Irv Lichtenwald

Can healthcare IT save rural hospitals?

August 28, 2018

Healthcare Industry 6 Minute Read

In business, disruption is often seen as a good thing, e.g., digital photography disrupting Eastman Kodak’s business so significantly that the company has scrambled in recent yearsjust to stay afloat, the thing they once did better than anyone now largely irrelevant.

So, disruption is a negative for employees of old technology companies, but it’s a boon for workers in cutting-edge businesses and generally for consumers as well. Those who benefit greatly outnumber those who don’t.

And disruption isn’t limited to photography, of course, but in other industries it’s more difficult to blithely nod to the gods of commerce and light another candle on the shrine of economic casualties.

The best example of this scenario we have right now is American hospitals, where Morgan Stanley says nearly 20 percent are either teetering on the edge of insolvency or are “weak.” Of the roughly 6,000 hospitals in the United States, more than 1,000 exist on shifting financial sands. In recent years, an average of 30 hospitals have closed each year, according to the American Hospital Association, and that seems likely to continue.

Among those threatened hospitals, the threat hangs disproportionately over rural areas.

“Since 2010, 86 rural hospitals have closed and 673 others — a third of all rural hospitals in the U.S. — are vulnerable and could shutter their doors,” says Healthcare Dive. “And currently, 44 percent of rural hospitals are operating at a loss, up from 40 percent last year.”

What factors are making it so hard to function outside America’s urban zones?

  • Shrinking reimbursements
  • Higher costs
  • Fewer inpatient admissions
  • Many Medicare/Medicaid patients and few with private insurance
  • Competition from alternative care sites

And let’s be clear about the impact of these hospital closures. When a hospital is shuttered in an urban environment, it creates an inconvenience and a slightly longer car/ambulance ride. When hospitals close in rural areas, towns lose jobs, a source of civic pride and community engagement, and often lives as well.

But the current hospital closure rate need not continue. As healthcare moves through dramatic changes, re-imagined processes and sparkling new tools can empower key preservation strategies:

Establish Telehealth Partnerships: When Plains, Georgia, the home of former President Jimmy Carter, lost its only clinic in March, the Mercer University School of Medicine stepped in and opened Mercer Medicine Plains. Offering both onsite and telehealth services, Mercer Medicine Plains is just the most recent project managed by Jean Sumner, dean of the School of Medicine, who has managed similar efforts in other rural parts of Georgia.

“It’s a way to bring some healthcare to people who don’t often see it, but who do need it,” Sumner said. “In these areas, you need to figure out what you have, and then work with it.”

Telehealth also offers the potential to simplify revenue cycle through enhanced billing and collections. As direct payments by patients have become a larger segment of hospital revenue, organizations must now collect as many outstanding dollars as they can. With telehealth, patients are often willing to pay upfront for convenience and ease.

If we want other communities to benefit as Plains, Georgia, has, we must make sure sufficient infrastructure is in place. In recent testimony, the American Hospital Association encouraged Congress to make sure broadband networks proliferate more widely to the areas where telehealth can have a dramatic impact.

Use the Cloud: In northern Kansas, rural Republic County Hospital used to have an expensive relationship with a radiology organization that read images for the hospital. With the current cloud-based, vendor neutral PACS system in place today, Republic cut their imaging costs in half and can now give clinicians access to patient images through any internet connection. The update to an internal fiber optic network opened a new world of possibilities that the hospital is now starting to maximize.

Beyond PACS, how else might Republic use the cloud to further cut costs and improve revenue?

A cloud-based storage and healthcare IT platform would empower Republic to save money on servers and other local infrastructure, provide better access to patient data beyond just imaging, access solid backup and disaster recovery options, scale for expanded storage without having to buy hardware, and run analytics on patient and organization data to identify opportunities for greater efficiency.

Increase Reimbursements: Hospitals are reimbursed by the federal government, in part, based on a formula that uses a national average and local factors like cost of living and level of competition. This wage indexing of reimbursement, not to mention other regulations, makes profitability more of a challenge for rural hospitals than it arguably is for their city cousins.

“Rural is experiencing death by a thousand cuts,” said one rural hospital CEO.

The issue here is that while cost of living in rural areas may be less, the cost of providing care is not. Members of Congress have asked why CMS has not yet fixed this problem, and the agency may have to come up with a different reimbursement scheme or decide in the interim that rural healthcare is a public good the government must preserve while financial viability is worked out.

Reduce Regulation: Yes, telehealth shows strong early promise, but many of those providing care in rural areas believe it could have more of an immediate impact with fewer shackles. Currently, Medicare’s telehealth limitations include geography, setting and type of service provided.  

Rural healthcare is also subject to policies and regulations that may work perfectly well in city hospitals but are much more difficult to comply with where resources are scarce. Rural hospital administrators argue that what they need is the flexibility to solve problems in a manner that makes sense locally. In essence, these same administrators are making the argument for the freedom to remain viable, which seems like a clear-cut public good on the face of it.

Amid the ongoing turmoil, many clinicians and administrators lament the way technology is turning the traditional hospital environment upside down. It’s a completely understandable response to upheaval. But technological change would not be possible in an environment that was not already ripe for disruption. And the good news is that technological change does not just plow through an industry like a tornado through a Kansas trailer park. It leaves a different, usually more flexible order in its path.

So, to revisit the original question, can technology save the rural component of American healthcare from destitution? Not alone, but many of the policy changes necessary to save rural care are enabled by advances in technology. We’re better served by an integrated, collaborative approach regardless of which healthcare sector we work in.

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