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A Narrative About Virginia’s Rural Hospitals that Obscures the Facts

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sherlockj
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by James C. SherlockBecker’s Healthcare

, a widely read medical news organization, published a story on Friday, “892 hospitals at risk of closure, state by state.” Rural hospitals were the topic.

It cited as its source a report from a non-profit named The Center for Healthcare Quality and Payment Reform (CHQPR), which presents itself as “a national policy center that facilitates improvements in healthcare payment and delivery systems.”

The CHQPR report Rural Hospitals at Risk of Closing claims that twelve of Virginia’s “27″ rural hospitals are at immediate risk of closing. It certainly engaged my interest.

Another CHQPR report, The Crisis in Rural Health Care, has an interactive map where the twelve perhaps can be found.

But the sources of both reports are a mystery, at least to me.

  • First it must be noted that the Virginia Department of Health lists only 20 rural hospitals in the state.
  • Only five of them lost money in 2020 (see the column “Revenue and Gains in Excess of Expenses and Losses”).
  • Four of those are owned by large and profitable health systems that use them to feed more profitable cases to other system hospitals.

It is dangerous to the cause of improving rural healthcare to create “reports” like this.

From the CHQPR story, the rural hospitals “at immediate risk of closing” have:

• Persistent Financial Losses: The hospitals had a cumulative negative total margin over the most recent 3-year period for which financial data were available; and
• Low or Non-Existent Financial Reserves: The hospitals either (a) had total liabilities exceeding all assets other than buildings and equipment, or (b) had assets greater than liabilities, but only by enough to sustain continued losses for at most 2 years.

I checked the ownership and financials of Virginia’s 20. Only five of them were unprofitable in 2020. The money losers were:

  • Buchanan General Hospital
  • Carilion Tazewell Community Hospital
  • Dickenson Community Hospital – Ballad Health
  • LewisGale Hospital Pulaski – HCA
  • Bon Secours Rappahannock General Hospital

The biggest problem with the story is that it reports on the financials of each hospital as if it were a stand-alone entity. Only one is.

Carillion, Ballad, HCA and Bon Secours are each very profitable statewide and were in “the most recent three-year period.”  Their total assets certainly exceed their liabilities.

In fact, the money-losing rural hospitals in those systems serve as feeder facilities to larger hospitals in the same system for more complex, high-margin care.

It is stories like this from agenda-driven sources that distract from the very real problems of rural healthcare:

  • Increased inflation will hit all of healthcare. Medicare and Medicaid payment models need quickly to keep up, especially in payments to rural healthcare providers. With 3% inflation, annual adjustments were workable at the receiving end. At 10% inflation, that will not work.
  • I am not aware of a state process to raise payments when the General Assembly is in recess. There may not be one. Perhaps Steve Haner can address that.
  • Another major issue is the scarcity of healthcare professionals that is chronic in rural Virginia.

There are lots of things to talk about without creating a scary narrative out of thin air.

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12 responses to “A Narrative About Virginia’s Rural Hospitals that Obscures the Facts”

  1. DJRippert Avatar
    DJRippert

    Good article. However, the “macro” issue is that rural America is losing people at an absolute rate. The 2010 – 2020 Census timeframe was apparently the first time all of rural America lost population.

    Isn’t there a minimum population required to keep a hospital afloat financially?

    https://carsey.unh.edu/publication-rural-america-lost-population-over-past-decade-for-first-time-in-history

    1. James C. Sherlock Avatar
      James C. Sherlock

      Thanks for backing me up. I should have written that.

      Some of Virginia’s rural hospitals are quite small. Some of them have closed in the past. Some, acquired as part of bigger systems, have cut back on services to serve as emergency departments with a few other basic services and referral/pick up points for bigger hospitals. That is what Ballad did, for example.

      As for absolute numbers of people served however, you are right.

    2. CJBova Avatar
      CJBova

      Critical access hospitals are rural, have 25 or fewer beds, are at least 35 miles from another hospital, provide 24/7 emergency service, and have annual hospital stays of 96 hours or less.

      Two of the Virginia hospitals mentioned, Ballad Health’s Dickenson Hospital and Bon Secours Rappahannock General Hospital, are critical access hospitals, and they’re not going anywhere, but for different reasons.

      Dickenson County (pop. 14,000) is one of Virginia’s least healthy counties. Out of 133 localities, Dickenson ranks 120th for health outcomes, 129th for health factors, 118th for health behaviors, and 130th for social and economic factors. Dickenson Hospital has 25 beds and according to Ballad’s Needs Assessment, Dickenson’s three priority areas are substance abuse, mental health and lack of transportation.Providing service in that area and others like it was part of the merger deal Va and Tn made.

      Last April, Bon Secours broke ground for a 35,000 sq. ft renovation an0d expansion from 8 beds to 10 and “a major overhaul of the emergency department.” The website says they had raised 75% of the $15 million for the renovation.

      1. DJRippert Avatar
        DJRippert

        Carol:

        Thanks for the info. Dickenson County is a great example. The population in that county dropped by 11.2% from 2010 to 2020. The county’s peak population was in 1960. It has lost people every census from 1960 onward.

        Unless the population at least stabilizes it seems that health care in Dickenson County will become a bigger and bigger problem.

        https://en.wikipedia.org/wiki/Dickenson_County,_Virginia

  2. Nancy Naive Avatar
    Nancy Naive

    Air ambulances… I suppose.

    I’m given to think of New London, NH. They qualify as rural with a small town, e.g., a grocery store, a strip mall, handful of restaurants, two gas stations, and a hospital with ER. Save for three cities, the whole State looks like wilderness or water.

