A rural Georgia hospital has adopted a novel approach to cutting costs: It's shutting down-temporarily.
Hancock Memorial Hospital, Sparta, staggered by $3 million in debt and monthly losses estimated at $123,000, will close its doors for 90 days to save money and prepare for a state inspection that could lead to its designation as a critical-access hospital. That would make the facility eligible to receive cost-based reimbursement from Medicare and Medicaid.
The Hancock County Hospital Authority board voted on March 8 to close the 35-bed hospital for three months beginning this week, maintaining a skeleton staff to collect money owed to the facility, which is located in the central part of the state. By doing so, officials said, the hospital could clear about $109,000 per month and focus on preparations for the vital state inspection.
"The idea was to stop the bleeding and give us some breathing room," said Jim Burnette, owner of First Choice Healthcare, an Atlanta-area consulting firm that manages the hospital.
The hospital plans to suspend operations on March 14 at 5 p.m., said Burnette, who added that it's "hard to predict" when-or if-Hancock Memorial will reopen.
Asked about the odds of survival, he replied, "I'd say it's about 80%."
To become eligible for cost-based Medicaid and Medicare reimbursements, the hospital must change a number of procedures and policies, including limiting patient stays and reducing capacity to 15 beds. Some existing beds might be sold for use as a nursing home, hospital officials said.
Hancock Memorial has been operated for the past six months by First Choice, which owns 40-bed Tattnall County Hospital in Reidsville, about two hours away in the rural southeastern section of the state. Tattnall wasn't in any better shape than Hancock, facing debt of $3.5 million and monthly losses of about $85,000, before Burnette announced plans several months ago to dramatically cut staff and improve the billing and collection process. He said Tattnall is already exceeding projected patient volume and revenue.
Burnette expressed hope that receiving cost-based reimbursement from Medicaid and Medicare will allow Hancock Memorial to cover its receivables as well as satisfy longtime creditors.
Late last year, the situation at Hancock Memorial was so grim that a two-week payroll was met only when officials cashed in the last of the Hancock County Hospital Authority's certificates of deposit. The next payroll was met through a $100,000 loan from the local bank that was personally guaranteed by the hospital's chief of staff, Bradford Brown, one of two admitting physicians.
It's not the first stretch of financial trouble for Hancock Memorial, which closed in 1974 and didn't reopen for about nine years. Some opponents of the temporary shutdown warned that the drastic measure could cost the hospital employees and patients in the long run.
But Bob Fandl, chairman of the hospital authority, said the 90-day shutdown is the best way to protect the facility from vendors who are seeking payment and threatening to "take over this hospital and its assets."