How Regional Partnerships Bolster Rural Hospitals

The article is part of a partnership between the Commonwealth Fund and the Bassett Research Institute in Cooperstown, N.Y., to explore innovative approaches to the health care challenges facing rural communities across the United States.

Introduction

Since 2005, more than 190 rural hospitals have closed across the U.S., many because they lose money on the services they provide. Of those that remain, 600 — nearly one of three — are in danger of closing. While pandemic relief funds offered some hospitals a lifeline, those funds are going away, and many rural providers are once again on shaky ground.

The federal government and some researchers have suggested that partnerships among rural providers could make them stronger, producing efficiencies and generating solutions to shared problems. Some have also suggested that partnerships can shore up rural providers’ finances by enabling them to participate in value-based payment arrangements that offer a share of the savings that result from reducing medical spending.

Since 1998, the federal Health Resources and Services Administration (HRSA) has offered grants to help rural hospitals and health clinics form partnerships, sometimes involving academic or nonprofit partners. “The goal is to develop rural health networks that expand access to care, increase the use of health information technology, explore alternative health care delivery models, and continue to achieve quality health care across the continuum of care — from prevention and wellness to acute and long-term care,” says Kathryn Umali, division director in the Federal Office of Rural Health Policy, part of HRSA.

We examined how critical access hospitals (CAHs) — facilities with 25 or fewer beds located more than 35 miles from another hospital — and other rural providers have partnered to overcome their challenges. There are at least 40 such regional partnerships around the country. While some hospitals in these partnerships are part of larger health systems, most are independent.

Sharing Staff and Expertise

Recruiting and retaining physicians to rural hospitals has been a perennial challenge despite programs that offer loan forgiveness and other incentives for people to practice in rural areas. During the pandemic, staffing shortages extended to new groups, including lab technicians and nurses.

To fill the nursing gap, the Eastern Plains Healthcare Consortium, which includes 10 hospitals east of the Colorado Rockies, created a staff share program. Nurses from member hospitals sign up if they are willing to work extra shifts at other member hospitals, and they receive grant funds to offset their travel costs. Members of the Illinois Critical Access Hospital Network (ICAHN), which includes 58 CAHs, have also formed alliances to share staff, including orthopedists and other specialists who aren’t needed full time.

The Louisiana Independent Hospital Network Coalition formed in 2019, shortly before the next year’s Mardi Gras festival led to one of the worst early outbreaks of COVID-19. The six founding members banded together to share rapidly evolving protocols, scarce supplies, and, eventually, vaccines. The success of their approach led other hospitals to join. The coalition now has 26 members, mostly critical access hospitals. It brings like staff together from different hospitals — pharmacists, information technology professionals, and care coordinators — to share best practices. The network’s critical access and tertiary hospitals jointly credential providers so they can work in one another’s facilities, and they’ve granted one another access to their electronic medical record systems, enabling them to coordinate the care of patients who are referred back and forth.

Where distance makes sharing staff impractical, technology has helped. Wilderness Health, a partnership of nine hospitals in sparsely populated areas of northeastern Minnesota and northwestern Wisconsin, is piloting a telemedicine service funded in part through a HRSA grant. It gives primary care providers in members’ rural clinics on-demand access to independent mental health professionals located throughout Minnesota. The professionals evaluate patients for anxiety or attention deficit hyperactivity disorder to alleviate long delays in testing for those conditions. Recently, the Louisiana Independent Hospital Network Coalition began piloting a telemedicine service for rural providers caring for respiratory patients in intensive care units, enabling them to consult virtually with an independent pulmonology group.

Through partnership, rural health systems also gain access to quality improvement expertise, enabling them to benchmark their performance against peers. Without access to data from peers, “they don't know what good is for rural,” says Elya Prystowsky, Ph.D., executive director of the Rural Collaborative, which includes 24 of Washington State’s rural hospitals. There aren’t many public databases of rural providers’ performance. Because of low volume, a third of rural hospitals have no quality ratings on the federal Hospital Quality Star Rating system, for example.

Each year, the Rural Collaborative selects two measures for which members share data and set goals for improvement. Recently, this process revealed that one of the member hospitals had much higher rates of colorectal cancer screening than the others. That hospital’s staff explained how they did it and shared their workflows, staffing charts, and other tools they developed after a physician who had worked at the hospital for 30 years died from colorectal cancer. In the six months after this presentation, half of the hospitals reporting data saw increases in colorectal cancer screening rates.

