In outlining some “survival strategies” for rural hospitals, Gift says facilities need to evaluate their resources. “Is it a relatively new facility, or is the hospital an aging plant that requires a significant amount of capital infusion?” he says. “The major consideration is the availability of medical-capital equipment,” such as sufficient technologies, he adds. “If they need capital infusion, maybe you're looking for some sort of strategic partner to infuse that.”
Capital is one of the six major areas of concern for America's small community hospitals that was identified in the first part of a three-part series titled, Surviving the Storm: Tumultuous Times for America's Small Community Hospitals, a report funded by Siemens Financial Services and released this month. The research—completed by Susan Carol Associates Public Relations in Fredericksburg, Va.—listed the federal mandate for electronic health records, payer mix (mostly Medicare and Medicaid), technology upgrades, nurse shortages and physician recruitment as the other five troublesome areas.
“One 2009 report found that 44% of hospitals surveyed by the American Hospital Association in 2008 classified capital from banks and financial services companies as ‘significantly harder to access' today than previous years,” according to the Siemens study. “The same report found that 45% of these hospitals were also experiencing more difficulty than before obtaining tax-exempt bonds. Although the study did not break out figures for small community hospitals, it is realistic to believe that, due to these facilities' payer mixes and rural environments, access to capital for these hospitals is equally as difficult or more so.”
Meanwhile, rural healthcare facilities are not immune from a federal mandate that requires the use of EHR technology in all U.S. hospitals by 2014. They also risk facing decreases in Medicare reimbursements in 2015 if they're not compliant. As part of the American Recovery and Reinvestment Act of 2009, the federal government committed $19 billion in funding to those hospitals that can demonstrate they have achieved meaningful use.
“Ironically, lack of capital to purchase this technology—and others related to EHRs in the next five years—will likely prevent these
facilities from qualifying for incentive funds that would provide them with desperately needed reimbursement,” according to the Siemens report. “As of March 2009, just 1.5% of more than 3,000 hospitals surveyed had comprehensive EHR systems in place and less than 8% had even partial systems that enable physician and nurse rotation.”
As rural hospitals contend with the struggle of accessing capital to update facilities and EHR systems, they also must determine if they want to maintain their own local identities, which has long been a trademark of rural healthcare in the U.S.
“There remain a few of those, and what drives it is availability of medical resources and a sufficient population base,” IMA Consulting's Gift says. “There have to be enough people to serve. If the community has that, then the next question becomes availability of medical resources. Do they have the right kind of physicians to meet the needs of the community and do it in a way with diverse enough services to meet the needs but not so diverse that they are ineffective?” he says.
“You need a critical mass of population and a critical mass of medical staff to provide those services in cost-effective ways for the community and hospital to offer those services,” Gift adds. “The third piece is the capital. Hospitals have insatiable capital appetites and being able to afford an appropriate level of medical technology and increasing business technology to meet the demands is really tough.”
A closer look at the development of LeConte Medical Center shows that Covenant Health's Fort Sanders Sevier Medical Center dealt with these issues: The region was badly in need of an updated hospital, and the facility requires advanced IT systems to meet the federal mandate for EHRs by 2014.
The 54-bed Fort Sanders Sevier, which had served several rural counties and also the residents and visitors to adjacent Pigeon Forge, Tenn.—home to the Dollywood theme park since 1986—saw its annual emergency room visits increase in “what seems like overnight,” says Ellen Wilhoit, LeConte's president and chief administrative officer. She began her career as a registered nurse and served previously as director of nursing and also was president and chief administrative officer at Fort Sanders. The region has experienced strong population growth in the past 10 years.
Wilhoit says estimates showed it would have cost about $40 million to renovate Fort Sanders Sevier, which was built in 1965 as Sevier County Hospital. Meanwhile, Covenant Health officials, Fort Sanders Sevier employees, civic leaders, community residents and the county's economic development board were committed to preserving the identity of the region, which Wilhoit describes as “a very close-knit community that takes care of its own.”
While the community has grown considerably through the years, so has the hospital's emergency-room visits. Sevier County's population was about 28,000 in 1970, five years after the hospital opened. It grew to 41,400 in 1980, 51,000 in 1990 and 71,200 in 2000. By 2009, the county's population was more than 86,000. Meanwhile, the hospital's ER visits increased to about 47,000 in 2009, up from 42,000 in 2007 and 34,000 in 1999.
Sitting in LeConte's chic new boardroom just weeks after the new hospital opened, Covenant Health President and CEO Anthony Spezia (a 2009 winner of Modern Healthcare's CEO IT Achievement Award) talked about Sevier County, which he says had been exporting its healthcare out of the community. “Our job,” Spezia says, “is to bring it back.”
In March, one month after opening, LeConte had 324 inpatient admissions, a 14% increase from the 284 inpatient admissions that Fort Sanders Sevier had in March 2009.
As Spezia explains, maintaining a rural community hospital's identity is part of the seven-hospital Covenant Health system's model.
“We do not put doctors in our communities to refer doctors to Knoxville,” Spezia says. Instead, he says it's important that hospitals such as LeConte “celebrate” being part of a larger system while still supporting healthcare in their own communities.
Covenant Health has followed this model since Spezia became CEO in 2000. Since then, the system has invested more than $750 million in new facilities and technologies for its various Tennessee communities, including a new
facility for 40-bed Fort Loudoun Medical Center in Lenoir City, LeConte in Sevierville, and a commitment (in 2008) to build a new facility for 46-bed Roane Medical Center in Harriman. For the LeConte project, Covenant Health invested $115 million for the entire campus, including the Thompson Cancer Survival Center.
In April, Covenant Health's board approved a definitive agreement to merge with Morristown, Tenn.-based Morristown-Hamblen Healthcare System in a deal that is subject to approval by the Federal Trade Commission. The agreement includes a seven-year, nearly $100 million investment—which is in addition to the $750 million the system had invested in its facilities previously.
A joint news release from both systems states that Morristown-Hamblen sought a not-for-profit partner that not only shared its values, but also would “preserve its community mission.”
“We don't just bring capital to the play,” Spezia says of Covenant Health's hospitals. “We bring a commitment to quality, for driving quality,” he says, adding: “We want them to really have the community bonds around them, but at the same time they are very much expected to contribute to the system.”