Rural Hospital Network Dying in Time of Change

In the 15 years beginning in 2005, 170 rural hospitals in the United States closed their doors.

Rhea Medical Center in rural Rhea County, Tennessee. (Courthouse News photo/Daniel Jackson)

CHATTANOOGA, Tenn. (CN) — It took an emergency for Garrett Burns and his wife to learn the kind of service McKenzie Regional Hospital gave to their rural Tennessee community.

In March 2009, Burns and his wife were students at Bethel University. “It was our first child so everything was an emergency, obviously,” said Burns, now a chaplain with the Cumberland Presbyterian Church.

All during the pregnancy he and his wife traveled 80 miles round trip to a hospital in the larger metropolitan area of Jackson because friends and family recommended the larger hospital, thinking a bigger metropolitan hospital would give them better care. But everything was thrown out the window when late one night Burns’ wife called him into the bathroom and he saw that she had been bleeding profusely.

He called an ambulance. The closest hospital was McKenzie regional.

“Not to get too specific, the baby engaged pretty hard and that’s common among first deliveries, first children. But it caused a lot of bleeding and a lot more than we were expecting,” Burns said.

Turns out, according to Burns, thanks to an Amish community nearby, McKenzie hospital’s delivery services was staffed by a good number of midwives and doulas. It was better care than what Burns and his wife could have received at the larger hospital many miles away.

The experience, Burns said, “changed our opinion completely of rural health care,” and the rest of the Burns’ children were birthed locally.

But in 2018, McKenzie Regional closed. 

A college town home to Bethel University, a robust farmer’s market and ball clay that attracted porcelain manufacturers, McKenzie was one of the rural communities to join the trend of communities facing rural hospital closures across the country. The trend continues through the Covid-19 pandemic and researchers expect that this year might see the highest number of hospital closures nationwide.

In news releases from that time, Quorum Health Corporation announced it was discontinuing operation of McKenzie Regional and selling its assets to a company with other hospitals in the area: Baptist Memorial Health Care Corporation.

McKenzie Mayor Jill Holland said when reached by phone that the private hospital, which delivered about 300 babies a year, had been losing millions of dollars a year, despite its efforts.

“They brought in specialty doctors, they brought in new equipment,” Holland said. “They did everything they could to build up the clientele but so many of our citizens are on fixed incomes one way or another. So many of them don’t have the insurance and it just was not anything that the hospital could sustain.”

There are no plans for another hospital to move into town, Holland said. There is no incentive for them to do so.

Recently, a $50,000 grant facilitated the purchase of a telehealth machine so that McKenzie residents could consult with doctors at, say, Vanderbilt University Medical Center.

As a result of the closure, Baptist Healthcare beefed up the services its clinic provided, such as providing crisis care.

These days, in event of an accident or emergency, McKenzie can rely on an air helicopter to chopper in and ferry out critically injured people, McKenzie Police Chief Craig Moates said by phone.

Nearby hospitals are about 10 to 15 minutes away when ambulances are going emergency speed. But the clock can quickly run up to 45 minutes if there is flooding on the roads and the ambulances need to take a different route, Holland said.

“One of the things that impacts us is, for example, with not having a local hospital, if we have certain criminal activity, a DUI for example, our blood draws have to be done in another jurisdiction in an area that we don’t have authority in,” Moates said.

Mark Holmes, a professor at University of North Carolina who studies rural hospitals, said many rural communities not only lose their hospital when the institution closes, but one of the area’s largest employers, right up there with the local school system.

“Some of the more subtle cases are when a hospital closes, there’s probably an erosion of physicians who have privileges there, they might leave town. The EMS, home health, hospice, a lot of those other things that sort of, you don’t think about in a hospital but are part of a health system, those probably leave as well,” Holmes said.

Often, hospitals served as a nexus in the community, sponsoring a Little League team, for instance. But for a hospital whose competitors were, say, five miles away, the loss of services might not be felt, Holmes said. In some instances, the hospital building is turned into a different use, such as a car wash, church or condo.

The Cecil G. Sheps Center for Health Services Research at the University of North Carolina at Chapel Hill tracks rural hospital closures. The year 2019 had the highest number of hospital closures since 2005 — 18 — according to Sheps. In that 15-year period, 170 rural U.S. hospitals closed their doors. 