Pursuing More Favorable Contracts with Payers

With a lower volume of patients, rural hospitals can be at a disadvantage when negotiating with vendors and payers. The Louisiana Independent Hospital Network Coalition formed a group purchasing organization to secure better rates for members, negotiating the purchase of food services, laundry, radiology equipment, and other services and supplies.

Several of the rural partnerships have tried to negotiate better deals within the constraints of federal and state antitrust laws that bar independent hospitals from comparing information about what they’re paid by insurers and other forms of collaboration that could be construed as efforts to hinder competition.

Hospitals in some states have more flexibility than others. Washington State’s public hospital districts, created in 1945 to expand access to care in rural areas, allow members of the Rural Collaborative to work together in certain ways, including by forming agreements to better serve patients. “It’s phenomenally helpful,” Prystowsky says. Her members can also jointly contract with health plans, helping them negotiate better terms and stay on top of changes. “It takes a lot of time and skill for each hospital to carefully read payer contracts,” she says. “We’re able to centralize that work. When a payer changes a policy, we let all our members know right away and can swiftly advocate for appropriate changes.”

The Rural Wisconsin Health Cooperative took another approach. In 1996, it obtained a “business review letter” from the U.S. Department of Justice that allows members to work together on health insurance contracts. This means that staff of the cooperative can, for example, review and help negotiate language in managed care contracts on behalf of its 44 members and offer consultation on how members are reimbursed for services such as swing beds, used for patients needing rehabilitation. “We can do things that add substantial value for our members, short of sharing hospital-specific reimbursement or organizing a boycott,” says Tim Size, CEO.

Participating in Value-Based Payment Arrangements

The collaboratives can make it easier for rural hospitals to participate in accountable care organizations (ACOs) or other value-based arrangements that enable providers to share in the savings that result from improving care for a defined set of patients. Such arrangements can be fraught for rural providers, given their low volume: a handful of catastrophic cases can not only negate any savings, but incur losses for the ACO. By banding together with other hospitals, rural hospitals gain sufficient patient volume to minimize that risk. Joining together also gives rural providers access to performance benchmarks and guidance on ways to improve.

In Minnesota, Wilderness Health formed an ACO in 2015 with the state’s Medicaid agency, which gave hospitals access to data to see “gaps in care and who’s using the emergency department for primary care,” says executive director Cassandra Beardsley. “We used that information to build our care coordination approaches,” she says.

The initial contract called for member hospitals to receive shared savings or incur losses based on their ability to meet quality benchmarks and control costs. Although the ACO achieved savings in its third year, generating revenue that supplemented fee-for-service payments, members asked the state to replace the shared savings and losses approach with a per member per month amount that would be added to fee-for-service payments. “Without that, it’s hard to make sure you’ve got resources for care coordination,” says Beardsley. The per member per month fees, totaling more than $1.8 million over the past four years, are adjusted based on patients’ health and social risks. Wilderness Health has used the funds to hire a care navigator that works with member hospitals, and individual hospitals have hired care coordinators, clinical pharmacists, occupational therapists, and other staff to help patients manage their chronic conditions.

In 2015, 20 members of the Illinois Critical Access Hospital Network formed an ACO, the Illinois Rural Community Care Organization, to join the Medicare Shared Savings Program. In 2017, the ACO signed a contract with Blue Cross Blue Shield of Illinois to manage commercially insured patients, earning $4.4 million in shared savings in 2019 and 2020.

In 2021, 18 hospitals in the Illinois ACO launched a venture with the managed care company Centene to coordinate care for Medicare Advantage patients. Centene brings financing and data analytics to the partnership, while the local hospitals work to create “stickiness,” that is, to build long-term relationships with patients so they stay in their communities for care. “Patients must go to an urban center of excellence for some of the things they need,” says Trina Casner, CEO of Illinois’ Pana Community Hospital and chair of the board of the ACO. “But we are working on finding the right support to help them stay local, which is not only beneficial to them, but also to the local providers.”

Promoting Community Development

Ultimately, rural hospitals are only as strong as their communities. When hospitals close, it’s often after years of rising unemployment rates, declining per capita incomes, and depressed housing markets in the surrounding counties. And their closures often worsen economic conditions as jobs leave the community.

