Virginia’s Rural Hospitals in Serious Jeopardy Without Prompt State Policy Action

by Lowell

Recently, a New York Times article highlighted the impacts on rural communities of hospitals being forced to close due to financial difficulties. As the article noted, these hospitals are “mainstays of small communities, providing not just close-to-home care but also jobs and economic stability,” which is why “the economic cost of losing the hospital could be stark.”

Here in Virginia – as was discussed several weeks ago during the kickoff of the Virginia Hospital & Healthcare Association’s statewide public awareness campaign – rural hospitals are a top employer in 82 percent of Virginia’s rural counties, employing around 18,000 people in good-paying jobs. Those numbers, of course, only touch on these hospitals’ economic footprint, as each hospital job in rural communities supports two jobs in the local economy. In addition, many rural health care providers have contractual relationships with local businesses whose operations are at least partly dependent on contracts with hospitals. Overall, health care supports one in nine Virginia jobs (11 percent of the state workforce), with a combined payroll of $8 billion. And the industry was one of the few job growth sectors in Virginia last year.

Now, all those positive benefits are threatened by funding cuts, sequestration, and lack of state and federal policy actions that could relieve some of the financial pressures imperiling long-term hospital stability. Medicaid and Medicare reimburse hospitals at levels below hospitals’ actual cost for providing care, which means that here in, inpatient Medicaid reimbursement rates now sit at just 66 percent of the cost of hospital care. Also, more than half the patients on average at Virginia hospitals receive discounted care as a result of a longstanding government mandates, such as the 30-year-old federal requirement to treat people in the emergency room regardless of ability to pay.
While these mandates make sense in many ways, they also place tremendous pressure on local hospitals and health systems. Virginia hospitals provided $627 million in free or discounted care in 2013, up 57 percent since 2008. In the past five years, Virginia hospitals and health systems have endured $1.5 billion in funding cuts. Combined with sequestration and other mandated reductions, this is clearly an unsustainable situation for Virginia’s local hospitals and health systems. Unfortunately, state policymakers have not been able to agree to recover available funds so that more Virginians can access health care. Finding compromise in that regard would not, of course, resolve all the challenges facing health care providers, but it would alleviate considerable pressure.

This is a statewide problem, no question, but it is magnified in many rural communities which have their own unique challenges regarding economic prosperity, educational attainment, and demographic trends. Data show many rural communities lag behind population centers on these metrics. Local economies aren’t always as robust, and populations trend older, meaning more people who are potentially Medicare-eligible. Projections suggest Medicare enrollment will rise in the coming years as the Baby Boomer generation ages into program eligibility.

Each of these factors threatens harm to hospitals, the people they employ, the local economies they support, and public health. Continued neglect of these challenges by policymakers risks hospitals being forced to make difficult decisions about spending with local vendors, staffing levels and employment, service lines and practice areas offered (several rural providers have already scaled back obstetrics services, for example), and other operational matters.

Hospitals have already tightened their belts to address the challenges facing them. The next round of tough decisions could yield even more unwelcome decisions with far-reaching implications. Anyone involved in economic development recruitment efforts knows three factors weigh heavily in how corporate leaders being wooed assess a potential location: roads, schools, and health care network. Having a strong health care network with the highly skilled clinicians and modern equipment and facilities is essential for any community that wants to compete for new business prospects. Lacking that infrastructure is a turn-off to corporate scouts when competition with other states is so intense.

While the economic case is clear, public health concerns are just as compelling. Few of us expect to need a hospital on any given day. Yet we all expect (and want) a state-of-the-art hospitals with top-notch medical professionals nearby to care for us or our loved ones when that unexpected moment of medical need arises. Hospitals are there every day, around the clock. But we can’t take for granted that will always be the case, especially if the current challenges confronting hospitals remain unresolved.

Available data show that nearly one-third of Virginia’s acute care hospitals had negative operating margins in 2013. The ratio was even greater among acute care rural hospitals – 17 of 37 operated in the red that year, a fact affirmed by the fact checkers at Politifact Virginia. We have already seen one hospital in Southwest Virginia close. That is a microcosm of what’s going on around the country, where nearly 60 rural hospitals have closed since 2010. (Note: that’s why Mayor Adam O’Neal – a Republican – of Belhaven, NC has been pushing so hard on this issue) It is estimated another 283 rural hospitals are at risk of closing. The optimal outcome is to find policy compromise to avert further closures or difficult decisions that lessen access to care to people who need while also jeopardizing local economies supported by health care operations. For the good of all Virginian, let’s hope our state legislators make that happen – and soon.