Cottage Hospital, a critical-access facility in Woodsville, N.H., has a unique market, covering nearly 26 towns in both New Hampshire and Vermont. Cottage has been able to buck the troubling financial trend facing many rural hospitals and maintain operations while looking to expand some services. CEO Maria Ryan says the key is staying flexible and looking for innovative ways to manage costs. Ryan spoke with Modern Healthcare Managing Editor Matthew Weinstock. The following is an edited transcript.
MH: So many rural hospitals are struggling to keep their doors open. What are you doing differently?
Ryan: We’re very nimble. We can turn on a dime and take a risk on something. Also, I look at overhead. Take the emergency department. We are a designated trauma center. That means I have high-priced physicians and nurses on 24/7 that are board-certified in emergency medicine and they have advanced trauma training. I have that overhead whether one customer comes in or 50; whether they pay or not.
It’s a very important service in a rural area. (Our patients) depend on it. I’m going to give it to them, but I have to look at the rest of the house. Where can I save money or push profit margins? One of the things—this relates to being nimble—is looking at specialists; they are a lot of money. A lot of small hospitals make the mistake of employing specialists, but if you look at metrics and volume, you may have only needed a part-time doctor. Nobody’s going to work part-time though, right?
I make deals with different hospitals that may just need a little bit more physician coverage, and I need half. We share a doctor. I do that a lot with Dartmouth Hitchcock Medical Center. I share gastrointestinal doctors with them and radiologists, orthopedists and endocrinologists. I did regional surgical coverage with a couple other hospitals at one time. It’s really looking at my business, being nimble but only hiring for what I need.
MH: Cottage a few years ago, and some other hospitals more recently, closed their birthing unit. What impact does that have on the region?
Ryan: Given the land mass that I cover, this was kind of an easy decision for me. We were very good at delivering babies and we had really good outcomes, but since the inception of our birthing center, it never could cover costs. It was losing about $500,000 a year. The comforting thing was, No. 1, it’s not required in order to be a critical-access hospital, but No. 2, my service area had options.
They could go to Dartmouth or they could go to two other hospitals in Vermont. If I had to give up a service, I wasn’t leaving people high and dry.
MH: Did you face much community backlash when you closed that?
Ryan: Not really, and I think it’s because of our transparency. I had been talking about it for four or five years, sharing the financials with anybody and everybody, and I have to tell you, the staff, especially the OB staff, tried everything in their power to mitigate the losses. When it finally came down after talking about it transparently for four to five years, I had this huge meeting at a community center, and I had doctors, nurses, a lot of people involved. We looked at the service line. Even the doctors who delivered babies had to say that we, as an organization, needed to give it up.
MH: One of the areas where you are adding services is behavioral health. You opened a geriatric behavioral health unit recently. Can you talk about that?
Ryan: Again, being faced with cuts in reimbursement at every turn (I have to look at what ) I can do to make sure we’re sustainable. I’ve got to at least cover costs. So I started to look at the reimbursement structure. I looked at Medicare reimbursement for acute hospitalization for psychiatric illnesses, and do you know that’s one of the ones that hasn’t really been cut through the years.
So we have to look at our communities. What is needed? That dictates everything. I looked at what’s needed (in the two states)—New Hampshire and Vermont. Vermont had just closed their state hospital. So I said, “There’s such a gap. I’m going to be a referral center.”
I did it as a regional referral center, and we’ve been full since the day we opened. It’s an acute center. The average length of stay is around 25 days.
MH: How are you staffing it?
Ryan: Again, a very innovative model. I have psychiatry oversight, but I have the 24/7 medical coverage by board-certified psychiatric nurse practitioners.
I consider cost management but also look at quality.
MH: Did you have to rejigger the building at all?
Ryan: I had to do about $2 million in construction. I had bought 26 acres near the hospital that I was putting a medical office building on. I took physical therapy out of the hospital and put it over there to gain space for this unit.
MH: When you’re looking at razor-thin margins, where do you find that $2 million?
Ryan: I was lucky. We have a very small endowment. We manage it conservatively, and we’ve never tapped into the money. I didn’t want to incur any more debt. I’m still paying debt from a previous administration.
MH: The other area that you’re looking to expand is outpatient capacity, right?
Ryan: That is correct. We’ve been successful in our outpatient strategies and that’s where healthcare is moving. We are in conversations with a couple of towns about clinics or urgent-care centers.
MH: What do you think that shift to outpatient does to the critical-access hospital program?
Ryan: Right now, critical-access hospital designation means you need an emergency department and you need inpatient beds.
In some of these very rural areas they may not have enough staffing but they can run a really good emergency department, really good outpatient lab and radiology. We’re advocating for a type of critical-access status that would require an ED and not the inpatient beds.
MH: How would disproportionate-share hospital payments cuts affect Cottage?
Ryan: That’s a couple million dollars, and we have set aside reserves.
