Nonprofit Launch Offers Help to Financially Stressed Rural Hospitals

John Commins, August 16, 2017

Community Hospital Corp. has formed a nonprofit organization to provide low- and no-cost consultations and viability assessments for financially troubled rural and community hospitals.

Plano, TX-based Community Hospital Corp. has formed the Rural & Community Healthcare Collaborative, which will make available no- and low-cost consulting services to troubled community and rural hospitals to assess their solvency and sustainability.

A 501(c)3 organization, RCHC is led by CHC CEO Emeritus Michael D. Williams.

The consultancy received seed funding of more than $50,000 this spring from CHC employees and supporters, and will now expand fundraising efforts across the nation. Williams spoke with HealthLeaders Media about RCHC, what it hopes to accomplish, and why it’s needed. The following is a lightly edited transcript.

Mike Williams
Michael Williams

HLM: Why is RCHC needed?

Mike Williams: We’re trying to bring the fate of smaller community hospitals’ to more people’s attention and provide funding that will allow the assessment of the potential viability of some of these hospitals. We've found there are so many hospitals out there that can't pay the cost of doing an assessment. So, we thought we'd have to launch some effort to raise funds for these hospitals that potentially are viable, but don't know that they are.  

HLM: How does RCHC work?

Williams: We'll use hospital report cards. That is an objective assessment tool that allows our staff to look at critical success factors for any hospital in any sized area, other than the urban marketplaces, and make an assessment of the things that need to be done to sustain the hospital as a short-term acute care hospital. If that is not sustainable, is there an alternative model for access to care in this marketplace?

HLM: Where’s the funding coming from?

Williams: We will use the 501(c)3 framework to apply for grants from large foundations, governmental entities, etc.

HLM: Have you provided any assessments yet?

Williams: The state of South Carolina identified some of the hospitals that they thought were at risk. We did an assessment of four of those hospitals and came forward with some plans for viability. Of the four, three have moved forward and are much more sustainable today by virtue of either improving their operations in focused areas, going to a different care delivery model, or affiliating with a larger entity.

HLM: What is your anticipated operating budget?

Williams: Based on the size of the hospital and its location and the intensity of the effort, it will cost between $30,000 and $50,000 per institution to do an assessment. Consequently, based on the numbers of hospitals that are involved, we are going to approach states like South Carolina to provide this service. If we are successful getting the grants and foundations to help, the annual operating budget could exceed $1 million.

HLM: What does an RCHC assessment look like?

Williams: It will provide an assessment in five strategic areas.

First, it’s going to look at market strategy. What is the hospital doing in terms of maintaining a relationship with people in their community who could receive services? Why is there out-migration? Why are people choosing to go to larger communities for care?

Secondly, it’s going to look at their costs, particularly in terms of productivity. So many small and community hospitals have not been optimal in their staffing. We’re going to do a cost-center-by-cost-center assessment based upon the type of population and what you need.

The third part is an assessment of the revenue cycle. How many patients are being seen that do not have coverage who, if the right information was obtained, could be eligible for some type of state or federal coverage? What is the process through which the institution is negotiating managed care rates for those patients where it’s appropriate? Many of these institutions do not have managed care expertise. What is the process of getting the bills out and the documentation in place and getting the money back into the coffers as quickly and appropriately as possible?

The fourth area is information technology. What are the strengths and weaknesses of the IT that the organization is using? What could they do differently?

The fifth area is supply chain. So many institutions buy independently and they leave so much money on the table as compared to what they could do if they bought in a collaborative effort.

HLM: What happens if your assessment is grim?

Williams: If it becomes obvious that the hospital cannot sustain its level of operations with the patients that are being served, then an alternative model would be recommended. If there is a population sufficient to support it, it could be a short-stay hospital, a clinic, rural health clinic, things that could be viable and an access point for that community. All of this information is in a 150-page document that is lay oriented for the board of trustees, the governmental entities, whomever is engaged, with a third-party objective assessment of what is going on. Here are the options for improvements. With the improvements, here is the bottom line. If that bottom line is not sustainable as a hospital, here are some models that could be employed for continued access to community care.

HLM: Who is eligible for these free or reduced-cost assessments?

Williams: Obviously, any organization that is financially distressed that is in a secondary market area. The expertise we bring to the table will not allow us to do this type of assessment at a tertiary institution in an urban marketplace. Our expertise has been and continues to be the sole community providers in secondary markets that might have two hospitals, that might go up to 250 beds. Those are not absolute criteria, but that is where we see the most distress, particularly in the rural settings where there is not access to the expertise to show how they can optimally operate.

HLM: How do you define distressed?

Williams: Most of these institutions are in a negative financial position. If they are not in a negative financial position losing money from the bottom line, they are not providing sufficient cash flow to fund the depreciation on the capital that they have. Many of these institutions are old, with worn out buildings and equipment. Consequently, as they look to buy new equipment, many of them don’t have the access to capital to do that. most of the institutions we’re talking about are losing money from a cash-flow perspective.

HLM: What metrics will you use to ensure that RCHC is working?

Williams: A couple: First, what is the level of interest that we can generate across the country in having individuals, corporations and foundations provide funding for these assessments? Secondly, once that funding is available, what is the result of the assessments that we do in the first year to provide an alternative for more successful operations or an alternative model for continued operations.

On a longer-term basis, how can we make people more aware of the plight of rural and community hospitals relative to healthcare reform? The Affordable Care Act is not perfect, but if the House and Senate make good on their proposals to cut the Medicaid expansion, it would harm most of these hospitals that we work with because they have a high Medicaid population. If they are not Medicaid-covered, many are no-pay patients. There is a sustainability factor. What is the impact of removing the Medicaid expansion in the continued success of these hospitals?

HLM: Should rural and community hospitals brace for profound change in the way they do business?

Williams: All hospitals should take a closer look to see if they are operating efficiently. Specifically, community and rural hospitals are going to close at a rate that we heretofore have not experienced. What we are forgetting with those closures is that there are many individuals being served in those small communities who don’t have the wherewithal, the physical ability, the financial ability, to travel to the urban marketplace. Absolutely yes there will be story after story about the impact of change in healthcare on the viability of these hospitals, but more importantly to the patients they have been serving.

John Commins

John Commins is a senior editor at HealthLeaders Media.

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