital outposts have a disproportionate burden when it comes to technology and other investments. Whether it is Electronic Health Records (EHR), new equipment and technologies that advance patient care, or facility maintenance and upkeep, rural hospitals have fewer patients to bring in revenue that offsets the investment. Affiliating with a larger organization means less need for investment in some technologies and the benefit of volume discounts on others. Additionally,  new telemedicine technologies are making it easier than ever for medical facilities to affiliate and share patient care. 

2. The Physician Shortage and Patient Volume 

It’s challenging for rural hospitals to stay competitive with services and expert second opinions when a lack of patient volume makes it difficult to attract top physician talent. This is particularly true when it comes to specialty medicine. Affiliating with a larger health care facility brings access to both experts and technology without having to bankroll it on their own.  Hospitals must recognize the mission of old may not provide a sustainable future since fee-for-service is sun setting in the future. 

3. Patients Now Research Their Own Solutions 

The Internet has made it easy for patients no matter where they live to investigate their symptoms, care protocols, and diagnostic tests prior to seeing a physician or during an unfolding health challenge. In short, just because they live in a more remote area does not mean they are willing to go without the benefits of the latest technologies and specialist expertise. Affiliating with a larger organization helps smaller hospitals stay relevant with their patients by providing a higher level of service through telemedicine and reciprocal arrangements. 

Transportation and new mobile technologies have redefined how care is delivered. And the “what’s next?” factor of change is accelerating at a pace that will leave many rural hospitals far behind.  It’s great to see that many rural or small hospitals are taking proactive action before the decision is made for them to find a strategy like affiliation or close their doors. Last year University Medical Center in Jackson, Mississippi  struck a 20-year lease deal with  Grenada Lake Medical Center. 

Deals like this are happening all over the country but so are rural hospital bankruptcies. The difference lies in deciding early on whether the changing health care marketplace is a barrier or an opportunity. Status quo is not a strategy. Rural hospitals are going to have to make some tough decisions that might not always be popular with their communities but are needed for survival.