6 Strategies for Community Hospitals to Remain Viable

For a new research brief, the Center for Studying Health System Change tracked five community hospitals across the country and found six strategies that helped those organizations not only survive, but also grow, in the past 15 years.

The organization studied 12 communities total from 1996 onward, finding five that maintained a local public hospital that provided the bulk of safety-net services. Those hospitals/systems are: Cambridge Health Alliance in Boston, MetroHealth System in Cleveland, Wishard Health Services in Indianapolis, Jackson Health System in Miami and Maricopa Integrated Health Services in Phoenix.

While strategies depended on hospitals' market conditions, the center said the lessons learned by these five organizations should prove useful to other public hospitals.

1. Establish independent governance structures. Although they remain publicly owned, four of the five hospitals implemented a governance structure removed from local government. An independent board can provide more flexibility when making decisions about cost reduction or strategy that may be unpopular with the community, but are best for the hospital's long-term viability. For hospitals with more independent governance structures, there is generally less political influence over labor decisions, such as hiring, layoffs, benefits, salaries and raises.

2. Secure funding from predictable and local sources. The amount of local spending for community hospitals varies and does not offer full support for charity care and other uncompensated costs, which have been rising. For example, annual local funding ranges from about $6 million for Cambridge Health to $330 million for Jackson — 2 percent to 28 percent of respective total net revenues. Also, public hospitals provide enough charity care to the community to reduce pressure on nearby private hospitals. As a result, private hospitals often support the public hospitals' receipt of public funding, but the level of support can fluctuate.

3. Shore up Medicaid revenues. Medicaid is the largest source of funding for safety-net hospitals across the country, representing 35 percent of total net revenues on average. Medicaid inpatient discharges at each of the five hospitals in the study met or exceeded the national average, which is 36 percent of total discharges. Many of the public hospitals have benefited from new arrangements, including upper payment limit provisions and/or Medicaid waivers, according to the brief.

4. Pay more attention to revenue collection. Public hospitals have become more organized and assertive in their collection efforts throughout the past 15 years. Wishard, for instance, established a system where patients who paid on time received a discount. The hospital also charged a fee for emergency visits to encourage uninsured patients to receive primary care.

5. Attract commercially insured patients. Privately insured patients comprised less than 20 percent of the five hospitals' inpatient discharges. To attract more of these patients, the five hospitals have worked to demonstrate improved efficiency and quality of care. Each hospital also formed affiliations with medical schools, which made innovative technology and prominent physicians more available.

6. Expand access to community-based primary care. The five hospitals expanded their access to primary care services in the past 15 years, especially through clinics in low-income neighborhoods. Improved access to timely care can prevent low-income patients from developing more serious health problems and reduce their use of emergency and inpatient care. Expanding primary care capacity is also foundational in healthcare reform, as more primary care physicians likely will be needed to serve more insured people.

More Articles on Community Hospitals:

Charity Care and Property Taxes: Why They Are Now Inseparable
3 Characteristics of Successful Community Hospitals
To Be or Not To Be Independent: 5 Considerations for Community Hospitals

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