Now Covid-19 is straining hospital resources nationwide. The coronavirus has pushed rural hospitals to the brink as they canceled services and cleared beds in anticipation of a Covid-19 surge. In 2016, 31% of acute care hospitals were unprofitable, with many of the underperformers in rural areas. They don’t have the cash reserves of larger hospitals, Holmes said.

“You had these rural hospitals that were struggling. Now in many places, they’ve seen their revenue plummet,” he said.

Covid-19 has shed light on issues that have been fomenting for years.

For instance, on April 7, Quorum Health Corporation filed for bankruptcy protection. 

According to its voluntary petition, Quorum had $373 million in assets and $1.26 billion in debts. When the company began in April 2016, then-Quorum President Thomas Miller said the company would use its resources to make rural hospitals essential to their communities “at a time when rural hospitals are under siege.”

In 2016, Quorum Healthcare said it owned or leased 38 hospitals containing almost 3,600 beds across the nation. Quorum sold a hospital — in keeping with its strategy, it said — in October that year.

It continued to disinvest in hospitals until it was managing only 23, with almost 2,000 beds in April. Of those divested hospitals, six are closed. Only two of the closures were marked by Sheps as rural hospitals. One was McKenzie Regional.

Over the years, Quorum has been the subject of three securities lawsuits claiming it misled investors.

A 2016 federal lawsuit in the Middle District of Tennessee claimed: “Defendants made false and/or misleading statements and/or failed to disclose that … a number of Quorum’s hospitals were underperforming at the time of the spin-off from CHS.”

According to that complaint, matters came to a head in August 2016 when the company reported substantial losses for the quarter. In April 2018, Chief Judge Waverly Crenshaw Jr. denied Quorum’s motion to dismiss and a jury trial is scheduled for July.

When it leaves the restructuring process, Quorum expects to have slashed $500 million from its debt.

In a statement, the company said it would continue its service through the Covid-19 pandemic.

“We believe the (Restructuring Support Agreement) will significantly reduce our debt and annual interest expense and better position our company, our affiliated hospitals, and our hospital management and consulting company, for future growth,” said Quorum President Bob Fish.

Courthouse News reached out to a spokesperson for Quorum but did not receive a reply.

Holmes, speaking generally, said there have been many instances in which hospital systems have declared bankruptcy and flourished afterwards.

“It’s not typical, but it is an option that particularly health care providers that are serving rural communities have been exploring. … And so this is an approach that some have had to take in order to modernize and sustain their operations,” Holmes said.

Eighteen rural hospitals closed last year, and in the first four months of 2020, 12 rural hospitals have closed, and the financial effects of the coronavirus have yet to fully work their way through hospital budgets, Holmes said.

“It’s a hard business and it’s always an air of rapid change in health care,” Holmes said.

In the short-term, however, some rural hospitals have been receiving money to sustain their operations through Covid-19. Recently, Tennessee announced it was delivering $10 million to 25 hospitals in the state.

For instance, Rhea Medical Center, which operates in Rhea County north of Chattanooga, received $500,000 from the state’s Small and Rural Hospital Readiness Grants.

Within the past few weeks, the county has seen a spike in Covid-19 cases, 210 as of May 31. Craig Swafford, a surgeon who practices in the area, said most of the Covid-19 cases in Rhea County were found in a migrant worker population, in a public Facebook post May 21.

Swafford did not respond to requests for comment.

But according to Rhea Medical Center’s CEO David Bixler, the hospital had been preparing. Days before the U.S. Surgeon General came out with recommendations and stay-at-home orders started coming down, the small hospital began increasing inventory and holding off on elective surgeries, for instance.

“I like to think that the smaller, rural critical-access hospital, that we were a little bit ahead in terms of our being able to be nimble and respond and react pretty quickly to different situations,” Bixler said by phone.

While Rhea Medical Center has seen a decrease in emergency room visits, the hospital “weathered the storm” and the number of surgeries and outpatient imaging services are coming back, Bixler said. The money it received from the state will help offset the expenditures and the decrease in other procedures because of Covid-19.

Rhea Medical Center’s building is about 13 years old and does not need its heating and air-system updated, for instance, Bixler said. Furthermore, Rhea county is growing and has opportunities for business development.

The hospital has been adding services, such as a pain management group.

But another key according to Bixler is the collaboration at all levels of the hospital. “They’re treating a lot of their family members or people they know in our community. So I think a lot of that contributes to the overall success and culture of the organization,” he said.

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