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Nona Tepper: Welcome to Modern Healthcare’s Beyond the Byline, where we offer a behind the scenes look into our reporting. I’m Nona Tepper. I write about insurance. Senior Operation’s Reporter, Alex, has joined me today to talk about rural healthcare in Alabama. Thanks for joining me, Alex.
Alex Kacik: Hey Nona, thanks for having me.
Nona Tepper: So you recently reported that about 21 rural hospitals have closed over the last two years. And, you know, as such, we’ve seen a hollowing out of the rural health safety net as hospitals cut services to try to keep those doors open. How are rural hospitals faring in Alabama?
Alex Kacik: So one of those hospitals that closed over the last two years was Pickens County Medical Center in west Alabama. It closed right before the pandemic in March. And there’s a lot of factors at play here, but one of them is Alabama chose not to expand Medicaid, which is partially why 84% of their rural hospitals are losing money. Many of their hospitals cut less profitable services, like you mentioned. Obstetrics is often one of the first ones to go, and labor and delivery. So we’ve seen that throughout a lot of rural communities across the country. And this has led to pretty wide care gaps, meaning that folks are having to travel further from their communities to get care, and that compounds health outcomes. But I talked to hospitals in Demopolis, in Centreville, that are adding certain service lines to keep folks in their community, and that helps these bigger academic medical centers because they could care for the sickest of the sick and retain their beds for the most complex cases in places like Birmingham and Tuscaloosa.
Nona Tepper: Well, that’s fascinating. So instead of actually closing down services as a way to cut costs, they’re actually adding services and investing in their provider system. Is that right?
Alex Kacik: Yeah. So the initial reaction by a lot of financial executives that are, are running hospitals is to try to cut away at various services that are less profitable. And, you know, you do have that case that happens maybe early on, but over time you may see services continue to wind down if financials don’t improve. But there’s a few hospitals in Alabama that have adopted a theory where if you add services that aren’t well represented in the community, sometimes around primary care, eye care, wound care, depending on your population, you can keep folks in your local community and then you could add these wraparound services. And so, that generally builds on each other. As you retain more patients, you can keep them in your hospital by adding add-on services as one of the executives described it to me. So, yeah. Well, one of those was Whitfield Regional.
Nona Tepper: That’s a fascinating approach and very different from what it sounds like the rest of the industry is doing. I know you mentioned that one of the hospitals was Whitfield Regional Medical Center in Demopolis. They were on the verge of closing several years ago, but then Marengo County voters and UAB Medicine helped right the ship. What happened at Whitfield?
Alex Kacik: So, Whitfield had lost about $20 million from 2008 to 2018, so over a 10 year period. So it did initially cut obstetrics services in 2013 to try to stabilize. But then after that, a specialist left, and then there was this related economic ripple effect throughout the county. Marengo County voters passed a property tax increase a couple years ago. And UAB Medicine formed a clinical affiliation with Whitfield to keep patients in its hospital via telehealth services. Specialists are few and far to come by in rural areas, so UAB has its affiliations with the local schools and has the pipeline of specialists coming through their systems. So, they offer consulting services with like nine rural hospitals in Alabama. And one of which is Whitfield. So you’ll have a specialist guide care via telehealth. So, you know, their video feed appears as, you know, they’re treating the patient, diagnosing them. And so they help keep complex cases when it comes to folks with severe kidney problems, maybe lung disease, stroke patients, and other critical care, they keep them in their community. So their drives are shorter and also their freeing up space at UAB for tertiary care.
So now Whitfield is bringing back obstetric services next year, after it’s been able to retain many more patients. It’s not only retaining more patients, it’s case counts went up. Just average daily census has gone up significantly. Its patient mix is much more complex. So it’s allowed them to open up a new breast cancer clinic, imaging services, cardiovascular care, eye surgery, and gastrointestinal services, among others. And so, I was able to talk with some folks to figure out what the impact of the community was.
Nona Tepper: That’s fascinating. So essentially by letting its patients visit with UAB Medicine clinicians through telehealth, and it sounds like UAB Medicine maybe even gets to keep the cash from those visits. Whitfield has actually been able to retain and grow its membership. Is that correct?
Alex Kacik: Yeah, that’s right. So Whitfield has 99 licensed beds and it was operating at an average daily census of between 12 and 20 people before the pandemic. That has jumped to about 51 now. So I’m not exactly sure on the financial arrangement, but, you know, I think Whitfield and the other hospitals, they have a monthly fee with the UAB Medicine for those consulting services. And on the DRG billing, I’m not exactly sure how that works out.
But I think ultimately, as they’re able to keep more folks in the system, they could add all these wraparounds services, which has helped a lot at Whitfield Regional. Its patients are more acute, which means it gets paid more. Now it’s adding things like wound care and infusions for its disproportionately high amount of patients with chronic disease. So you have a lot of folks that are suffering from diabetes, for instance. So this wound care clinic, their wound care services that they’ve set up, allows them to kind of stay in one place. So instead of traveling an hour or two hours to the big academic medical center, they could stay in the area.
Nona Tepper: Wow. So shorter travel times and maybe a greater trust in their local provider, which is always good for every community. I know you mentioned Jo Fitz-Gerald earlier. Can you tell me a little bit about her?
