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There are dire predictions for the future of small community hospitals as healthcare/payment reform and deficit reduction plays out: many will be forced to close their doors.

USA Today recently chronicled the plight of Richland, GA, a community that saw it’s 25-bed hospital close in the spring of 2013.  Richland, a nub of a town with less than 2000 residents, probably lacked the population base to support a hospital given there was only one physician.  The mayor tried to find investors, but without a sufficient tax or population base, there was little hope.  That said, the fact remains — the nearest hospital is 40 miles away.

Some towns, anticipating the long-term cost and other challenges in providing healthcare, sought the support of regional healthcare systems or smaller investor-owned hospital corporations to ensure their hospitals survived.  The results have been mixed. Some have survived, some not.  Others have seen their hospitals passed around like an unwanted stepchild.  Promises made, promises forgotten.

The hospital in Terrell, Texas, a community of about 16,000 30 minutes from Dallas, is a prime example.  Since it was initially sold to American Medical International (now Tenet), the hospital has had at least 8 different owners since the early 1980s.  The most recent owner was Dr. Tariq Mahmood, a Pakistani physician who began practicing in Texas in 1978.  Dr. Mahmood was convicted in July of billing fraud.  His chief financial officer plead guilty to defrauding the federal government of $800,000 in meaningful use payments.

To be fair to those smaller hospital management companies and regional health systems that sought to support rural and smaller community hospitals, if a town doesn’t use the hospital, then it will close regardless of who owns and operates the facility.  On the other hand, the owners of these small hospitals have a special obligation to ensure they are delivering a service that is worthy of public trust.  That was not the case in Terrell, and in five other Texas communities where Dr. Mahmood owned hospitals.

If you are a community that can justify and want a hospital — based on population or geographic remoteness — then consider these points:

  1. No Easy Solution — Hospitals are expensive community assets but before you pull the plug and shut it down, there are dire consequences for long-term economic development.
  2. No Guarantees — Selling your hospital is no guarantee that you will have one available when you need it.  There are innumerable promoters and other sketchy hucksters that will promise what you want to hear.  They will keep their promises as long as it is in their best (read: financial) interest. Communities can’t sell and forget, taking the money and assuming the problem is solved. Community leaders have an obligation to promote and support the hospital and its physicians regardless of ownership.
  3. No Pot of Gold — Selling out does not mean you will end up with a new hospital.  Regardless of who operates the hospital, it must make economic sense.  There is never a pot of gold that will make everything OK.  If the new owners cannot recoup their investment, they will not invest in technology or facility improvements.  The naiveté of some community leaders when they did decide to sell their hospital is staggering.  Running a hospital requires discipline, hard choices and community support.  Abdicating that responsibility is not always the right solution.
  4. Left Holding the Bag — As healthcare reform continues, and as deficit reduction begins to further erode Medicare reimbursement, some communities who thought they had a permanent solution for their hospital are going to be surprised as management companies sell or close facilities to ensure they are meeting profit targets. In the case of not-for-profit health systems, it is more about suffering unsustainable losses that leads to closure.  Community Health Systems recently announced they were closing Dallas Regional Medical, known for years as Mesquite Community Hospital. There will be more. CHS and other investor-owned hospitals will not continue to operate hospitals that are not solidly profitable.  With declining Medicare/Medicaid reimbursement, coupled with the emphasis to reduce healthcare costs, these investor-owned companies will have trouble meeting Wall Street’s earning expectations.
  5. Hospital Tax Districts — States should give local communities — based on established geopolitical boundaries — the right to tax their citizens to support a hospital.  If the community decides not to tax themselves for a hospital, or if they will not support it with their donations and use, then that can best be described as a free market making a decision.  The hospital district option is one that has been successfully used in Texas.