Are We Creating Hospital Deserts?

Why Local Hospitals Are Closing, and What to Do About It

January 26, 2015

Healthcare Strategist, NBBJ


If you’ve been following the news you know that Critical Access Hospitals (CAHs), hospitals with 25 beds or fewer and located in isolated areas, have been struggling mightily in the new era of health reform. It seems this valuable resource may be headed for extinction. Modern Healthcare reported that critical-access hospitals saw 14 closings in 10 states last year. Overall, there are 1,321 critical-access hospitals in the country in 2014, down from 1,332 in 2013.

It’s not just CAHs that are affected. Urban safety net hospitals, the ones that care for a disproportionate share (DSH) of Medicare and Medicaid patients, are heading this way. The latest to report layoffs is Harris Health in Houston. Even more disturbing, here in Massachusetts two significant hospitals, Quincy Medical Center and North Adams Regional Hospital, closed suddenly and another publicly discussed the deteriorating financial conditions that may cause it to close. These were not critical access or safety net hospitals.

A number of forces are causing this. First and foremost is the reduction in DSH and uncompensated care payments. Increased insurance coverage and expanded Medicaid from the Affordable Care Act were supposed to supplant this, but unfortunately several states are not expanding Medicaid even as DSH payments decline. Then there was sequestration two years ago, which resulted in a permanent reduction in Medicare payments to all hospitals. Add to this the financial penalties Medicare has adopted for things like preventable readmissions and hospital acquired infections, and all hospitals regardless of status have been weathering a severe financial storm that is not abating anytime soon.

Inpatient utilization is changing too: care innovations, changing reimbursement incentives and technological advances will move more and more patients out of the hospital bed. This may be mitigated in some areas with a growing population, but not by much, if at all.

Because our ability to do more things on the outpatient side has increased, we really don’t need small and inefficient facilities that can’t keep up with the technology now required to provide basic inpatient care. I’ve seen proposals that these facilities should simply be freestanding emergency rooms that “pack and ship” to larger facilities.

But even providing this lower level of care and other ambulatory services requires some sophisticated knowledge these days. And many folks forget that even the most endangered rural and urban hospitals are part of our emergency response and disaster preparedness system. Without them we quickly lose a fundamental ability to respond to anything.

Are we creating hospital deserts? It depends on what you think a hospital is. In some respects hospitals are public utilities, always present and ready to respond. In other respects, especially in this new era of health reform, they are cold, hard businesses that must ensure they are financially viable; that means shutting down services and whole facilities if necessary. In other respects, we simply don’t know what a hospital is any more. The hospital of the future is more likely a number of different facilities providing services like intense acute care, intense ambulatory care, critical access and telemedicine.

We don’t have policies that address any of this right now. Instead we are letting the market decide how it all will shake out. It certainly lets policy makers off the hook, but if access to healthcare in rural and urban areas is reduced as a result, or our ability to deal with emergencies and disasters is compromised, then what?

I think we need to not only maintain a basic inventory of critical access hospitals in rural areas, but also expand the concept to urban areas so hospital deserts are not created. I have several possible solutions for this:

  • The emerging super-regional and national hospital systems should be required to maintain some of this inventory in exchange for allowing them to grow in size and scale.
  • We should leverage our VA system to also be part of this system. I know the VA has had its share of troubles lately, but they are a resource and they are national.
  • Finally, I would start looking at creating some basic primary acute care capacity in nursing homes. This would require changing a lot of physical and operating standards, but we need to consider it. Nursing homes are local, more local than hospitals, and they could serve a valuable role in our emergency and disaster preparedness response system.

We need to do something soon. A policy of not-so-benign neglect that creates hospital deserts is no strategy at all.

Image courtesy of Rod Ramsey/Flickr.

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