Mark Holmes
Health economist Mark Holmes. Photo courtesy of the UNC Gillings School of Global Public Health

These are uncertain times for North Carolina’s rural hospitals. Hospital systems are buying small, struggling independent hospitals, while all hospitals have taken financial hits due to budget cuts and the state’s decision not to expand Medicaid.

North Carolina Health News’ Taylor Sisk asked UNC-Chapel Hill health economist Mark Holmes to assess the status of rural hospitals in North Carolina today and to talk a bit about what he sees in their future.

Mark Holmes
Health economist Mark Holmes. Photo courtesy of the UNC Gillings School of Global Public Health

Holmes is an associate professor of health policy and management at the Gillings School of Global Public Health, co-director of the Program on Healthcare Economics and Finance at UNC’s Cecil G. Sheps Center for Health Services Research and director of the N.C. Rural Health Research and Policy Analysis Center.

Among his research findings is that losing the only hospital in a county leads to a decrease of about $1,300 in per capita income and increases the unemployment rate by 1.6 percent.

NCHN: Generally speaking, how are rural hospitals faring today?

Holmes: Nationally, 50 rural hospitals have closed since 2011, two of those in North Carolina. Southern states seem to be having more closures and more financial distress than is the case in other regions.

NCHN: Why is this a bigger issue in the South?

Holmes: I think a lot of people are looking at the South now and pointing out that when you draw a map of where the closures are and another map of where Medicaid hasn’t been expanded, there’s a lot of overlap. We get asked a lot whether Medicaid expansion would solve this crisis. It’s hard to imagine how it would hurt. Anytime you increase the number of paying customers, that’s a good thing.

But I don’t think we know yet if it would have a sizeable effect. A lot of the closures are in Georgia and Texas, and Georgia’s hospitals have been struggling for years. They tend to have hospitals with smaller volumes. I don’t think it’s clear whether the decision not to expand Medicaid pushed them into closure or whether it was a long-term trend and they just eventually fell over.

I think it’ll be awhile before we’ll have these answers.

NCHN: What are the broader implications for rural communities of hospital closures?

Holmes: When a hospital closes, not only do you lose an inpatient facility, but a hospital is also a nexus of a lot of different forms of health care. You’re going to lose a lot of the connected services: home health, ambulance, a lot of those other things the hospital provides. We generally think of the hospital as a place where you spend the night, but there’s a whole lot more that they do than that.

We also know that when a hospital closes, the independent clinicians operating under its umbrella – the pediatrician who has an office across the street, for example – may also choose to leave town.

But there’s a whole economic aspect as well. We found in research we conducted about a decade ago that when a hospital closes it has a long-term per capita income effect. It’s not just, “Well, some people are losing their jobs but we can recover.” It’s a permanent shock to the community.

NCHN: So it’s bad for business in general.

Holmes: There are many narratives by economic developers who talk of recruiting a manufacturing facility to a community, and the manufacturer said, “We’re not going to move to a county that doesn’t have a hospital.” I think part of that is from a practical business standpoint: If you’re doing something with, say, tool and die, you’re going to want an emergency room close by.

But I think there’s also a quality-of-life aspect. When a manufacturer opens a large facility, managers are going to be moving in and they’re going to want the things they value, and included in that would be a hospital. I think that aspect sometimes gets lost when we talk about closures and their impact on rural communities.

But even beyond that, an analogy I like to use is that rural communities think of their hospital as metropolitan areas think of their professional sports team: This is what puts us on the map; this is a big part of our identity. And then you lose that.

NCHN: What will, or should, the rural hospital of the future look like?

Holmes: I think every facility administration needs to figure out what makes most sense for their community and tailor to that. What was pretty evident with Belhaven was that they could have really used some sort of emergency room facility.

The farther you are from the next closest alternative, the more important that is.

But in many areas, this is currently financially unsustainable. So you have to try to find the sweet spot, identifying places that are most underserved by emergency services and figuring out what financial models would support that.

You’d look at things like how many people would be served, what the percentage of Medicaid recipients is and what you might put around it to make it work. Maybe you find one or two specialties that aren’t otherwise available, and use those to help support your emergency facility.

NCHN: What can state and local governments do to prepare for this future?

Holmes: A lot of the changes will have to happen at the federal level. There are current federal regulations, particularly with regard to Medicare, that make a lot of these things challenging – and by that I mean the current reimbursement structure of a lot of these rural hospitals. Every year, there are proposals to cut back on payments for some of the major revenue sources for rural hospitals.

There are some state-level policy interventions – the degree of oversight, for example, for physician assistants – that could happen. Medicaid expansion would be a policy variable that would be important.

In some places, county government has stepped in. Maybe that means a tax increase. How much are people willing to pay to help support this kind of thing? Or are you OK with a different model? Maybe a hospital system comes in and wants to affiliate with your local hospital. You lose local control. But if it leads to long-term sustainability, maybe that’s OK.

These are the kinds of discussions that can be taking place.

NCHN: Are you concerned about the future of health care in rural North Carolina – about where the trend is headed?

Holmes: Looking at trends – with more closures and increasing rates of financial distress and challenge, continuing problems with access to providers – it does appear worrisome. Health care professionals are not generally moving into rural areas without some incentives and specialized training. We can count those things pretty well – we’re pretty good at counting things.

But there are a lot of variables. There are some innovative models out there. When Georgia was going through a lot of their closures, they said, “Let’s see if we can make this freestanding emergency department work.” They gave it a go, but no one really went for it. But now they’re going back and reshaping it.

In North Carolina, we have a history of being highly innovative, of trying new things. The health care industry is in major flux right now for a lot of reasons. I’m optimistic that in the face of these declining counts and the challenges that are pushing stressors on the heath care system, we’ll be able to come up with models that meet our needs.

As more surgeries are done on an outpatient basis, you’re going to have fewer people staying overnight in rural hospitals. This is a change in technology that’s more patient centered; most people would rather be at home than in the hospital anyway.

So we have to continue to monitor, as these points of access are declining, whether we can offer the access and quality that we’re accustomed to. That’s the big question.

[box style=”2″]This story was made possible by a grant from the Winston-Salem Foundation to examine issues in rural health in North Carolina. [/box]

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