Becker's Hospital Review

9 CFO / FINANCE 'The fight is worth it': How rural hospitals can recover from the brink of closure By Madeline Scheetz Hospital. Closure. Two words many healthcare leaders try to avoid but are increasingly faced with considering. With 720 hospitals at risk of closure in the U.S., Sturgis (Mich.) Hospital was the latest to shut its doors June 19 aer 101 years in operation. "Over the previous two years, [Sturgis] had a 13% decrease in their emergency department volume, and that's really significant," said Lauren LaPine-Ray, DrPH, vice president of policy and rural health for the Michigan Health & Hospital Association and executive director of its Center of Rural Excellence. "I don't know if I could say generally that volume is always the first domino to fall, but I do know that in the cases of the last two closures we've had in the state of Michigan, the decrease in volume has certainly played a significant role." Dr. LaPine-Ray identified a similar pattern at Aspirus Ontonagon (Mich.) Hospital, which closed and transitioned into a rural health clinic in April 2024. She said the hospital had a low patient volume for years, which became a challenge to maintain services and fix costs. While closures and restructuring is never the top choice for hospital leaders, Dr. LaPine-Ray said the vast majority of Michigan nonprofit facilities are governed by local community boards, with hospitals oen the largest employer in the area they serve. "ere's never a rural hospital leader that wants to close a hospital," she said. "It's a significant hit to the local economy and community. Almost always, the rural hospitals in rural areas of our state are the largest employer, so when we have a rural hospital that closes, it has a significant impact on the employees." At East Adams Rural Healthcare in Ritzville, Wash., the hospital got close to shutting down. When Viola Babcock joined as hospital CFO one year ago, the signs pointed to a crisis. "Our first warning sign [in June 2025] was, we don't have any cash," she told Becker's. "It wasn't a warning sign of what was coming. It was in our face, full out. We have no money." Ms. Babcock said some hospital vendors had not received pay in six to seven months. Todd Nida, who has been EARH's CEO for 11 months, detailed the same moment. "When your payroll is at risk, that's a clear sign of closure," Mr. Nida told Becker's. "e minute I took the seat, it was pretty overwhelming with what we were facing, with vendors having not been paid for months and no cash on hand. e fear of not being able to make payroll, that was an immediate issue." Both Mr. Nida and Ms. Babcock said one of the tipping points for the hospital was filing a WARN WARN notice in fall 2025, which is required by federal law when payroll is at risk. "Everything changed from that moment forward," Mr. Nida said. One year later, EARH has shown significant improvements on its financial positioning. e hospital's net revenue is in line with its expenses on a month over month basis, with leadership keeping a close eye on cash flow. With a "fair amount of money in the bank," payroll is no longer at risk and vendors are being paid biweekly. e hospital also just added a new ambulance to its fleet. Ms. Babcock credited a fine-tuned leadership team that agreed early on to not think just one to six months down the road, but 30 to 50 years. "We are going to make long-term decisions," she said. "I think that is what separates this team and the board from all other turnarounds that I have seen, because they tend to be short term." When asked what failure factor oen leads rural leaders to the decision of closure, Mr. Nida and Ms. Babcock had similar answers. "e one that I would say is the most prevailing is for an administration to not face the hard realities of declining revenue and increase in expenses, and not balance those in advance of being in trouble," Mr. Nida said. "Too many places wait till they're too deep." Does investment move the needle? Nitesh Kumar, MD, CEO, founder and chief strategy officer A3HCS, has worked at struggling hospitals and advised facility turnarounds. He told Becker's the line between a struggling hospital and one that is past revival comes down to if leadership can control variables driving losses. "A hospital crosses into 'point of no return' territory when the losses are driven by forces leadership can't reverse: workforce shortages that can't be staffed around, a shrinking or aging local population that can't sustain volume, or capital needs so large that no realistic financing path exists," he said. "e tell is whether the next dollar invested still moves the needle. If it doesn't, you're no longer managing a turnaround; you're managing a wind-down." For a hospital with only six months of financial runway le, Dr. Kumar said leadership must prioritize cash preservation and protect the continuity of patient care — in that order. To do this, leaders must immediately renegotiate vendor and payer terms. He also stressed getting ahead of workforce and community communication to ensure employee morale and trust does not dissipate. "What's not worth their time at that stage is any initiative with a payback period longer than the runway itself, things like new technology rollouts, long-term strategic planning, or systemwide culture initiatives," Dr. Kumar said. "ose are important in a stable hospital, but at six months of runway they're a distraction from the two things that actually matter: cash and continuity of care." 'Fix your broken systems' Gregg Miller, MD, chief medical officer at Vituity and an emergency physician, worked at Los Angeles-based Martin Luther King Jr.-Harbor Hospital when it closed in 2007. He told Becker's troubled finances are not the only path to closure. While Dr. Miller said no one thought the hospital would close, it shut down aer CMS found patients in "immediate jeopardy," months aer a patient died on the emergency department floor while a janitor mopped nearby. "If I were advising a leadership team on the same trajectory, I'd tell them to fix your broken systems and don't believe you're safe just because

• Cover