Kevin Stansbury, the CEO of Lincoln Community Hospital within the 800-person city of Hugo, Colorado, is dealing with a basic Catch-22: He may increase his rural hospital’s revenues by providing hip replacements and shoulder surgical procedures, however the 64-year-old hospital wants extra money to have the ability to develop its working room to do these procedures.
“I’ve got a surgeon that’s willing to do it. My facility isn’t big enough,” Stansbury mentioned. “And urgent services like obstetrics I can’t do in my hospital, because my facility won’t meet code.”
Besides securing further income for the hospital, such an growth may maintain locals from having to drive the 100 miles to Denver for orthopedic surgical procedures or to ship infants.
Rural hospitals all through the nation are dealing with an analogous conundrum. An improve in prices amid decrease funds from insurance coverage makes it more durable for small hospitals to fund massive capital enchancment tasks. And excessive inflation and rising rates of interest popping out of the pandemic are making it more durable for growing old amenities to qualify for loans or different varieties of financing to improve their amenities to satisfy the ever-changing requirements of medical care.
“Most of us are operating at very low margins, if any margin at all,” Stansbury mentioned. “So, we’re struggling to find the money.”
Aging hospital infrastructure, notably in rural areas, is a rising concern. Data on the age of hospitals is tough to come back by, as a result of hospitals develop, improve, and refurbish totally different components of their amenities over time. A 2017 evaluation by the American Society for Health Care Engineering, part of the American Hospital Association, discovered that the typical age of hospitals within the U.S. elevated from 8.6 years in 1994 to 11.5 years in 2015. That quantity has probably grown, trade insiders say, as many hospitals delayed capital enchancment tasks, notably throughout the pandemic.
Research printed in 2021 by the capital planning agency Facility Health Inc., now known as Brightly, discovered that U.S. well being care amenities had deferred about 41% of their upkeep and would wish $243 billion to finish the backlog.
Rural hospitals don’t have the assets of bigger hospitals, notably these in hospital chains, to fund billion-dollar expansions.
Most of right this moment’s rural hospitals had been opened with funding from the Hill-Burton Act, handed by Congress in 1946. That program was rolled into the Public Health Service Act within the Seventies and, by 1997, had funded the development of practically 7,000 hospitals and clinics. Now, a lot of these buildings, notably these in rural areas, are in dire want of enhancements.
Stansbury, who can be board chair of the Colorado Hospital Association, mentioned at the very least a half-dozen rural hospitals within the state want important capital funding.
Harold Miller, president and CEO of the Center for Healthcare Quality and Payment Reform, a assume tank in Pittsburgh, mentioned the main downside for small rural hospitals is that non-public insurance coverage is now not overlaying the total price of offering care. Medicare Advantage, a program below which Medicare pays non-public plans to offer protection for seniors and folks with disabilities, is a main contributor to the issue, he mentioned.
“You’re basically taking patients away from what may be the best payer that the small hospital has, and pushing those patients onto a private insurance plan, which doesn’t pay the same way that traditional Medicare pays and ends up also using a variety of techniques to deny claims,” Miller mentioned.
Rural hospitals additionally should employees their emergency rooms with physicians round the clock, however the hospitals receives a commission provided that somebody is available in.
Meanwhile, labor prices popping out of the pandemic have elevated, and inflation has pushed up the price of provides. Those monetary headwinds will probably push extra rural hospitals out of enterprise. Hospital closures dropped throughout the pandemic, from a file 18 closures in 2020 to a mixed eight closures in 2021 and 2022, in accordance with the Cecil G. Sheps Center for Health Services Research on the University of North Carolina-Chapel Hill, as emergency aid funds saved them open. But that life help has ended, and at the very least 9 extra closed in 2023. Miller mentioned closures are reverting to pre-pandemic charges.
That raises issues that some hospitals may spend money on new amenities and find yourself shutting down anyway. Miller mentioned solely a small portion of rural hospitals may be capable to make a significant distinction to their backside traces by including new companies.
Lawmakers have tried to assist. California, for instance, has mortgage applications charging low to no curiosity that rural hospitals can take part in, and hospital representatives are urging Colorado legislators to approve related help.
At the federal degree, Rep. Yadira Caraveo, a Colorado Democrat, has launched the bipartisan Rural Health Care Facilities Revitalization Act, which might assist rural hospitals get extra funding for capital tasks by way of the U.S. Department of Agriculture. The USDA has been one of many largest funders of rural growth by way of its Community Facilities Programs, offering over $3 billion in loans a yr. In 2019, half of the greater than $10 billion in excellent loans by way of this system helped well being care amenities.
“Otherwise, facilities would have to go to private lenders,” mentioned Carrie Cochran-McClain, chief coverage officer for the National Rural Health Association.
Rural hospitals may not be very engaging to non-public lenders due to their monetary constraints, and thus could need to pay greater rates of interest or meet further necessities to get these loans, she mentioned.
Caraveo’s invoice would additionally enable hospitals that have already got loans to refinance at decrease rates of interest, and would cowl extra classes of medical tools, corresponding to gadgets and know-how used for telehealth.
“We need to keep these places open, even not just for emergencies, but to deliver babies, to have your cardiology appointment,” mentioned Caraveo, who can be a pediatrician. “You shouldn’t have to drive two, three hours to get it.”
Kristin Juliar, a capital assets advisor for the National Organization of State Offices of Rural Health, has been finding out the challenges rural hospitals face in borrowing cash and planning huge tasks.
“They’re trying to do this while they’re doing their regular jobs running a hospital,” Juliar mentioned. “A lot of times when there are funding opportunities, for example, the timing may be just too tight for them to put together a project.”
Some funding is contingent on the hospital elevating matching funds, which can be tough in distressed rural communities. And most tasks require hospitals to cobble collectively funding from a number of sources, including complexity. And since these tasks typically take a very long time to place collectively, rural hospital CEOs or board members generally go away earlier than they arrive to fruition.
“You get going at something and then key people disappear, and then you feel like you’re starting all over again,” she mentioned.
The hospital in Hugo opened in 1959 after troopers getting back from World War II determined that Lincoln County on the japanese Colorado plains wanted a hospital. They donated cash, supplies, land, and labor to construct it. The hospital has added 4 household observe clinics, an connected expert nursing facility, and an off-site assisted dwelling middle. It brings in specialists from Denver and Colorado Springs.
Stansbury want to construct a brand new hospital roughly double the dimensions of the present 45,000-square-foot facility. With inflation easing and rates of interest more likely to go down this yr, Stansbury hopes to get financing lined up in 2024 and to interrupt floor in 2025.
“The problem is, every day I wake up, it gets more expensive,” Stansbury mentioned.
When hospital officers first contemplated constructing a brand new hospital three years in the past, they estimated a complete venture price of about $65 million. But inflation skyrocketed and now rates of interest have gone up, pushing the whole price to $75 million.
“If we have to wait another couple of years, we may be pushing up closer to $80 million,” Stansbury mentioned. “But we’ve got to do it. I can’t wait five years and think the costs of construction are going to go down.”
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