Thoughts from Ken Kaufman
A Path Forward for Rural Healthcare
Kenneth Beutke, James Landman, and Erik Thorsen
Kenneth Beutke, James Landman, and Erik Thorsen
Rural America encompasses a broad geography. Almost 20 percent of the U.S. population lives within the 84 percent of the nation’s land area that the Federal Office of Rural Health Policy (FORHP) defines as rural.
Provider organizations in rural America are subject to the same forces that are reshaping healthcare across the nation. Demand for inpatient services is weakening as many procedures and services migrate to outpatient settings and other alternative sites of care. The aging of the Baby Boom generation is shifting payer mix away from commercial insurance to Medicare. Technological advancements are enabling new healthcare delivery models that have the potential to significantly disrupt traditional care models.
These trends can have a unique or magnified impact on rural healthcare providers:
Reports on rural health often start with statistics on the number of hospitals that have closed, or are threatened by closure, in rural communities. It is true that 104 rural hospitals closed between January 2010 and April 2019. It also is true that, of these, only 63 facilities completely shut down. Five were converted to nursing or rehabilitation facilities; 16 were converted to outpatient/primary care/rural health center use; and 20 were converted to urgent or emergency care facilities. The most relevant question is not how many hospitals closed. Rather, it is whether the residents of affected communities retained access to needed healthcare services.
In our full article (downloadable below), we discuss a hospital in Streator, Ill., that OSF HealthCare has converted to serve as a rural health center.
The facility in Streator, Ill., was one of the 16 closed hospitals that have been converted to outpatient, primary care, or rural health center use. The decision to close a hospital is never easy. Hospitals often are among the largest employers in a rural community, and local business and political leaders often feel a community needs a full-service hospital to attract economic development.
Based on several factors, however, we believe the decision to convert the hospital to a rural health center with 24/7 emergency care will be the right decision for Streator in the long term. Here's why:
In short, conversion of the Streator hospital to a health center with a free-standing rural emergency facility helped the community avoid the two greatest impacts associated with rural hospital closures: lost access to emergency care and the economic impact of lost jobs. And, as described later in this article, it has converted excess inpatient space into space that better supports the community’s long-term health.
Conversion of the Streator facility could serve as a model for other health systems seeking to rationalize the provision of services within an owned network of rural facilities. A health system can provide clinical, financial, operational, and technological support to a rural health center. In turn, the center can serve as a spoke to the hub of larger facilities within the system’s network. Within the context of a system as a whole, a rural health center’s return on investment can be tied to downstream revenues from referrals. A health center’s focus on improving community health also can result in savings under a system’s managed or accountable care contracts.
Without the backing of a health system, or the opportunity to capture downstream revenues or savings, independent rural hospitals have more limited options, particularly in communities that face both declining populations and declining inpatient volumes. One possible solution—found in both the Medicare Payment Advisory Commission’s recommendations to Congress and the bipartisan-sponsored (but not yet passed) Rural Emergency Acute Care Hospital (REACH) Act —would end the requirement that rural hospitals maintain inpatient beds to receive Medicare payments. Instead, rural hospitals could convert to stand-alone emergency departments, with the option of changing back to an inpatient hospital if circumstances change. A converted facility would still be able to offer ambulance and outpatient services, and be paid for these services as well as for emergency care.
The future of the rural hospital will be brightest in areas that are experiencing population growth. In areas were population trends are flat or declining, the number of hospitals that can be sustained by the local population likely will continue to shrink. The future of those hospitals will depend on the ability of larger health systems to grow and support the conversion of facilities in their networks, or the willingness of legislators to support a more flexible model for rural healthcare facilities.
The Week in Disruption goes beyond the headlines to uncover the significance of emerging trends in healthcare and beyond.