[vc_row][vc_column][vc_column_text]

Future Trends in Healthcare and Their Impact on Rural Hospitals

The total cost of care, consumer engagement, quality and safety, and the governance and leadership of hospitals are four interrelated terms that drive the future trends of healthcare.

In a testimony to the Senate Banking Committee on February 26, 2019, Jerome Powell, Chair, Federal Reserve Board stated that, “the single biggest thing that drives the unsustainability [of the fiscal path in the United States] is health care.” This implies that either there will be a large change to the system or an aggressive downward-pressure reimbursement to hospitals and physicians.

Since 1999, the cost of family insurance premiums has increased by 224%, but the amount of worker contributions (premium shares, copays, and deductibles) toward family insurance premiums has grown by 270%. The 64% increase in workers’ earnings over the 47% increase in overall inflation during this same time does not include the growth in worker contributions. Because of the costs of healthcare, many workers’ standards of living have declined. The market has addressed this problem by shutting down healthcare providers. Even with the operating cash flow growing from 2% to 3% and stabilizing, driven by the highest Medicare reimbursement rate increases in around a decade, independent hospitals are disappearing. As of April 2020, 130 rural hospitals have closed since 2010. Groups analyzing rural hospital financial risk have determined that 21% of rural hospitals are at high financial risk of closing due to payer mix degradation, inpatient use declining, and limited capital.

Factors Driving Rural Hospital Crisis

  • Payer Mix Degradation: A loss of agricultural and manufacturing jobs has led to a corresponding degradation of the payer mix. Residents who remain in rural communities tend to be either very old or very young, and these communities often have higher rates of uninsured, Medicaid, and Medicare patients, leading to more uncompensated and under-compensated care. Medicare payment reductions are also a major factor, with the average rural hospital counting on Medicare for 46% of gross patient revenue.
  • Declining Inpatient Care Driving Excess Capacity: Many rural hospitals were originally built in the post-World War II era to provide a level and volume of care that is no longer needed. This factor, combined with the ascendance of managed care and an increased focus on outpatient services, has left many rural hospitals overstaffed and underused. According to research, the average rural hospital has 50 beds and 321 employees, but a daily census of just seven employees.
  • Inability to Leverage Innovation: Many already budget-strapped rural hospitals have been unable to keep up with technological trends as they lack the capital to invest in updated innovative technology, such as electronic health records (EHRs) and advanced imaging platforms.

Newer Challenges-

  • The shift from inpatient to outpatient care, disruptive competition
  • Increased regulatory burden
  • The high cost of pharmaceutical drugs
  • Bypass: Bypass behavior is the tendency of local rural residents to not seek care at their closest hospital. Bypass behavior leads to significant losses of potential revenue for rural hospitals, which in turn leads to greater financial distress and risk of closure.
  • Technology and healthcare: Many services that used to be a three day stay in the hospital can now be delivered on an outpatient basis. This reduces revenue for a hospital, especially rural ones.
  • Mismanagement: In some cases, there are quality concerns for fraud that has led to accreditation or legal intervention that closes the hospital or restricts their ability to operate fully.
  • Weak Governance

Rural facilities often stabilize critically ill patients and then transfer them to larger regional or urban hospitals for more definitive care. However, when the hospitals submit their claims, bills from the first site of care generally get applied to a patient’s deductible. If a patient cannot afford to cover that amount, those hospitals often do not get paid, even as the larger urban hospitals where patients were transferred get close to full payment from the health plan.

The result is financial headaches for patients and a substantial rise in the amount of uncollectable “bad debt” written off by all hospitals during the past few years. According to the Healthcare Financial Management Association, hospital bad debt increased by $617 million to nearly $56.5 billion between 2015 and 2018. More hospitals, especially those in rural areas, are left teetering financially. Bad debt for rural hospitals has gone up about 50% since the passage of the Affordable Care Act in 2010.

New research shows that patients are more likely to die following a rural hospital closure, whereas urban closures had no measurable impact on mortality. Rural hospital closures boost mortality rates by nearly 6%.

Is Your Hospital at Risk of Closing?

The most at-risk are in Southern states where:

  • Inpatient volume is shrinking
  • Margins are thinning
  • Urban competitors are encroaching
  • The resident populations are poorer and sicker
  • Governance and Leadership is weak

In terms of COVID-

  • What is your risk of being overrun by COVID patients?
  • What is your risk of having a surge? Would is overwhelm you?
  • Do you have a meatpacking or food processing plant in your community? Do you have a prison in your community? These industries are the primary hotspot incubators for the virus that can shed cases into your community.
  • Is your hospital a destination location such as a College town, vacation hotspot, or primary working location?

