When the only hospital in Newton, Miss., shut its doors in November 1993, the town rallied to refloat the foundering ship.
Today, thanks to a successful financial bailout orchestrated by a local banking executive and dozens of community residents in the town of about 4,000 population, the hospital is back in the black, reporting a profit for the first time since 1992.
Rush Foundation Hospital, a 189-bed facility in nearby Meridian, Miss., had been leasing 39-bed Rush Hospital Newton from Newton County since 1982. Through an agreement that allowed either party to terminate the lease, Rush determined the hospital had to be closed because it was no longer economically viable.
The Newton hospital lost $354,000 on revenues of $2.9 million in the year ended Dec. 31, 1993. Rush gave board members about six months' notice before it closed the hospital.
At the time, the Newton hospital was one of four satellite facilities Rush Foundation operated in addition to its flagship Meridian hospital. Rush no longer operates any of the satellites, which either closed or returned to the local cities or counties, says Chuck Reece, vice president of operations and business development at Rush.
"Patient loads did not support the operations of those hospitals," Reece says.
At a time when Rush officials said they couldn't afford to keep the Newton hospital open, community members said they couldn't afford to keep it closed.
"A hospital is just like an industry in a small town," says Bill Freeman, senior vice president of Newton County Bank and a former mayor of Newton.
Freeman rallied residents to keep the Newton hospital operating. More than 160 people pledged $1,000 each to guarantee a $150,000 bank loan, part of the $450,000 in operating cash that was needed to keep the hospital functioning for the 60 to 90 days before it could obtain accounts receivable financing.
"During the closure, we lost a significant amount of jobs," Freeman says. "People were referred to another town for their medical needs and had no emergency room. (The bank loan) was the community's way of saying we wanted the hospital reopened."
About half a dozen hospital employees and their families, all the board members and a past administrator helped guarantee the loan, but most of the support came directly from the community, says Tim Thomas, the hospital's current administrator.
The facility, now known as Newton Regional Hospital, reopened in August 1994 with 49 beds. Nashville-based Ameris Health Systems, the management services company the hospital's board hired, and the East Central Planning and Development District, a state-funded development company, split the rest of the costs needed to reopen the hospital.
Newton Regional also had liabilities inherited from Rush, but Thomas is unsure how much debt had accumulated, because a great deal emerged over time.
"Part of our losses in the first year came from old liabilities the new hospital didn't expect," he says.
More recent financial statements put the hospital back in the black. For its fiscal year ended May 31, 1997, Newton Regional reported net income of $527,000, up from a loss of $505,000 in the previous year. Revenues jumped 44% to $8.2 million.
For the current fiscal year, Thomas projects a profit of $250,000 on revenues of $15 million. He attributes the drop in expected profitability to the hospital's investment in renovation and expansion of services.
Before the Newton hospital closed, Rush had operated its satellite facilities "to funnel patients into Meridian," says Jack Brand, an attorney for the Newton hospital. "Obviously, if you take all the patients here and take them to Meridian, this hospital is going to lose."
But Reece says his hospital didn't intentionally set out to lure people from Newton to Meridian. "It's just a trend. People go to larger town facilities because the availability of healthcare services is so much greater," he says.
Dan Harrison, an executive at Rush and the administrator at Newton when it closed, wasn't available for comment.
Certain services, such as magnetic resonance imaging and physical therapy, were not available at Newton, Thomas says. "There was no incentive for Rush to add services (at Newton) if they can take them to Meridian and do it. The situation is different now. We try to provide all the services here that are economically viable and important to maintain care at a certain level."
Since Newton reopened, the hospital has expanded its emergency department and added services in surgery, radiology, rehabilitation and geriatrics. Over the past two years, Newton has spent about $500,000 in new equipment and staff to fund the improvements, Thomas says. However, the facility still doesn't offer MRI services.
"The hospital struggled tremendously in its first and second years," Thomas says. But now it's posting modest profits and even finished paying off its bank loan. To commemorate the repayment, the hospital held a community ceremony last month to burn the bank note.
Newton Regional still has about $35,000 left to pay on a five-year loan from East Central. It also has begun repaying about $350,000 in loans from Ameris, Thomas says.
Community support was fundamental to the hospital's comeback, hospital leaders say.
"(With freestanding hospitals), you make it based on your commitment, your willingness to make changes and be innovative and to hold costs down," says Joe Herring, president of Ameris. "The employees were out in the community encouraging their neighbors and relatives to use the hospital. Over a period of time, the (hospital's) reputation (has become) local people caring for local people."*q