IOWA — Hospital leaders say a policy fix is needed to ensure the future of rural hospitals in Iowa and across the country that are succumbing to financial pressures and closing their doors.

Until that fix comes, though, Iowa’s network of rural community hospitals is making tough choices and smart partnerships to get by, a series of interviews by Iowa news organizations collaborating with IowaWatch revealed.

Some have dropped OB-GYN services. Smaller hospitals have turned to larger ones to form partnerships, which can result in the elimination of services to be more cost-efficient but forces patients to drive out of town for health care. Other efforts to maintain local hospital care include shifting to more outpatient care, the interviews show.

Rural hospitals face pressures, including tight profit margins, difficulty recruiting physicians or other providers, and older, sicker patients with multiple chronic conditions.

“For the first time in 30 years combined margins for Critical Access Hospitals are a negative 2.8 percent” said Kirk Norris, CEO of the Iowa Hospital Association (IHA), which represents the state’s 118 hospitals. “Health care administrators will tell you that you need between 2 and 4 percent to be sustainable.”

Norris said he thinks the best bet to rural hospitals survival is a two-part legislative fix.

The first would create a new designation allowing small hospitals with low patient counts to no longer have to provide inpatient care.

About 40 critical access hospitals in the state have, on average, four inpatients or fewer. Providing that care requires a necessary revenue stream, he said, but also means incredibly high infrastructure costs.

The second fix would be to reopen the application process for the critical access designation, allowing some struggling hospitals to obtain the designation even though they previously didn’t apply for it.

Both ideas have support from Iowa Sen. Chuck Grassley-R, Norris said, as well as from hospital associations in other rural states including Michigan, Ohio, New Hampshire, Kansas, Louisiana and South Carolina.

But the policy process can be a long and sticky one – especially because these ideas require funding through Medicare. However, Norris said he thinks they can find bipartisan support.

“At the end of the year, appropriations bills will be flowing and could provide a needed pressure point for Sen. Grassley to get these things in the mix,” he said.

Stretching resources for specific needs

Eighty-two critical access hospitals — facilities with 25 or fewer beds that receive a special reimbursement rate from the federal Centers for Medicare and Medicaid Services to help compensate for lower patient volumes — are scattered across Iowa, with a handful of larger, more regional facilities and more than 100 rural health clinics serving rural populations. They care for the nearly 36 percent of the state’s 3.1 million people who are living in rural areas.

The populations they serve are typically older, poorer and sicker than people who live in more urban areas. In Iowa, the average age of rural residents is eight years older than urban residents.

That means these hospitals see far higher portions of patients on Medicaid or Medicare — making them more susceptible to financial struggles when changes are made to these programs such as sequestration — a 2 percent across-the-board cut to Medicare providers.

Those financial pressures have been the cause for 113 rural hospital closures around the country since 2010. Though there have been no such closures in Iowa, neighboring midwestern states such as Kansas, Missouri and Nebraska have not been so lucky.

The majority of closures are concentrated in Southern states that did not expand Medicaid, according to the North Carolina Rural Health Research Program. In states that did expand Medicaid, people living in rural areas saw large gains in insurance coverage, while rural hospitals saw significant drops in charity care, which ultimately has made budgets more stable.

Those drops were more significant in states that expanded Medicaid, such as Iowa, which gave coverage to 150,000 additional people through the Iowa Health and Wellness Plan.

Nationwide, about 46 percent of all rural providers have a negative operating margin while 52 percent of Iowa’s 94 rural hospitals had a negative profit margin, according to hospital consulting firm Navigant.

These difficult financial situations force hospitals to make tough but necessary choices.

Cutting services like OB-GYN

Hansen Family Hospital in Iowa Falls closed its obstetrics department in November 2018. Hospital administrators in the 5,200-person town in northeast Iowa said declining birth rates, reduced Medicaid reimbursement and the resignation of a physician who delivers babies were key factors in the move.

“One of the hardest lessons that we learned as a community was to deliver those 86 babies, this hospital was losing nearly a million dollars,” Doug Morse, Hansen Family Hospital’s CEO, said.

Nearly three dozen rural Iowa hospitals have stopped delivering babies over the past 20 years. Eight Iowa hospitals, including Hansen Family Hospital, according to Iowa Department of Public Health, and another — UnityPoint Health in Marshalltown — closed this year.

