I know what it is to worry about the fate of a community hospital. Several years ago, I experienced that sensation firsthand when Abingdon’s Johnston Memorial Hospital went through an extended transition from an independent provider to a Mountain States Health Alliance affiliate. Change of any type inevitably is surrounded by uncertainty. In the case of Johnston Memorial, that was magnified by in-the-moment perception. Johnston Memorial has a proud legacy with roots dating back to 1905. Preserving that history was on the minds of many of those involved in the transition – I was Secretary of the hospital’s Board of Trustees as that process was underway in 2009.
Looking back now, it was a prudent business decision made with an eye on stability and continued longevity for our community hospital. It was also driven by market realities. Rural hospitals in communities across America increasingly have turned to mergers and consolidations with larger health systems as a survival strategy. For many, though, the outcome is bleak. The University of North Carolina Chapel Hill Campus’ Cecil G. Sheps Center for Health Services Research reports that 57 rural hospitals across the country have been shuttered since 2010. One of them is Lee Regional Medical Center. The Pennington Gap-based facility closed two years ago due to the pressures of providing free and discounted care to many of its patients (as mandated by Washington), and changes in health care policy that left the hospital in serious financial distress. The latest provider to join that ignominious list, according to a recent New York Times article, is Mercy Hospital Independence in Kansas. The National Rural Health Association (NRHA) warns that another 283 rural hospitals are at risk of closing.
These trends should trouble Virginians concerned about our economy. Virginia’s rural hospitals (nearly half of all hospitals in the Commonwealth) are struggling. They are outsized economic engines in their communities. Rural providers also have different demographic conditions to deal with. Congress in recent years has slashed spending on Medicare, the federal health insurance program for the elderly. Their patients tend to be older than those at urban or suburban hospitals in more affluent communities. Hospitals in less densely populated areas have fewer patients, but still carry significant facility and service overhead. Data from 2013 show that roughly half of Virginia’s acute care rural hospitals (17 of 37) had negative operating margins that year, a fact affirmed by the Richmond Times-Dispatch’s Politifact Virginia fact checkers. A review of annual data going back several years shows these trends have been persistent.
The financial pressures on rural hospitals are illustrated by the share of their patients in subsidized health insurance programs: 74 percent of patients at Virginia’s rural hospitals receive health coverage through Medicare or Medicaid, the comparable rate is 60 percent at urban hospitals.
Hospitals’ challenges stem from federal government cuts and mandates (including sequestration, the Affordable Care Act, and past decisions), Medicaid and Medicare reimbursement shortfalls, and emergency room care requirements. Medicare cuts alone in 2015 and 2016 will cost Virginia’s local hospitals and health systems $1 billion. That’s in addition to the $1.5 billion in federal funding cuts Virginia hospitals have sustained in the past five years. By 2021, the combined effect of cuts from ACA, sequestration, and other statutory and regulatory factors will cost Virginia providers roughly $1 billion annually – a figure that is only expected to grow. Health care is heavily regulated at the federal level and there has been no relief provided by state policymakers to alleviate the mounting pressure.
The resulting climate is one that poses serious threats to hospital stability and all the economic benefits they provide. Virginia’s hospitals and health systems are major employers (115,000 direct jobs with $8 billion in payroll), economic contributors ($36 billion in economic activity, $17 billion spent on good and services), and providers for the public’s access to health care. In many rural communities, hospitals are some of the largest employers around, providing many good-paying jobs. Rural Virginia hospitals employ more than 17,000 people and every hospital job supports two additional jobs in the local economy.
Johnston Memorial is no exception, with nearly 900 hospital employees as well as more than 200 medical staff members. In 2011, a new 500,000-square-foot modern medical center equipped with state-of-the-art technology and 116 beds opened off Interstate 81 in Abingdon. That success story seems worlds away from the flash points of intensely partisan health care policy debates that have become fixtures of our political discourse. Yet geographic distance is not enough to separate even remote rural hospitals from the impact of government funding cuts and mandates that financially hobble health care providers. Addressing the pressures government decisions and market factors place on health care providers is not a partisan issue. It is a jobs, economy, and public health issue. Two Republican governors now seeking their party’s presidential nomination – New Jersey’s Chris Christie and Ohio’s John Kasich – have advocated for policy measures that offer citizens affordable access to health insurance. Doing so has enabled their states to recover billions in available health care dollars from the feds. Gov. Kasich this month brought that message to Richmond, telling a large crowd why it makes fiscal conservative sense for a state to recapture its own tax dollars. Under Kasich, Ohio has also gone from running a massive budget deficit to an enviable surplus.
Being fiscally conservative and finding common sense health care policy solutions aren’t mutually exclusive. Even Bearing Drift recognizes this, explaining in a recent column that “‘no’ will never be a sufficient answer to the problem” of delivering health care in a way that strikes a balance between public health needs, the uninsured segment of the population, fiscal and personal responsibility, and the economic importance of having stable hospitals. Health care leaders are engaging policymakers now in conversations about these important issues. I encourage people to visit ISupportVirginiaHospitals.com to learn more about the major economic benefits Virginia’s local hospitals and health systems provide, the serious challenges they face, and the need for policy solutions addressing them.
Otey Dudley is the past President and Chief Operating Officer of E. Dillon & Company in Swords Creek. He is a past President of the Virginia Aggregates Association, served on the Virginia Transportation Construction Alliance Board of Directors, and the Johnston Memorial Hospital Board of Trustees.
