How tweener hospitals can achieve financial stability

Tweener hospitals, defined by the American Hospital Association as those too large to be considered critical access hospitals and too small to be rural referral hospitals or thrive under the Medicare hospital prospective payment systems, are typically found in smaller communities.

[The following content is sponsored by Community Hospital Corporation.]

These hospitals fall in a gray area of hospital designations. Since they exceed the size restrictions for critical access hospitals, tweeners are ineligible for cost-plus-one-percent reimbursement for all Medicare and Medicaid services, and they can't sustain the financial burden of being paid based on diagnosis-related groups.

In a roundtable discussion, three healthcare executives discussed the challenges facing these hospitals and strategies available to achieve success as a hospital of this particular size.

Shane Kernell serves as CEO of St. Mark's Medical Center in La Grange, Texas. SMMC, which is licensed for 65 beds, sits 60 miles from Austin and 60 miles from the Katy/Houston market. Wilson Weber serves as executive vice president and COO of Plano, Texas-based Community Hospital Corporation, which owns, manages and consults with smaller market hospitals. And Mel McNea serves as CEO of Great Plains Health in North Platte, Neb. Great Plains Health is a 116-bed independent, community-owned regional medical center serving a 17-county region of Nebraska, northern Kansas and southern South Dakota. Great Plains is approximately 262 miles from Denver, the location of the closest Level I trauma center and closest pediatric surgeon, and about 100 miles from Kearney, Neb.

Question: What special circumstances do tweener hospitals face?

Shane Kernell: Certainly with the Patient Protection and Affordable Care Act, I believe tweener hospitals are not put into the same general considerations as urban hospitals. We received the Medicare reduction like all hospitals, but we didn't get the backfill of newly insured patients like urban hospitals have seen under the PPACA. That's one big problem. 

Other problems go in the same kind of line. You're a tweener hospital, usually for a reason, because geographically you're within an hour of a larger metropolitan area. That's been difficult for us specifically — how do you meet the expectations, not only of the community, but of employees?   

Wilson Weber: Part of their challenge is that they're not recognized as critical access hospitals, so they're not receiving cost-based reimbursement so they can have some economies of scale relative to their cost structure. It helps if they're geographically essential and happen to be in a provider network. If not, then they need to focus on providing high-quality care, having a well-connected medical staff, supportive community, as well as high patient satisfaction and quality scores.  

Mel McNea: Offering desired specialties in our community while maintaining volumes for profitability, sustainability and quality can be a challenge. Physicians need to maintain volumes to keep their skill sets at a level to maintain quality. Achieving economies of scale enough to absorb some of the financial risks associated with the prospective payment system is a special circumstance tweener hospitals face. Recruitment of professional staff can be a challenge too, especially in the IT and nursing areas. 

Q: What is available in terms of help and relief?

S.K.: As a tweener hospital, we have to bring specialties and primary care to our market… such as orthopedics, OB doctors, dermatology. A lot of tweener hospitals have some key challenges with that, space being one. Another is the available population — demand will always be there, but will there be enough to keep the specialist busy? We do a target assessment and bring in what we believe is necessary with the quantified data. And we do the same thing with our employees. You have to keep up with salary surveys, along with that market assessment on an annual basis.  

W.W.: There are firms like CHC that work with hospitals to provide resources and support to these types of facilities. The other opportunity we're seeing across the country is that some of the larger urban health systems are reaching out and establishing levels of clinical affiliation or quality relationships with some of these tweener hospitals, resulting in collaboration that positions both the larger and smaller hospital for future success.

M.M.: One of the things available to help us with relief is our community relationship. We have a strong relationship with our community college and an investment in the RN program. We're invested in making sure the college is successful, so it's a very collaborative effort. The medical community is united. We work together with our independent physicians and with community leaders to make sure we're always getting input on the services we provide. In addition, we have joint ventures with our physicians to ensure we're not duplicating services between their practices and the hospital. We have collaborative relationships with community hospitals around us, which create win-wins for both.

We stay current with best practices so our customers come to our institution for their healthcare needs. Management watches the market and how others are navigating, so we're always educating ourselves and looking for success stories. We also encourage a lot of innovation among our executive team and our employees. We put a lot of trust in our frontline employees to make decisions, and we've seen great success with their decision-making and passion for the organization.   

Q: How can tweeners navigate healthcare reform?

S.K.: I don't know the whole implication of what the PPACA is going to deliver to tweener hospitals, and rural hospitals as far as that goes, given the fact that it's purely a reduction in payment to us. So what do you do to navigate that? You right-size your expenses — as you should always do anyway — and do your market assessments to look for other key areas that add revenue streams, and maintain a high level of quality. A well developed, loyal medical staff is key as well. 

WW: If indeed the tweeners are geographically essential, obviously that helps. If there are some other competitive facilities in their immediate market, then obviously they need to focus on providing high-quality care. They need to have a medical staff that is very supportive and very well respected in their community and region. They also need to reach out to care facilities in the form of clinical affiliations and various support relationships with some of the larger urban care facilities.   

M.M.: Each of us within the healthcare organization has to rely on the education our professional organizations provide. We have to stay current with what is occurring legislatively and the impact changes would have on our ability to provide quality care. We have to dedicate resources in a number of different ways, whether it's time in webinars or educational opportunities…not only for our leadership but for our frontline employees. As healthcare professionals, we can't forget what we're here for, and that's to provide quality care and a positive patient experience.

Q: How are some tweeners responding to the healthcare environment with success?

S.K.: The ones responding with success are proactive. They're the ones putting together a business plan to include their board of directors. I think a lot of times business plans are done by the executive team, and it's not atypical for a rural hospital's business plan to be put together by one person. I think that's a thing of the past. To be successful, hospitals have to include their board of directors on the strategic planning committee. They have to involve some key members of the community. They have to go out and measure the community's needs.

W.W.: Obviously they need to be a well-operated facility. They need to have a cost structure that is as efficient as possible. They need to be very effective in their revenue cycle processes to assure that they're turning their accounts receivable into cash and again, focus on good solid quality patient and physician satisfaction.

M.M.: There is nervousness in the market, and right now a lot of independent hospitals are trying to align or join a system. I don't know if that's the right path. Here, what we're trying to do is continue to focus on providing good quality care, maintaining strong financials and working hard at maintaining a collaborative relationship with physicians in our community and region. We create collaboration with strategic planning, which is inclusive and tied to a financial plan. We have to evaluate technology and analyze how it will work best for us, and not invest in technology that will not create efficiencies or a return on investment.

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