Alex Kacik: So Jo Fitz-Gerald is a sweet 83-year-old grandmother of 12 I talked with. She was diagnosed with breast cancer recently, and in most cases she would have to drive to Tuscaloosa, which was more than an hour from her hometown in Demopolis. But since Whitfield just opened its breast cancer clinic, she could stay close to home. So she goes for daily treatments, and it’s only a seven minute drive. Her cancer’s receding after several weeks of daily radiation. And she was telling me that the hospital, after years of being financially unstable, is doing much better and has, and will, save lives as folks can get care closer to home.
Nona Tepper: Definitely. Well, that’s a great story. And congratulations to Miss Fitz-Gerald.
So I know you and our data journalist, Tim Broderick, looked at rural hospitals Medicare cost reports, and there was something unique about Alabama hospitals. What did the data show?
Alex Kacik: So, part of the reason we focused on Alabama was that it has the lowest share of critical access hospitals per capita in the country. It has less than 0.1 per 100,000 population. Averages are much higher in like neighboring Mississippi, where it has, you know, closer to three or four. So the critical access program was formed in 1997 for hospitals that have fewer than 25 beds and are 35 miles away from another hospital. They get a slight boost in the Medicare reimbursement. But the folks I talked with said the political will wasn’t there in Alabama to pursue the designation. The main commercial insurer at the time, I think Blue Cross, paid them relatively well. But that, over time, dwindled, as you know, as insurers are trying to reduce, you know, the cost of care and their overhead.
And that 35 mile designation precluded a lot of hospitals from transitioning. Plus most were over 25 beds and that would require them to pare down of services, which is a tough sell sometimes. There’s a proposed law that would do away with that 35 mile provision. But the financial experts I talked with said that the gaining the critical access designation wouldn’t help that much in the case of these Alabama hospitals, given their a patient and payer mix.
So also starting in 2023, hospitals could get rid of more or less all of their inpatient care and qualify for a new program called the Rural Emergency Hospital Program. It gives you a 5% boost to Medicare reimbursement plus monthly facility fee payments. But most of the folks I talked to in Alabama, weren’t interested in winding down their inpatient beds and swing beds and services. They said, in particular, without these rural hospitals, the pandemic would’ve been a lot worse because they needed all the extra search capacity that was available.
Nona Tepper: Yeah. It sounds like this program actually would kind of do the opposite of what Miss Fitz-Gerald like benefited from. It would actually continue to cut services, but just as another way to gain additional cash, is that correct?
Alex Kacik: Yeah. So, in doing away with inpatient services is always a tough sell. It seems as like the backbone of a community, you know, from an economic standpoint and just from a safety standpoint. So, you know, we’ve done some reporting in 2017 where we looked at, you know, average daily census counts, and across the country, rural hospital’s inpatient beds were only a 38% full on average, which made it hard to sustain. You know, there’s been a lot of criticism on how kind of rural hospitals operate and advocating for them to more or less operate as a free standing emergency department, only like observations services and outpatient services. But the folks I talked with in Alabama, you know, they said that without these rural hospitals being there, the, you know, tertiary medical centers would’ve been even more overrun.
So in the case of Whitfield, you know, with the help of UAB Medicine specialists and telestroke and Tele-ICU and telenephrology, you know, they’re able to keep critical care patients in their facilities, making sure that UAB’s hospital beds were reserved for the sickest of COVID patients. As of now, nearly two-thirds of rural hospitals do not have intensive care beds, according to data from Charter Center for Rural Health. So this means that many were woefully under-prepared for patients who needed ventilators and other critical care. So it has shifted the conversations on what role rural hospital should play.
Nona Tepper: So is Whitfield like a case study for the rest of the industry? Like should the rest of every rural hospital, you know, just be clinically affiliating with larger systems to gain telehealth services, or should they be looking to engage specialists through telehealth?
Alex Kacik: I think these clinical affiliations are becoming more prevalent. So a lot of times they’re through like joint ventures or other informal partnerships. You don’t necessarily need to own some of these hospitals to have some of these clinical affiliations. And they’re increasing in frequency, where you’re seeing a, you know, mutually beneficial arrangement between the big health system and the smaller hospital that, you know, allows not only the smaller hospitals to utilize their specialty expertise, but they can also tap into some of their, you know, administrative infrastructure when it comes to IT and billing and coding. And some of that can be taken on by the bigger system because they have the scale, and it’s just not that much of a burden as it would be on a smaller facility.
Nona Tepper: What are some other ways that rural health care can, these systems can sustain themselves? What does the outlook look like?
Alex Kacik: So, you know, academics and consultants I talk with are hopeful the rural emergency hospital program will help stabilize rural hospitals, but that would entail cutting in-patient services, which is never an easy sell. There is an urgent need for rural hospitals to find all alternative revenue streams. And the folks I talked with said there are opportunities in the 340B drug discount program, and behavioral health, particularly for on the 340B front for folks that qualify for the disproportionate share hospital funding. So, you know, rural hospitals, like all others are having to pay their staff more similar to other healthcare providers, and those costs aren’t going away. So they’re going to need to find ways to keep patients in their community and add some ancillary services to bring in additional revenue.
Nona Tepper: Well, thank you for your time and thank you all for listening. It sounds like Whitfield was, at least in part, able to do that.
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