But Hansen Family Hospital found a new use for the space, converting birthing suites and nurses’ stations into an outpatient mental health program for senior citizens called Senior Life Solutions. Morse said it’s a better use of space, as more than 20 percent of residents in Hardin County, where Iowa Falls is located, are 65 or older. Within weeks of opening, Senior Life Solutions was at capacity.

The hospital faced a great deal of criticism for closing the OB department. But it has since built a “share care” model for prenatal care. This allows soon-to-be moms to continue to use the hospital and its clinics for prenatal care early in their pregnancy. When they reach the second and third trimesters, they’re transitioned to the care of the doctor who will deliver their baby at the MercyOne Medical Center in Mason City — about an hour from Iowa Falls.

Urban-rural partnerships

These partnerships between rural hospitals and health facilities in larger areas are becoming more common across Iowa and the country.

“Rural medicine needs those urban hospitals for specialty care,” Bryan Hunger, CEO of Jefferson County Health Center in Fairfield, said.

Small hospitals across the state have specialty clinics, which Hunger described as a space available for lease by larger hospitals for use of their specialists. These specialists, who visit monthly or weekly, provide outpatient services closer to home for rural residents.

It comes down to patient volume, Hunger said. Larger hospitals see higher volumes of patients, which justifies employing one or more specialty physicians.

“I couldn’t employ a cardiologist on my own because I don’t have enough people here for them to see,” Hunger said. “If they want to provide specialty care, rural hospitals generally need to partner with a larger urban-area hospital or clinic because none of us are going to have enough volume to do it on our own.”

Henry County Health Center in Mount Pleasant has taken the concept of partnerships a step further – joining in a management agreement with the Quad Cities Great River Health System 10 years ago. Great River Health Systems provides specialists for outreach clinics in addition to allowing Henry County Health Center save costs on administrative services, such as information technology support.

“That has been a very positive partnership for our health system – and I believe for our region,” said CEO Robb Gardner said.

The financial health of a rural hospital is vital to a community. As with their urban counterparts, rural hospitals often are one of the largest employers in town and bring with them indirect economic benefits as well — businesses want their employees to be able to receive nearby care.

Focus on outpatient services

Rural hospitals are also turning their attention more toward outpatient services – a trend the health care industry must deal with as new advancements in technology and pharmaceuticals continue to cut down the need for inpatient stays.

“The trend in health care historically has been a lot of inpatient, but we’ve started to see a pretty significant transition, especially in rural areas, from inpatient to outpatient,” Avera Merrill Pioneer Hospital administrator Craig Hohn in Rock Rapids, said.

The 2,500-person town in northwest Iowa has seen a large investment in its two health care facilities over the past few years – with a new $20 million hospital and $5 million medical clinic opening earlier this year.

“As we were really looking at this, we tried to figure out what’s an efficient model of care, what’s going to be the best use of dollars and how do we get the biggest bang for our buck with outpatient services, knowing that’s where healthcare is going,” Tammy Loosbrock, senior director of Sanford medical clinic in Rock Rapids, said.

But cutting service lines and partnering with larger hospitals can only do so much, IHA’s Norris said. Fifty percent of a hospital’s expenses come from salaries and benefits, so hospitals like MercyOne in Newton are down hundreds of employees from four years ago.

And UnityPoint Health-Marshalltown enjoys the benefits of a larger health system but still had to cut obstetrics care and is “hemorrhaging money,” Norris added.

“There’s only so far you can go to still meet quality of care and staffing needs,” he said.

Seeking a Cure: The quest to save rural hospitals is a collaborative project including the Institute for Nonprofit News and INN members IowaWatch, KCUR, Bridge Magazine, Wisconsin Watch, Side Effects Public Media and The Conversation; as well as Iowa Public Radio, Minnesota Public Radio, Wisconsin Public Radio, The Gazette (Cedar Rapids, IA), Iowa Falls Times Citizen and N’west Iowa REVIEW.

The project was made possible by support from INN, with additional support from the Solutions Journalism Network, a nonprofit organization dedicated to rigorous and compelling reporting about responses to social problems. For more stories visit hospitals.iowawatch.org

This story was produced by the Iowa Center for Public Affairs Journalism-IowaWatch, a non-profit, online news website that collaborates with news organizations to produce explanatory and investigative reporting. Read more at www.IowaWatch.org.

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