Rural hospitals, beset by financial problems, struggle to survive
MOUNT VERNON, Tex. — Despite residents’ concerns and a continuing need for services, the 25-bed hospital that served this small East Texas town for more than 25 years closed its doors at the end of 2014, joining the ranks of dozens of other small rural hospitals that have been unable to weather the punishment of a changing national health-care environment.
For the high percentages of elderly and uninsured patients who live in rural areas, closures mean longer trips for treatment and uncertainty during times of crisis. “I came to the emergency room when I had panic attacks,” said George Taylor, 60, a retired federal government employee. “It was very soothing and the staff was great. I can’t imagine Mount Vernon without a hospital.”
The Kansas-based National Rural Health Association, which represents about 2,000 small hospitals across the country and other rural care providers, says that 48 rural hospitals have closed since 2010, the majority in Southern states, and 283 others are in trouble. In Texas alone, 10 have closed.
“If there was one particular policy causing the trouble, it would be easy to understand,” said Mark Holmes, a health economist at the University of North Carolina. “But there are a lot of things going on.”
Experts and practitioners cite declining federal reimbursements for hospitals under the Affordable Care Act as the principal reasons for the recent closures. Besides cutting back on Medicare, the law reduced payments to hospitals for the uninsured, a decision based on the assumption that states would expand their Medicaid programs. However, almost two dozen states have refused to do so. In addition, additional Medicare cuts caused by a budget disagreement in Congress have hurt hospitals’ bottom lines.
But rural hospitals also suffer from multiple endemic disadvantages that drive down profit margins and make it virtually impossible to achieve economies of scale.
These include declining populations; disproportionate numbers of elderly and uninsured patients; the frequent need to pay doctors better than top dollar to get them to work in the hinterlands; the cost of expensive equipment that is necessary but frequently underused; the inability to provide lucrative specialty services and treatments; and an emphasis on emergency and urgent care, chronic money-losers.
Rural health-care experts say that unless the problems of rural hospitals are addressed by state and federal officials, there could be a repeat of the widespread closings that followed an overhaul of the Medicare payment system 30 years ago. That 1983 change, called the prospective payment system, established fixed reimbursements for care instead of payments based on a hospital’s reported costs. It rewarded large, efficient providers, but 440 small hospitals closed before the system was adjusted in 1997 to help them. Those adjustments created the designation of critical-access hospitals for some small, isolated facilities, and exempted them from the fixed-payment system.
“And now, beginning in 2010, we’ve had another series of cuts that are all combining to create another expansion of closures just like we saw in the ’90s,” said Brock Slabach, senior vice president of the Rural Health Association. “We don’t want to wake up with another disaster.”
In Mount Vernon, a town of 2,678 people nestled in grassland and dairy country about two hours east of Dallas, family practitioner Jean Latortue has taken out a lease on the now-vacant hospital building to convert it into an outpatient and urgent care clinic at his own expense. Reopening may be a risky move, he acknowledged, but the need is there.
“The community went into panic mode,” he said. “I figured I had to step up.”
The nonprofit ETMC Regional Healthcare System, based in Tyler, Tex., closed the Mount Vernon hospital and two others of its then-12 rural hospital affiliates because it could no longer sustain operating losses that had persisted for five years.
Perry Henderson, senior vice president of affiliate hospitals for ETMC, and other experts cite three reasons for the rash of closures nationally.
Sequestration, the across-the-board federal budget cut that arose out of the legislative impasse between the Obama administration and congressional Republicans, has resulted in a 2 percent reduction in Medicare reimbursements since 2013.
“If Medicare is 50 percent of your revenue and you lose two points,” North Carolina’s Holmes said, “it can be a killer.”
Rural hospitals took a second hit from the health law’s reductions in special Medicaid payments to hospitals with large numbers of indigent and uninsured patients. Federal officials made the cuts assuming that most states would embrace the Medicaid expansion envisioned in the law, thus sharply reducing their number of uninsured. But 23 states, including Texas, have declined to do so.
Another issue is the deductibles charged by some of the new insurance plans created under the health law. In many cases, they “are running between $2,500 and $5,000,” and people can’t pay them, said Maggie Elehwany, chief lobbyist for the Rural Health Association.
Latortue, who came to Mount Vernon as an ETMC hospital doctor in 2008, appears undaunted by the challenges of reinventing the hospital, which was treating an average of eight inpatients a week when it closed. Still, he said, “I’m very busy, and patients need to be seen — we’ll be all right.”
At the new clinic, he intends to provide outpatient services, including lab work, and emergency care, stabilizing patients until they can be transferred to the Titus Regional Medical Center in Mount Pleasant, 16 miles away, or to a smaller facility in Winfield, eight miles away. He also plans a wellness clinic to treat obesity and will offer Botox and laser cosmetic services. A cardiologist and a gastroenterologist will make weekly visits, and he is also looking for an Ob-Gyn.
Still, none of this will replace the hospital, and his patients know it. “I live right behind the building,” said Mary Hunter, a fit grandmother of 73. “I’ve had very good health until my blood pressure spiked last week,” she said. “We retired in 2006 and moved here, partly because of the hospital. And now it’s gone.”
This article was produced through a collaboration between The Washington Post and Kaiser Health News, an editorially independent news service that is a program of the Kaiser Family Foundation.
