Hundreds of rural hospitals across the nation face financial challenges, and many are at risk of closing. According to research1 by University of North Carolina's Cecil G. Sheps Center for Health Services Research, 76 rural hospitals have closed since 2010 and 673 rural hospitals are vulnerable to closure.2
There are many factors that contribute to rural hospitals closing, and one of the most pressing concerns is a result of the 2013 Budget Control Act. This legislation required sequestration to reduce all government expenditures, including a 2 percent reduction in Medicare spending for all providers. In addition, Medicare reduced the Medicare bad debt expense allowance from 100 percent to 65 percent.
On top of the Medicare reduction, other insurers and payers started extracting more value out of hospital services by reducing the amount of reimbursements to hospitals. The cumulative impact of these cuts have resulted in a financial fallout for rural and small-volume hospitals.
How Rural Hospitals Can Stay Open
The good news is, there are several ways rural hospitals can improve their financial performance and keep the doors open. At the National Rural Health Association, we advise our members and other rural hospitals to take the following steps:
- Maximize services. C-level executives have to keep a close eye on accounts receivable. It's never been more important, especially after implementation of the Affordable Care Act, than it is in today's healthcare landscape.
- Take advantage of group purchasing. Gain access to group purchasing organizations (GPO) and set a strategy to increase your purchasing volume through a GPO. It is always surprising upon investigation how much equipment and supplies are bought "off-contract."
- Conduct market share analysis. Sometimes hospitals are so busy paying attention to big issues they forget who they are serving and what they really offer. There are three parts to a good market share analysis:
Sometimes hospitals when paying attention to big issues forget who they are serving and what they really offer.
- Learn about your patients. What services do they need? What services require them to leave your community? Consider changing your offerings to include the services that are most needed in your area.
- Learn more about the care you provide. Does the quality of your care vary depending on which nurses or doctors are working? Your facility should offer consistency and value during the entire continuum of care. Take a look at your continuum of care to determine how good your results are both during and after treatment.
- Make sure your payment structures are tracking along with your delivery system changes. You don't want your payment to be out of sync with your delivery system, nor do you want to accrue savings for insurance and payers without retaining those savings within the community.
4. Use lean, data-driven techniques. Extract waste from your system by understanding that Medicare could be your best payer going forward. By drilling down to specific areas and analyzing data, you can cut unnecessary spending and increase your reimbursements.
5. Engage your medical staff. This is probably the most important work a hospital CEO has to do. Partner with your medical staff to deliver quality services that are relevant and useful to the community you serve. Make sure you are working with high-quality individuals who are driven to perform at the top level, and above all, implement programs that reward and publicly recognize your high-performing practitioners.
Healthcare IT Can Help Rural Hospitals
So how do you implement these changes to your hospital all at once? Utilizing EHR technology and HIT innovation is the most efficient, low-cost way to perform data analysis, track group purchasing, reduce waste, and keep clinicians on the same page. A sound and well-implemented HIT system can answer your questions with data-driven analyses.
However, not every IT solution will fit the bill for your rural hospital's needs. Before you make a decision, complete your due diligence and research the right tool (or set of tools) for your needs. On top of that, think long and hard about whether you have the resources, both in finances and in staffing, to make HIT work for you. With the right system and proper buy-in from your staff, an innovative product could re-position your rural or low-volume hospital to stay financially viable for a long time.