Becker's Hospital Review

Save the date! CEO Roundtable + CFO/CIO Roundtable — November 18-19, 2015 — Chicago. Please call 800-417-2035 to register. The healthcare industry has not been kind to community hospitals over the past several years and there is no indication that the industry will be any less cruel on these organizations during the next several years. Survival in this world will take decisive and creative action. Community hospital leaders are concerned about the future of their fa- cilities. In fact, financial challenges ranked No. 1 — above healthcare re- form and patient safety and quality — on the list of community hospital CEOs' top concerns, according to the American College of Healthcare Ex- ecutives' 2014 survey of top issues confronting hospitals, which included responses from 338 community hospital CEOs. Although all community hospitals are feeling the squeeze, facilities in states that have not expanded Medicaid are under more financial pres- sure. In expansion states, 8.5 percent of rural hospitals are vulnerable to closure, and that number is nearly doubled in nonexpansion states, where 16.5 percent of rural hospitals are vulnerable to closing their doors for good, according to the iVantage report. "Community hospitals tend to have a higher proportion of Medicaid and indigent patients than suburban hospitals," says Greg Charleston, senior managing director of financial advisory firm Conway MacKenzie and leader of its Healthcare Advisory Services Group. Medicaid expansion was originally mandatory under the Patient Protec- tion and Affordable Care Act, but a 2012 U.S. Supreme Court decision made it optional. As of May 26, 30 states had expanded Medicaid, includ- ing Washington D.C., three were discussing or considering expansion, and 18 states were not adopting Medicaid expansion at the time, accord- ing to Kaiser Health Facts. "Most of the southeast states have elected not to expand Medicaid, and this has been hard on community hospitals," says Mr. Charleston. He spe- cifically identified Georgia as one state that has experienced a significant amount of stress. "In the state of Georgia…four hospitals have closed in the last two years and at least 15 more community hospitals are in finan- cial distress," says Mr. Charleston. Along with states not expanding Medicaid, there are various other drivers behind the financial struggles community hospitals face. The issues these facilities are encountering must be overcome, as community hospitals are important pillars in the markets they serve. Challenge 1: Decreasing patient volume Some financially distressed community hospitals are facing fiscal challenges due to fewer patients coming to their facilities for care, and that has captured the attention of hospital leaders. In the an- nual ACHE survey, 63 percent of the community hospital CEOs who responded said decreasing inpatient volume was one of their top fi- nancial concerns in 2014. Various factors influence patient volume across the nation, including health reform and the increasing popularity of high-deductible health plans that cause some people to utilize less healthcare services or delay care because they have such a high financial burden. Along with these issues, community hospitals are also facing another threat — patient out- migration to larger population centers. Addressing the problem of declining patient volumes Community hospitals need to do a deeper dive into their dwindling pa- tient numbers. "They need to determine if their market is shrinking or whether they are losing patients to competitors," says Kelly Arduino, a partner in Wipfli's healthcare practice. Many community hospitals just assume patients will come to them, but that is not the case, and Ms. Ar- duino says community hospitals need to understand that "they need to do more than put a billboard up about their new doctor." The need for community hospitals to make their presence known is be- coming increasingly important as bigger systems improve efficiency and cost of health services. "Health systems are becoming larger, more sophis- ticated and more competitive," says Mr. Charleston. "The larger systems are using marketing, technology, economies of scale, and other methods to deliver better services less expensively. Larger systems draw patients from rural areas for acute treatment, leaving the community hospitals primarily with emergency and urgent care patients," says Mr. Charleston. Although smaller hospitals are having trouble keeping up with the larger systems in improving efficiency, community hospitals should not make any assumptions as to why their patients are heading to a competitor for care, as there are a number of reasons community members may stray. "It may be a matter of reputation," says Ms. Arduino. "It could be as simple as someone got a bad bill and talked about it all over town." To solve this problem, Ms. Arduino recommends hospitals use a community engagement survey to find out what local residents really think. Another reason patients go outside of their community for care is because the local hospital has become disenfranchised with its market. Although community engagement surveys can help facilities better understand how to support their communities, to stay in touch with the markets they serve, community hospitals must go beyond just providing healthcare. They must "become an engine for health and economic growth in their communities," says Ms. Arduino. She provided an example of this strategy at work. In 2006, Watford City, N.D., had a population of about 1,500, and that number has skyrocketed to more than 15,000 in the past nine years due to the oil boom in that area. The infrastructure changed, and the community hospital adjusted by getting involved in a number of functions outside of healthcare, such as becoming the force behind affordable housing developments in its market. Even if a community isn't going through significant change, all community hospitals should ask themselves, "How can we not only be an acute-care organization, but also lead the community as a whole?" says Ms. Arduino. Strategies for Overcoming Financial Challenges and Keeping Your Hospital's Doors Open By Ayla Ellison 9 (continued from cover)

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