Rural Hospitals in Financial Distress - North Carolina Health News
By Taylor Knopf
Rural hospitals are struggling to keep their lights on and the doors open.
Since 2010, there have been 82 rural hospital closures across the U.S. Four were in North Carolina.
The majority of the closures are in the Southeastern U.S., according to researchers based at UNC Chapel Hill. About two-thirds of closures occurred in states that did not expand Medicaid under the Affordable Care Act and there has been a spike in hospital closures just over the last four years, with between 13-16 facilities closing each year.
There are two types of closures: abandonment and conversion, said George Pink, deputy director of the North Carolina Rural Health Research and Policy Analysis Center.
He said most of the closed facilities cease all medical care. But 10 have closed and reopened as different types of facilities.
North Carolina has lost four rural hospitals. Pungo District Hospital and Yadkin Valley Community Hospital closed while the hospital in Blowing Rock was converted into a nursing home. And in 2015 Franklin Medical Center in Louisburg closed but that facility is scheduled to reopen in 2018 due to a lease agreement with Maria Parham Health, which is part of Duke LifePoint Healthcare.
According to a report by WTVD-TV, Franklin Medical Center will be an extension of Duke LifePoint’s Henderson hospital. It will operate as an 24/7 emergency department and will include behavioral health services.
A fifth North Carolina hospital, Morehead Memorial in Eden, is currently in bankruptcy.
Pink noted that many hospitals that closed had ceased doing deliveries of newborns in the year before they shuttered. In North Carolina, at least two western hospitals, Angel Hospital in Franklin and Blue Ridge Regional Hospital in Spruce Pine have announced plans to discontinue maternity care.
In the red
About 40 percent of rural hospitals operate with a negative profit margin, according to a study by the Chartis Center for Rural Health published in May called “Rural Relevance 2017: Assessing the State of Rural Healthcare in America.”
“Rural hospital operating margins in Medicaid expansion states are statistically higher than rural hospitals in states that did not expand Medicaid,” the study reads.
The study lists a number of other factors that negatively affect a hospital’s profit margin. Top among those factors is the mix of payors, especially when most of the patients have Medicare or Medicaid, which both tend to pay less than commercial insurance.
Many rural areas have high rates of folks who are unemployed, meaning more people who can’t pay. They also have higher numbers of seniors and retirees, leaving hospitals more dependent on Medicare for payment.
The study also said that many hospitals that closed had another facility that was reasonably close, drawing away patients and depriving the local facilities of the revenue.
Over the past decade, Pink and his colleagues at UNC have been tracking rural hospital closures using newspaper reports and interviews. Using what they’ve learned, they created a model to determine a rural hospital’s level of financial distress and whether or not it would be open in two years.
The model takes into account four predictors of financial distress: financial performance; level of government reimbursement; hospital characteristics such as ownership and size; and market characteristics such as distance from nearest hospital and area poverty rate.
In 2013, the Pink’s model predicted that 8 percent of rural hospitals would be at high risk of financial distress by 2015. It turned out over time that those hospitals identified in the model were four times more likely to close than others not judged to be at high risk.
Recently Pink and his colleagues re-ran their model and found even more – 9 percent – of rural hospitals across the country are at high risk of financial distress. In the South, 16 percent of hospitals were in financial distress, the highest rate of any region in the country.
“To be honest, I actually find this to be of greater concern than the closures,” Pink said. “Closures… there’s been 14, 15 in the last year and it’s awful for those communities.
“But the proportion of hospitals at high risk of financial distress… this concerns me more because it’s an indicator of future problems that could be larger than the closure problem that we have now,” he said.
Rose Hoban contributed reporting to this story.