The Rural Wisconsin Health Cooperative recently launched an economic development program to offer technical assistance to members about ways to invest their community benefit dollars and other resources to promote affordable access to housing, childcare, broadband, and other infrastructure. “Ten years ago, we needed jobs in rural Wisconsin,” says Marie Barry, the cooperative’s director of community economic development. “Today, we have jobs but we don’t have people. We don’t have places for them to live. We don’t have people to watch their children while they go to work.”

Members have had some success in building affordable internet access, something one of four rural residents lacked as of 2021. Several federal programs offer grants to help rural communities develop broadband, but these communities may not have capacity to apply for them. “One of our small rural counties just hired its first county administrator,” says Barry. “Prior to that they’d had a county board with part-time members who then had to go back to being farmers or bankers or nurses. People from other areas of the country aren’t always aware of this lack of administrative capacity in rural communities.”

To help, one of the Wisconsin cooperative’s member hospitals dispatched its chief information officer to join a countywide task force that secured $4 million in funds for broadband. In other parts of the state, hospitals joined with schools and county governments to fund an angel account that pays for low-income residents to have Starlink broadband, which relies on low-orbit satellites to provide access in communities that lack internet towers or fiber optic cables.

Coop members are also working to increase access to affordable housing in their communities, using community benefit dollars and mechanisms like land trusts to finance new developments. The CEO of Door County Medical Center became interested in this issue after learning some of his own staff couldn’t find housing: one of his X-ray technicians was living in a storage shed, and a nurse was living in the back room of a yoga studio. Among other efforts, Door County Medical Center helped commission a market study to identify the housing gaps in the area. The CEO has also voiced support for a new, multifamily housing development and connected developers to local investors.

Lessons

Regional health care partnerships aren’t a panacea to the many problems facing rural providers. For example, while they’ve often been able to share staff, they’ve had little success in helping hospitals recruit new staff — a problem likely to get worse with the looming retirement of baby-boomer clinicians. Still, by joining together, members have been able to secure grant dollars, pilot local solutions, and dip their toes into value-based payment arrangements. Their experiences point to policy changes that could strengthen rural providers.

Medicaid expansion and other supportive state policies. While rural hospitals in many southern states have closed, Louisiana has seen only two hospitals close since 2005. The state’s decision to expand Medicaid eligibility under the Affordable Care Act has likely helped, reducing the burden of providing uncompensated care to uninsured patients. Louisiana’s Rural Hospital Preservation Act has also increased Medicaid rates. Leaders have prioritized rural health care, according to Canning: “Our state government is focused on not letting rural hospitals close.”

Giving rural hospitals flexibility to work together. If more states created protections like those in Washington State, more rural hospitals could work together to negotiate better contracts with payers. The protections would need to be set up in ways to prevent hospitals from engaging in anticompetitive behavior.

Policies to encourage hospitals’ investments in rural communities. Critical access hospitals have a financial disincentive for investing in certain types of programs that benefit their communities, like Meals on Wheels programs or childcare, because this requires allocating some of their overhead costs to these programs even when they do not need much administrative support. “Doing so can lead to a loss of reimbursement for hospitals since hospitals are paid by Medicare and Medicaid based on their costs of providing clinical care,” says Barry of the Rural Wisconsin Health Cooperative. “This can deter hospitals from taking part in nonclinical programs that benefit their communities.”

Value-based payment arrangements that make sense for rural providers. Research suggests that rural hospitals’ participation in ACOs that involve shared savings from fee-for-service payments has not increased their operating margins. Others have pointed out that small rural hospitals with low patient volume are unlikely to reap gains from these contracts because there are few opportunities to generate savings. “It’s like trying to squeeze blood from a turnip,” says Lauren Hughes, M.D., M.P.H., M.Sc., associate professor of family medicine and state policy director of the Farley Health Policy Center at the University of Colorado Anschutz Medical Campus. Hughes notes that rural providers would benefit from population-based payments that provide them with predictable revenue streams and flexibility to care for their patients.

Harold Miller of the Center for Healthcare Quality and Payment Reform argues that rural providers need “standby capacity payments,” that is, monthly fees per patient to sustain emergency care and other essential services regardless of how many services patients receive. Such payments could also enable rural providers to shift away from inpatient care and planned procedures, where demand is low, to offer chronic care management, home-based care, and other services that could benefit their sicker and older patients.

“Providing care in rural America is different than providing care in urban America,” says Casner of Illinois’ rural ACO. “We're the bread-and-butter stuff that most people will need at some point in their lifetime.”