‘Not just a hospital,' 17 rural ND hospitals operating at a loss
Brad Gibbens grew up in Cando, N.D., where a single hospital provided care for people up to 50 miles away.
That distance may seem unsettling, but in rural North Dakota that’s the norm, said Gibbens, now the deputy director of the Center for Rural Health at UND.
“I grew up in rural North Dakota in a town with a hospital; it basically means everything,” Gibbens said. “It is an access point to care, but also a big part of economic development.”
But, according to Gibbens, rural health care could be jeopardized as many rural hospitals struggle to turn a profit.
Roughly one in five rural hospitals in the nation is in danger of closing due to financial standing, according to a recent study. In North Dakota, that would be devastating for many rural communities, experts on rural health care say. North Dakota has five rural hospitals considered “essential at-risk,” the study indicates. The study does not say where those five hospitals are located.
“This is not just a hospital, it is the overall viability of a community, a school system, everything,” Gibbens said. “Rural hospitals and clinics are incredibly important to rural North Dakotans.”
In Minnesota, 21% of the state’s rural hospitals were categorized as “high financial risk” in the study by consulting firm Navigant.
Pete Antonson, CEO of Northwood Deaconess Health Center, said his hospital has seen its share of financial struggles.
“You become pretty resourceful at not having a lot of resources,” Antonson said. “With more resources, maybe you’d replace your facilities quicker or maybe you’d take more chances.”
Northwood Deaconess Health Center is a “critical-access hospital,” or CAH. This is a designation by the federal government.
“It’s somewhat of a financial safety net,” Antonson said. “It helps with Medicare payments and helps support the cost of operations.”
There are 36 critical-access hospitals, or CAHs, in North Dakota, including in Northwood, Grafton, Park River, Mayville, Hillsboro and Devils Lake. There are only six acute care hospitals in North Dakota that are not CAHs, including hospitals in Grand Forks, Minot, Fargo and Bismarck.
Of those 36 critical-access facilities, Gibbens said 19 are operating in positive margins, and 17 are operating at a loss. When asked which hospitals are operating at a loss, Gibbens declined to provide specifics.
The president of CHI St. Alexius Health in Devils Lake, Andy Lankowicz, said the Devils Lake hospital currently has a “strong, positive margin.”
“If you’ve seen one critical-access hospital you’ve seen just one,” Lankowicz said. “Each critical-access hospital is so different from one another and we’re all in very different situations.”
In Grafton, Unity Medical Center CEO Alan O’Neil said his hospital has been operating in the black for about five years, but it hasn’t always been that way.
“We’re just covering our operating costs,” O’Neil said. “We’ve had to think in another dimension, in terms of applying aggressively for grants and getting help from the community.”
Northwood’s hospital is one of those operating in the red, Antonson said.
“We had an operating loss of about 5 percent,” Antonson said. “Historically, that’s a little worse than we’ve typically done.”
That’s not including grants and gifts received in 2018, which put the hospital at just above even, Antonson said.
Nationally, 40% of CAHs operate at a loss. In North Dakota, 47% of CAHs operate at a loss, Gibbens said.
North Dakota was below the national rate for return on equity at 4.46%. Return on equity measures profitability. The national rate is 5.32%; Minnesota’s rate was 6.31%.
Another key category, days cash on hand, refers to the number of days an organization could operate if no cash flowed in. The higher the number of days, the better outlook for the organization.
North Dakota’s state rate is 52.27 days, which is under the national rate at 77.72 days. Minnesota’s rate is 120.12 days. The lowest was Alabama, with only 1.26 days, Gibbens said.
Medicaid, outdated facilities
Gibbens said rural hospitals have closed in states that haven’t expanded Medicaid.
“Medicaid expansion has put about $25 million a year into rural hospitals, which maybe doesn’t sound like a lot of money, but for a rural hospital, it is big,” Gibbens said.
An issue rural hospitals face is the “one size fits all system for health care,” Antonson said.
“Our payment system and our regulatory system help create duplication. They create some inefficiencies and really significant overhead,” Antonson said. “On the regulatory side, we all want good, safe health care services, but the ‘one size fits all’ model creates a lot of inefficiencies.”
