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Local Hospitals Drive Local Economies

John Commins, for HealthLeaders Media, April 1, 2009

As important as community and rural hospitals are to the physical and mental well-being of the people they serve, these little hospitals are also economic dynamos that play a huge role in business development in their communities.

Of course, small hospitals in small towns put a lot of money back into their communities. They are often the largest employer in the area and their payroll keeps many dependent small businesses like the local grocer or clothing stores afloat. That's already evident and it's not particularly difficult to slap a price tag on that value.

However, there is a more intangible value: A hospital's ability to attract new businesses, or keep businesses in the community. Strong local healthcare services are a top quality-of-life issue that any business would evaluate before they relocate. That is difficult to quantify.

Ed Hannon, CEO of McDowell Hospital in Marion, NC, and the new chairman of the AHA's Small or Rural Hospitals Governing Council, went to Congress this week to share that message. "They may understand the numbers when we talk about the size of the payroll, or the number of employees, or the dollars we put back in the community," he says. "What is sometimes missed is 'what is our role in economic development of our communities?' Will companies either survive in our communities if the hospital doesn't exist? Will they be able to recruit and retain employees, or will those companies also fold? We often talk about our abilities and our effect on recruiting new businesses in the community. Because companies will look for communities that have good schools, and good healthcare, that have the services that people will need if they are going to live in the community. But I don't think we look at 'if we close what affect will that have on the community?'"

With that in mind, Hannon shared his concerns with the House Small Business Committee about the potentially adverse impact of some new provisions in President Obama's 2010 budget proposal. Of particular concern is the proposed creation of a $630 billion healthcare reserve fund over the next 10 years that would be paid for with anticipated healthcare savings like bundling Medicare payments for hospital post-acute care, reducing payments for hospitals with high readmissions rates, and a pay-for-performance component that links inpatient payments to quality improvements.

The bundling proposal could save about $18 billion over the next 10 years if hospitals provide the most effective and appropriate post acute-care practices. Hannon told the committee that rural hospitals are disadvantaged because often don't have post acute-care facilities of larger, urban hospitals. "Some of our members are organized in ways that would facilitate bundling payments," he told the committee. "But many are not and need the tools and infrastructure for coordinating care and managing risk."

Hannon told the committee that the effort to save about $8 billion by trimming payments to hospitals with high 30-day readmission rates may be a one-size-fits-all solution to a complex series of problems. He noted that some readmissions are beyond a hospital's control. "Any provision that does not recognize legitimate reasons for readmission may become an obstacle to patient care and safety," he says.

Hannon also warned that using pay-for-performance incentives to drive savings could inadvertently harm small hospitals with low patient volumes, where one negative outcome could have a huge impact on funding. While he supports rewarding excellence, Hannon told the committee that "some of the approaches will result in payment penalties, inequities and other serious consequences for hospitals and the communities they serve."

As we mire in this recession looking for a way out of the swamp, it's important for the nation's political leaders to understand that community and rural hospitals are a vital economic asset. Community and rural hospitals should not get trampled by our big city cousins in the rush to secure money and policy changes at the state and federal level. What may be less-arduous for larger, urban healthcare systems with bigger budgets and more resources could be a budget buster for that 20-bed critical access hospital way out in Hooterville.

That is the message we need to take to our elected officials. "We all, as hospital administrators and our boards, need to meet with our elected officials to educate them," Hannon says. "We need to be the voice of our communities. Who will speak for small hospitals if we don't?"


John Commins is the human resources and community and rural hospitals editor with HealthLeaders Media. He can be reached at jcommins@healthleadersmedia.com.
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