The Shifting Role of the Rural Hospital

Here’s a potentially disturbing statement: “Rural healthcare needs healthcare – not buildings.”

I’ve been watching rural hospitals closely as they cope with the changing healthcare landscape, and I’ve come to believe this statement is true. You might find it disturbing because of its implications – if rural hospitals don’t need buildings, what happens to their staffs, their service, their presence in the community and their stakeholders? And most of all, without a physical presence in a community, what happens to urgent care and its lifesaving role in rural areas? 

In the face of such profound implications, rural hospital boards and administrators are often tempted take the easy way out and do nothing. If you are of that opinion, I urge you to reconsider because I believe that doing nothing will quickly lead to your hospital’s demise.

Here’s why – the old models for success no longer apply.

In the old business models, rural hospitals secured their reputation and their profitability by offering as many services as possible, and then building clinics and departments and wings to house equipment, staff members, treatment rooms and beds. Having a large physical presence was integral to their business plans. They often tried to be all things to all people. They advertised local treatment – even if treatment at a facility in a larger town was less expensive and had better outcomes. The model seemed to work because patients weren’t paying the freight directly, and the hospital was reimbursed for the number of procedures it provided.

When the hospital wasn’t reimbursed for services rendered and indigent care overwhelmed care for patients with insurance, it was possible for rural hospitals to operate at a loss year after year because volume-based reimbursement programs, dedicated donors, foundations and grants often helped them stay in business. Rural hospitals were often providing care to those in the underserved community and some were created as a result of federal funding to provide charity care.

Now, however, the pressures on rural hospitals are pushing them to the breaking point. Bundled payments, value-based outcomes and an emphasis on population health are replacing fee-for-service in the marketplace. To survive, rural hospitals must reposition their business models, but they can’t change blindly. They must weigh the impact of their decisions in the following areas:

  • Rural hospitals are often the largest employers in their communities. They have dedicated staff members who often have many years of service. How a hospital treats its professional and medical staff is key to its ongoing reputation.
  • Communication is vital so that patients understand how their care will be delivered and by whom. Perceived disruption of services can result in extremely negative patient opinions.
  • Springing a completely new business strategy and plan of operations on a community is counter-productive. Engaging staff members, community leaders and the media is crucial to success.
  • Stakeholders, including a hospital’s philanthropic arm, donors, state and local government leaders, and physicians have a financial stake in the success of the hospital.

Here are six recommendations to redesign an effective rural hospital. This is an effective structure for the project; I’ll leave the details to you.

  1. Evaluate. Start with comprehensive service planning geared toward reducing redundancies. It makes no sense to offer extremely specialized services, if they are available at a larger facility within an hour’s drive. It also makes no sense to maintain the same bed space, if you can’t keep them occupied. It does, however, make sense to strengthen high demand services as well as EMT and ambulance services.
  1. Establish partnerships. Bundled payments are coming; you should get ready to capitalize on them. Hospitals don’t need underutilized behavioral health, dialysis or rehab services if a partner is available within a short distance.
  1. Reconfigure. As more services are handled through technology and at larger facilities, real estate needs will decrease. Find ways to repurpose facilities and real estate to support the new plan.
  1. Upgrade technology. New technology is shifting the emphasis away from electronic health records and on to clinical technology that allows treatment at a distance. Wearable devices are able to transmit health data to remote locations and can assist physicians in making diagnoses and creating treatment plans. Reimagine your facility as one without walls and cultivate the ability to bring the best medical expertise possible to your community electronically.
  1. Help staff members find new opportunities. The emphasis can be on putting your staff to work in new ways. Some of them may have worked at the hospital for years, and you can help them train for new jobs. How you handle the continued service of loyal employees will resonate – good and bad – throughout your community.
  1. Share your plans with stakeholders. Being a stakeholder means you have something at risk. Don’t dictate to your stakeholders – employees, donors, volunteers, state and local governments, to name a few. Stay out front with your plans. Share your objectives and solicit their input. These groups will have enormous influence over the eventual outcome of your plans.

I think it’s clear that rural communities need excellent healthcare, just like urban communities do. The model, however, that encourages extensive real-estate holdings and capital building projects is no longer useful. The new rural hospital won’t look much like its predecessor, but it can be even more effective with proper vision, precise investment and productive dialogue among the affected stakeholders.

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Topics: Rural Health Care, Affordable Care Act Summary, Value-Based Care

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