Antonson said the facility he and his team operate in Northwood is dated and more suitable for inpatient care than outpatient care, which creates an issue with the majority of outpatient services the hospital offers.
Many hospitals were built in the post-World War II era to provide a large volume of inpatient care no longer needed, the Navigant study states. According to the study, the average rural hospital has 50 beds and 321 employees but only an average of seven patients per day.
“We are financially constrained; we can’t just replace the building,” Antonson said.
Northwood Deaconess Health Center has 12 rooms in its hospital and an average of four patients per day, according to Antonson.
The hospital has hired Minneaoplis-based consulting firm Wipfli to do a market study on what the hospital can afford to do to make the facility more efficient.
“Care has changed,” Antonson said. “This has created a lot of pressure on us financially to replace or retrofit facilities built for a different era of health care.”
In Grafton, Unity Medical Center is gearing up for an addition to the facility. It will take 16 months to build, O’Neil said. The hospital was built in 1956.
“But thanks to the community and some of the grant opportunities we’ve received, we do keep expanding and enhancing our technology,” O’Neil said.
Unity Medical Center remodeled its clinic in 2017, giving it a “bull pen,” which puts all nurses and providers in one central area with patient rooms around it. This is a more efficient set-up and something Antonson said his facility in Northwood would be interested in doing after the market study.
‘One resignation away from a crisis’
The study also states a loss of agricultural and manufacturing jobs in many of these communities has led to financial struggle.
“That’s one of the biggest struggles we have — people,” Antonson said.
Antonson said rural towns are seeing a decline in population, and that makes it challenging to find employees who want to work in health care.
“When I started here, we were looked at as an employer of choice,” Antonson said. “Today, we’re finding we don’t have that benefit like we used to. Certainly, we pay more than the local hardware store, but we don’t have the benefits we used to offer.”
In the radiology department, the hospital is “one resignation away from a crisis,” Antonson said.
“When you have a department that’s staffed by three or four people and you have a resignation, all of a sudden you have a 30% vacancy rate,” Antonson said. “And finding that next replacement is getting harder and harder every day.”
Gibbens said there is maldistribution of the workforce in health care.
“North Dakota’s population is split evenly urban and rural. Primary care physicians, who are the backbone of rural health, roughly 70% of them are in urban areas and 30% are in rural areas,” Gibbens said.
Registered nurses are also split unevenly, Gibbens, with around a 70% to 65% split in urban and rural areas.
“Because of this, primary care is often done through physicians assistants in rural communities,” Gibbens said.
Antonson said his hospital is trying to add services to the community.
For example, Northwood Deaconess Health Center has added a significant amount of physical therapy and occupational therapy for the pediatric population. The hospital also has increased niche services, such as therapy and helping children with learning disorders.
The hospital’s pediatric therapy program services clients within a 70-mile radius of Northwood, Antonson said. For other services, the hospital usually draws from about 15 miles away.
‘It would be devastating’
Antonson and Gibbens said a hospital in a small community is usually the No. 1 or 2 employer in the area. A rural hospital with a clinic accounts for 15% of the local economy.
“One physician can generate as much as $2 million for a community,” Gibbens said.
A typical rural hospital has an economic impact of between $6 million and $7 million on the local economy, Gibbens said.
“Closing a rural hospital would be just like closing a school or the local post office,” Lankowicz, the Devils Lake hospital president, said. “It would have just a huge impact.”
About 90% of CAHs own a clinic, Gibbens said. Thirty percent own a nursing home, 20% own an ambulance and 20% own assisted living facilities in the communities where they are based.
“If a rural hospital is in danger of closing, that community is likely going to lose a clinic or an ambulance,” Gibbens said.
Northwood Deaconess Health Center also owns a nursing home, assisted living facility and independent living apartments for seniors. The hospital owns and operates two ambulances.
Northwood residents can also use the fitness center in the hospital for a small fee, Antonson said.
“We are the largest employer in town; if we closed, it would be devastating to the town,” he said.