Last month, Paul R. Bengston, CEO of Northeastern Vermont Regional Hospital, a small, critical access hospital located in St. Johnsbury, Vt., was chosen to lead the American Hospital Association's (AHA) Section for Small or Rural Hospitals in 2014. The 21-person governing council represents small or rural hospitals in the AHA's policy process and member services initiatives.
Healthcare Finance News recently interviewed Bengston to get his take on some of the most prominent financial challenges that small and rural hospitals may face in 2014 and the years ahead.
Q: What would you say are the most prominent financial challenges rural hospitals may face this year?
A: The federal government ended certain programs back on Oct. 1, 2013 related to special reimbursement policies for Medicare-dependent hospitals and a number of other special categories that were discontinued. With budget resolution talks, Congress agreed to extend some of these especial payments out until March 31, 2014, and then they come to an end unless Congress acts again to reinstate these payments to Medicare-dependent hospitals. Those are the immediate threats right now.
Q: What are some long-term challenges that these hospitals may see or continue to see?
A: Congress has recently acted to run sequestration out into the 2020s and even further. Using hospital payments in general to fund things like the sustainable growth rate … looking at payments made to hospitals and cutting those based on certain assumptions they are making on what will be needed in the future. This will affect all hospitals, not just rural hospitals. Smaller, rural hospitals have particular challenges given the volumes of work they do - their fixed costs tend to be greater portions of their overall costs. That's my general impression.
Q: Are certain challenges unique to only small, rural, or critical access hospitals?
A: For small, rural hospitals in particular, there're already reductions for reimbursements from the original 101 percent of reasonable costs, and that's just one. Then there are other pressures on small hospitals that own or manage ambulatory services, as well as laboratory reimbursements that have been affected. These are smaller things, but they all accumulate. It's almost death by a thousand cuts for them.
There are also critical access hospitals that are assuming they will lose their critical access status, and they are scrambling to find out and determine what their future identity will look like. Some of those small hospitals are looking for alignments or affiliations with larger systems. If you look at New England, for instance, there are very few truly independent hospitals at this point.
There are also all of these other concerns affecting small, rural hospitals as well as rural healthcare organization practices. Being a small, rural hospital, how do you retain your physicians? It's a people concern that turns into a financial concern. You can develop structures but if you cant fill the positions for the jobs that need to be done, it doesn't really matter what your reimbursements are.
Q: How can these rural hospitals and healthcare organizations overcome and survive these challenges in the coming years?
A: What I'm observing is that first of all you have to stay engaged and willing to listen and participate in all developing opportunities. You can't just sit on your hands and say you're not going to explore the opportunities. If you're going to survive all of these changes, you have to make sure you're really relevant to the populations you serve. If you're going to have a life in the future, you'll have to always make sure you're valuable to the, say, 30,000 people in your service area – so valuable that they'll really care if you go away. Stay involved with the population you serve and stay ahead of the trends you see there. That's the first thing these hospitals should do and it can't be done overnight. You have to have strong working relationships with other rural providers to offer the spectrum of services to your community. Stay on task in improving the health of the population you serve and don't leave it up to someone else. You have to be the leader.
The major anxiety is around identity - who am I going to be in the future? Who are we going to be and how do we fit in? How do we talk to policy makers so they don't do what I often sometimes feel they do, which is make these budget decisions with just a signing of a bill. What seems like a small decision gets amplified by a thousand with a lot of consequences for small, rural hospitals.