Penrod Blog

The Plight of Rural Hospitals…and the Best Ways to Save Them

Rural hospitals are important beacons of care in remote areas. Given that, it's troubling that one in four of them faces the risk of closure...and the problem is worsening by the day. Over 60 million Americans live in the rural regions that occupy approximately 97% of the United State's total land area. With so much at stake, the effects of even a single closure can devastate a community.

This trend has put thousands of healthcare providers out of work and left millions of residents without access to local healthcare. To say that this is a difficult issue to solve would be an understatement. That being said, we wanted to shed insight on the most promising solutions to this consequential problem.

By Matt Fiel, Director of Marketing & Alliances

Why are Rural Hospitals Closing?

Before we jump into the reasons, let’s establish some definitions.

  • We deem a rural hospital closed if it’s a facility (including a critical access center) that halts its inpatient services and moves at least 15 miles away from its current location.
  • We deem a rural hospital closed if it ceases to provide any type of healthcare. 
  • A typical rural area serving a community of 60,000 people employs around 300 health workers.

Now, let’s investigate. Here are the primary reasons why rural hospitals are closing. 

Lack of Technology Infrastructure 

The financial burdens facing most rural hospitals (leading to their closure) are primarily linked to a technological deficit. Until rural hospitals implement solutions like patient engagement platforms, patient management, and centralized documentation, locals may be incentivized to keep seeking care elsewhere. 

We live in a tech-savvy era. Patients expect streamlined healthcare processes that are simple to understand, and those are severely lacking in rural facilities. For instance, many don’t utilize patient management solutions to track patients, monitor their health, or personalize the doctor-patient interaction – massively reducing hospital revenue. 

The other factor accelerating closures is the lack of patient management infrastructure in rural healthcare facilities. Some rural hospitals perceive patient management software as an unnecessary expense in an already shoe-string budget – despite the fact that they’re often necessary to meet patients’ rising expectations.

The last technology infrastructure whose unavailability we found as a significant reason for rural hospital closures is centralized documentation. A centralized document management system allows for consolidating all files and records into a single, more secure and affordable storage space. This eliminates internal document storage costs, increasing profitability. What’s more, without centralized documentation, there’s no clear-cut framework for training, education, or staff enablement. This can stunt the quality of care in the long term, leading to patient attrition. 

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The Coronavirus Pandemic

It’s common knowledge that COVID-19 limited the number of people seeking inpatient care, resulting in revenue loss for some practices. Since the onset of the virus, hospitals across the country have registered a decline in patients, except those visiting due to COVID-19 complications. 

Most people have also developed a fear that if they visit a hospital, they may either contract or be mistaken for having COVID, even if it’s just a mere cold. So, they’ve resorted to OTC medications and only visiting the hospital in case they develop severe symptoms. In rural areas with low populations, this is a significant revenue impediment, causing stagnation of services in most facilities.

Payer Degradation

One of the core factors leading to rural hospital closure is the lack of sufficient financial capital to sustain operations – and payer mix degradation is a significant cause. Much of the population are either uninsured or rely on government-provided insurance – Medicaid or Medicare. 

As a result, most rural care facilities are either uncompensated or under-compensated since they largely rely on Medicare for gross patient revenue. To make matters worse, COVID-19 has also had a hand in the payer mix degradation as it has caused a loss in agriculture and manufacturing jobs that most rural residents count on to earn a living.

Lack of Qualified Staff

We’re presently facing a countrywide shortage of physicians…and the ones who are available are often incentivized to work in urban care facilities. This leads to a lack of diverse specialities at rural hospitals…and if you’re a patient, what’s more frustrating than going to a local health center to seek treatment only to be told that there’s no doctor qualified? You’ll probably go elsewhere.

That’s the current state of many rural hospitals, leaving patients seeking acute care with only one option…traveling hundreds of miles to get treated for their conditions. This leaves rural health centers idle…and an idle hospital is at risk of becoming a closed hospital. 

Care may be too Acute

With most rural hospitals lacking sufficient qualified staff and medical equipment to care for acute conditions, many patients seek treatment in urban hospitals. This deprives rural health centers of significant patient revenue since they remain idle most of the time. This is especially troubling because rural populations skew older, making them more susceptible to chronic conditions like diabetes, mobility disability, and cancer. This means rural hospitals may have no option but to close since most of their local patients must seek treatment elsewhere. 

Not Getting Reimbursed for Care by Medicare

Another significant cause of rural hospitals’ financial crisis is the government’s lack of compensation for Medicare beneficiaries. Under the current payment system for Medicare services, rural hospitals are receiving less and less for the same life-saving services provided to their urban counterparts. Without reimbursement, these rural health centers will continue to face the risk of shutting down. 

Solving the Current Challenges to Prevent Rural Hospital Closures

One thing’s clear – improving rural hospitals’ financial performance is vital to saving them. But how?

Investment in the Back-End Technologies

As we alluded to earlier, patient expectations are incredibly high in service delivery, and the only way to match their needs is to leverage technology. However, the technology infrastructure in rural hospitals can be so lacking that it prevents physicians from providing certain specialized procedures, forcing them to refer patients to more modern facilities. Investing in forward-thinking solutions like telehealth, patient management, patient engagement, and centralized documentation can improve healthcare services, boost patient confidence, and increase revenue. 

Adoption of Patient-Focused Payment Systems

In a patient-focused payment system, patients “control and coordinate” their treatment through a primary care physician to guarantee that they receive the best care whenever and wherever they need it. In other words, patients and payers are empowered to “agree” with the provider care teams concerning the sets of services they’ll perform, plus the outcomes to expect. As such, the care teams only get paid at a specific rate if they fulfill all the requirements.

Periodic Physician Training

Rural hospitals lose substantial revenue by turning away or referring patients elsewhere. Instead of referring patients to urban hospitals due to a lack of qualified staff to treat certain conditions, investing in the training of existing physicians can ensure a rural community has access to the services it needs. 

Collaboration with other Rural Facilities

Small rural hospitals that wish to receive adequate compensation from private insurance, Medicaid, and Medicare should work hand-in-hand to determine the minimum feasible costs for providing essential services. By comparing costs and the methodology used to derive estimates, rural facilities can optimize factors like equipment costs, staffing plans, and overheads. 

Comparing costs with other rural hospitals also helps bring transparency to how much a payer should pay for delivering specific services – versus the actual costs of providing those services.

What Next for Rural Hospitals?

Despite serving only a fraction of America’s population, rural hospitals remain a critical part of the US healthcare system. We feel these facilities can be saved with healthcare technologies, trained physicians, patient-focused services, and increased cost transparency. 

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