Questions You Must Ask Yourself to Link and De-link Independence and Survivability

  • Can we survive while staying independent?
  • Can we thrive while staying independent?
  • If there is any doubt, there is no doubt. If there is any doubt that your hospital can survive independently, the question becomes whether your hospital should integrate with a hospital system. It is important to initiate these conversations from a position of relative strength.

How Does COVID-19 Affect These Health Care Trends?

COVID-19 accelerates the trends that have been discussed throughout this document and makes them more random. Rural hospitals have been caught between COVID-19 and incredible tension in the health care system of whether we have a “Just-in-Time” or a “Just-in-Case” Health Care System. “Just-in-Time” health care systems are where we do not want excess inventory or waste in the system. They are designed to capture maximum efficiency, and it worked pre-COVID-19. When COVID-19 began, we saw this system’s limitations. Hospitals began to compete with one another for necessities due to supply chain weaknesses and complexities, ultimately driving up prices for needed supplies. “Just-in-Case” Health Care Systems are designed to leave room for excess inventory and less efficiency in preparation for the “just-in-case” possibilities, such as the COVID-19 pandemic.

Lack of experience and low inventory utilization baseline created false PPE capacity projections. Surge COVID-19 burn rate for PPE is 4:1, to as high as 8:1. These ratios suggest that predicted surge PPE inventory consumption of between 4 to 8 weeks, would last one week.

Revenue Recapture

55% fewer Americans sought hospital care in March-April due to COVID-19, driving a clinical and financial crisis in U.S. healthcare. An analysis of 2 million patients encounters revealed that U.S hospitals are losing $60 Billion per month; uninsured patient numbers have increased by 114% during the COVID-19 pandemic.

Due to the loss of revenue during the start of the COVID-19 pandemic, hospitals are now rushing to maximize the provision of elective procedures to recapture revenue. Millions of patients who put off care or had it delayed during the pandemic can soon be expected to flood hospitals and physician offices seeking care. It is believed that many facilities will likely have a difficult time handling the resulting surge in patients while also maintaining capacity for COVID-19 patients. However, hospitals must also be prepared for this “release” of pent-up demand to not come at all or to come sporadically.

“Pent Up Demand” Surge May Not Happen

  • Patients will be afraid to go to hospitals if they believe that they may become infected with coronavirus while there. They will be further put off when they learn that their loved ones will be prohibited from visiting them and they will be all alone in the hospital.
  • Skyrocketing unemployment during the crisis means that many people who had to postpone care now have no health insurance. Or, they may still have their health insurance, but their weakened finances render them unable to afford the deductibles and co-pays. An estimated 27 million Americans have lost employer-based health coverage during the pandemic.
  • The crisis has accelerated the normalization of Telehealth and may significantly change cultural expectations and demands of the public. While a patient cannot get a knee replacement via telehealth, she can get second or third opinions that may tell her there are other, non-invasive, and less expensive ways of dealing with knee pain. Telehealth could easily reduce the hoped-for release of pent-up demand.
  • Doctors and nurses and other care givers are concerned about their own safety regarding resuming elective surgery. If their hospital has no N95 masks or other PPE to give them, they may not wish to resume their work if they are concerned about being exposed to patients with COVID-19. We must not take the care giver capacity needed to respond to pent up demand for granted.
  • If we reopen the economy too quickly, COVID-19 cases could surge again requiring additional suspensions of elective procedures and pressures on hospitals. A vicious cycle may ensue which could whip-saw the health care system in general and rural hospitals in particular.

What Does the Future Hold?

There are fears that the nation’s supply chain is not anywhere close to being ready to distribute the COVID-19 vaccine.

Even as the COVID-19 pandemic draws attention and resources to the nation’s doctors and hospitals, the health-care industry is suffering a historic collapse in business that is emerging as one of the most powerful forces hurting the U.S. economy and a threat to a potential recovery.

On April 22, 2020, the Social Security and Medicare Trustees issued their annual reports detailing the financial state of America’s two largest entitlement programs. The reports echo past conclusions: Social Security and Medicare are still going bankrupt. At its current pace, Medicare will go bankrupt in 2026. It is believed that the Social Security Trust Funds for old-aged benefits and disability benefits will become exhausted by 2035.

[/vc_column_text][/vc_column][/vc_row]