    New London views their hospital as a jewel and every year they have a week long celebration “Hospital Days” around July 4 geared toward raising money for the hospital.

    Is that unique? It’s reminiscent of “Northern Exposure “.

  3. Virginia Project Avatar
    Virginia Project

    creating scary narratives out of thin air is the Democrat Party business model

  4. Jonathan Wight Avatar
    Jonathan Wight

    What counts is not whether these hospitals are technically in the black or not, but how the ownership of these hospitals view the resources tied in up in those facilities. Opportunity costs, not nominal profits, drive resource reallocations. Example: Rural hospital A is in the black, earning $1 m. annually. But the owner could sell that facility and use the resources to expand another facility in the suburbs of a big city and earn $2 m. annually. Hence, while Rural hospital A is technically earning a profit, it is actually losing money from an opportunity cost perspective. Lesson: Being in the black is not synonymous with being profitable. So, many other rural hospitals may be in danger of closing even if in the black.

    1. Nancy Naive Avatar
      Nancy Naive

      Clearly, there is ONLY one solution — we need an organization willing to operate at a nearly complete loss, either cash or economic opportunity, for the sole purpose to promote the general welfare for those in the service area. Now, who could do that? Who could we get with deep pockets with only one mission — keep high quality hospitals open in rural areas?

      There is our favorite Uncle, but boy, would Republicans squeal. Time to expand the 7th uniformed service.

      Location, location, location.

      1. James C. Sherlock Avatar
        James C. Sherlock

        It is not about money alone, whatever the source.

        These are areas where highly trained medical professionals simply do not wish to live and work.

        The federal government brings in a lot of foreign-trained medical professionals on special visas to help, but it is not enough to provide other than emergency services and a few other services at every rural hospital.

        See my response to Mr. Wight above.

        1. Nancy Naive Avatar
          Nancy Naive

          Well, when socialized, really socialized like UK, medicine arrives, it will come out of a cornfield.

    2. James C. Sherlock Avatar
      James C. Sherlock

      Mr. Wight, as I wrote, individual hospitals balance sheets in a large system of hospitals do not reflect the contribution of a single hospital to the profits of the system.

      There is a term “capture zone” used by large hospital systems that put emergency rooms and basic services that they designate as hospitals in rural areas to capture the patients there for their larger facilities for more profitable services.

      As the population shrinks, so do the number of services offered onsite. Look at Ballad Health. That system was created from two existing systems on either side of the Virginia/Tennessee line by an interstate agreement that sidelined the FTC’s ability to invalidate the merger. Ballad consolidated very expensive services on both sides of the state line.

      The most controversial services that were consolidated were Neo-natal intensive care units (NICUs). Those facilities get above average use in Appalachia as an outcome of drug addiction in the mothers.

      But capture zones work, the small hospitals take care of about 90% of the need, and the rest are transported to larger, more capable hospitals. That business model has saved most of the remaining rural hospitals in Virginia.

  5. Harold Miller Avatar
    Harold Miller

    I’m glad you found CHQPR’s reports on rural hospitals interesting. However, there is nothing mysterious about the source of the information. The data are all available on the RuralHospitals.org website at https://ruralhospitals.chqpr.org/Data5.html along with a description of the sources of the data.

    The financial data are essentially identical to what is in the spreadsheet that you posted (although the margins are calculated slightly differently, a positive margin is still a positive margin and vice versa). The methodology used to determine how many hospitals are at risk of closing is described in the report that you read (and it is also described on the website here: https://ruralhospitals.chqpr.org/Solutions.html#The_Need_for_Rapid_Action_to_Prevent_Closures_and_Sustain_Rural_Healthcare .

    There are different ways to classify hospitals as rural vs. urban. The Medicare methodology cited in your spreadsheet is somewhat more restrictive than the methodology that is more generally used by the federal government. However, some of the hospitals in the spreadsheet that are classified as “urban” are considered “rural” under all federal definitions, and so the classifications in the spreadsheet are simply wrong. For example, Sentara Halifax is located in South Boston, a community of 8,000 people that is clearly in a rural area, Lewisgale Hospital is located in Low Moor, a town with less than 1,000 population. For both reasons, there are 27 rural hospitals in Virginia, not 20.

    Many hospitals that had been losing money prior to 2020 appear profitable in 2020 because of the special federal assistance they received due to the pandemic. Not only will that assistance not continue in the future, but some of it has to be paid back, so 2020 will not be at all representative of a hospital’s true financial viability in the future. For example, Bath Community Hospital is a very small rural hospital that received a large amount of federal funding in 2020, and nearly $4 million of that has to be paid back. (You can see this for yourself in Note 11 of the hospital’s 2020 financial statement: https://bathhospital.org/wp-content/uploads/2021/06/BCH-Financial-Statement-Draft-4-19-1.pdf )

    It is true that many of the rural hospitals are owned by large systems, and those systems likely have the resources to keep the hospitals operating if they want to. However, there is no guarantee that they will do so, and there are many examples around the country of large health systems acquiring small hospitals and then later eliminating services and ultimately shutting them down. In many cases, the small hospitals did not want to be acquired in the first place, but they were forced to do so because they could no longer continue operating on their own. It is unfortunate that efforts were not made to help them stay viable before that happened.

    The only “agenda” driving this report is to make the public aware of the problems facing healthcare delivery in rural communities and the causes of it. The information is indeed frightening but what is really frightening is that it is based on facts, not “thin air.” I would urge you to read all of the detailed information and analysis available at https://ruralhospitals.chqpr.org/Problems.html If you think any of the specific information is incomplete, inaccurate, or biased in any way, please let me know.

    Harold D. Miller
    President and CEO
    Center for Healthcare Quality and Payment Reform
    http://www.CHQPR.org

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