Resurgence Health Group is employing critical-access status as an interim strategy at 25-bed Tattnall Community Hospital in Reidsville, Ga. The privately held company, founded in 1999 and based in Sugar Hill, Ga., operates three hospitals, but Tattnall is the only one with critical-access status, says Phil Eastman, Resurgence Healths CEO.
Obviously, if the reimbursement is higher with a cost-based vs. a PPS, that is preferred initially, Eastman says. Thats usually because of volume being so low. Theres insufficient revenue to cover costs under a PPS. That also means that theres no profit, which doesnt work with a for-profit, of course. Tattnall went to critical-access status in 2002, about a year after Resurgence acquired it, Eastman says. The volume at Tattnall was so low, and the ramp up was going to take so long, that it needed some way to financially survive that ramp up, and that was critical access, he says.
Resurgence is studying whether it makes sense for Tattnall to revert to the PPS, Eastman says, something that no critical-access hospital has done to his knowledge. Were deciding whether were at that point to convert back, he says. When you do so, you get new (Medicare) provider numbers, and your cash flow comes to a halt until you get re-surveyed. That takes 30 to 90 days, so its a question of whether the expected increase in payments under the PPSas volume starts to pick up and a hospital can add bedsis worth the cash flow hit, at least in the short term, he adds.
I think the for-profit players look at critical access as an interim step, a temporary move to shore up the finances while the volume grows and the hospital moves back to prospective payments, Eastman says. The not-for-profits see it as a terminal point, with no plans to go back to PPS.
Several of the larger for-profit operators have a few critical-access hospitals. HCA, Nashville, operates four of them. Two of them were part of HCA before the critical-access program began, and two were acquired in HCAs last big acquisition, the $1.13 billion purchase of Health Midwest, Kansas City, Mo., in 2003. In each case, these hospitals are part of major metropolitan markets served by HCAAtlanta, Nashville and Kansas Cityspokesman Ed Fishbough says. HCAs strategy is to be the largest or second-largest hospital operator in fast-growing markets, and these small hospitals complement that approach in those markets, Fishbough says.
Community Health Systems, Franklin, Tenn., operates two critical-access hospitals, but such facilities are not a large part of the companys strategy, a spokeswoman says.
The larger for-profit hospital companies that buy nonurban hospitals have been targeting larger facilities for acquisitions the past few years. Ive been in this rural hospital space for 20 years, and it goes in cycles, Resurgences Eastman says. Right now, it looks like the larger players, especially because of the consolidations, are shying away (from acquisitions in general), but there are a lot of privately held companies that are doing exactly what we do.
Don Collins, for one, is thankful for that as he describes how the landscape has changed for Culberson Hospital. The Culberson Hospital District that he chairs is looking at whether to build a replacement hospital. The district already has a new clinic funded out of the operating revenue that Preferred Management generated. The hospital district has been able to lower the tax rate that Culberson County landowners pay by about 13%. Instead of inconsistent physician coverage, Preferred Management has recruited two full-time physicians who live in Van Horn as well as a physician assistant.
It seems like everybody is real pleased. The clinic is real busy, he says. I just dont hear many complaints. The main thing is that it costs too much to go to the hospital, but you hear that everywhere.