Since the 1980s, tiny Atoka (Okla.) Memorial Hospital hovered on the verge of extinction, threatened by losses from inpatient Medicare services.
The rural hospital 100 miles south of Tulsa tried a number of strategies to increase revenue. Hiring physicians boosted volume, but proved to be a financial drain. A run at home health worked until Medicare reduced reimbursements for those services.
Finally, the hospital engineered an epic turnaround using case management, improved efficiency and aggressive collections, says Paul Moore, president and chief executive officer of the hospital's parent, the Atoka County Healthcare Authority.
The hospital, which has an average daily census of just under six, nearly eliminated annual inpatient Medicare losses of just more than $300,000, or more than $1,000 per patient, and slashed lengths of stay to three days from six.
As a result, the authority went from an operating loss of $497,293 in 1996 to an operating profit of $311,189 in 1999. Total revenue grew about 2% to $4.7 million in the same period.
But it wasn't until the hospital won a critical-access designation from Medicare in January 1999 that its financial future turned rosier, Moore says. He believes the hospital's future would be iffy at best without the designation, which shields qualifying rural hospitals from Medicare's risky prospective payment system (Jan. 3, p. 48). Critical-access hospitals receive cost-based reimbursement and are exempt from certain staffing requirements, such as on-site physicians.
"We were making improvements, but everything was stacked against us with the (Balanced Budget Act of 1997)," Moore says, referring especially to Medicare's looming outpatient services PPS. All rural facilities are exempt from the outpatient PPS until 2004. After that, only critical-access facilities will be exempt.
Now, Atoka Memorial has become a national model for critical-access hospitals, thanks to its aggressive efforts to reshape services.
The critical-access program has done more than help Atoka Memorial's finances. It has furthered the hospital's mission of meeting community health needs, according to rural healthcare advocates.
The hospital had been winning community confidence by eliminating an unpopular management contract with Quorum Health Resources and adding new services such as a mobile mammography unit and stroke management program. It's also focused on improving trauma care, given its location on the main highway between Tulsa and Dallas.
Networking with other providers has also become a priority. For example, Atoka Memorial has increased its revenue and improved service in neighboring communities by selling its computed tomography scanner services to other rural hospitals, which previously relied on a larger regional provider. The mammography unit, which is sponsored by an Atoka County native, singer Reba McEntire, is operated by Texoma Healthcare System in Denison, Texas.
The critical-access designation helped the hospital carry out its mission by freeing it from worries about Medicare losses, Moore says. In addition, the hospital took advantage of federal grant money that states such as Oklahoma are using to help hospitals perform community surveys and gather demographic data that help the facilities determine local service needs.
Eric Shell, a consultant with the Northland Health Group in Portland, Maine, says the critical-access program stabilizes hospitals' Medicare revenue, allowing hospitals to focus on increasing revenue from other sources. Shell agrees that Atoka Memorial is an example of a hospital that is shifting its focus to outpatient services and networking with other tertiary and community providers to the benefit of the local community.
"You no longer have to be concerned with filling your beds, so your attention shifts to outpatient services, which is what the community is looking for anyway," Shell says.
For the past year, Moore, a 45-year-old self-described country boy, has been invited to such far-flung places as Seattle and Boston, to speak before audiences of rural healthcare providers and state healthcare officials about the benefits of the critical-access program.
He's an unlikely person to be wowing national audiences with a financial turnaround story. A community pharmacist and Atoka native, Moore never set foot in business school and didn't hold a management job until three years ago, when the hospital tapped him to create its case-management program. He was promoted to president and CEO in 1998.
Forrest Calico, who heads the health systems division of HHS' Office of Rural Policy, calls Atoka a "picture postcard of what we aspire to accomplish."
"If we're going to be building sustainable rural health systems, the decisions have to be community-based," Calico says.
Calico says at least 185 rural hospitals have achieved a critical-access designation under the program, which was enacted as part of the balanced-budget law and has been running for less than two years. He believes the number of hospitals with the designation will grow to 300.
Calico says pending legislation in Congress to offer further advantages to critical-access hospitals, including higher rates for outpatient laboratory services, could make the program even more popular.
To qualify, hospitals must maintain no more than 15 acute-care beds and 25 total inpatient beds, and they must limit average Medicare lengths of stay to 96 hours.
Last year, Atoka Memorial boasted a 36% increase in total inpatient admissions, to 764 from 559 in 1998, which Moore attributes to a public perception that the hospital was meeting community needs.
"They felt like somebody cared. As a result, more people began to stay here for care," Moore says.
He says employees initially were worried about losing income because the critical-access designation allows the hospital to send staff home if there are no patients. But Moore says that concern disappeared. "Medicare has said, `We'll do our part,' and that brings a sense of confidence that we won't close the doors," he says.