The $50 billion Rural Health Transformation Program arrived last year as a federal commitment to the communities most likely to lose access to care under HR-1’s Medicaid cuts. Rural health executives across the country have questioned the program’s structure, pointing to a framework in which states control the money, eligible uses are tightly constrained and there is no guarantee funds flow to providers at all.
JJ Hodshire, president and CEO of Hillsdale (Mich.) Hospital, is deeply skeptical of the program’s effectiveness and ability to support hospitals like his.
“There is no hope in the rural health transformation funds. There’s none,” Mr. Hodshire said in a recent episode of the “Becker’s Healthcare Podcast.” “The money is going to create nothing more than legacy costs with programs that are not going to be effective for communities like Hillsdale.”
HR-1 will eliminate Michigan’s average commercial rate uplift for Medicaid, a reimbursement mechanism that brought state Medicaid payments closer to cost. For Hillsdale Hospital, where roughly 70% of the payer mix is Medicare and Medicaid, the stakes are real.
“The impact to my hospital is $6 million annually that we will lose as a result of this,” Mr. Hodshire said. “That’s the difference between profitability and non-profitability. It’s the difference between providing benefits to the community, community engagement and community support, and having your hospital doors open.”
Michigan received approximately $173 million in the first round of transformation fund awards, part of a $50 billion program distributed to all 50 states — a figure that amounts to very little once divided among the hospitals that qualify, Mr. Hodshire said. More critically, the funds cannot be applied to operating losses; they must fund programs built around parameters set at the state level.
“It can’t be used to offset any type of financial losses,” Mr. Hodshire said. “It has to be used to create programs and parameters that have been established by bureaucrats in each respective state.”
Mr. Hodshire is not the only rural leader who has challenged the program’s adequacy. But where others have pressed for better implementation or more flexible use guidelines, he is staying close to the hospital’s independent roots.
“We have decent cash on hand right now that we’re going to turn around,” Mr. Hodshire said. “I’ve already shared this with my board and my senior leadership team. We’re going to spend some of that money. And it’s a gamble because we’re going to be going into areas that rural health has traditionally not gone into.”
The investments under consideration — an oncology and urology partnership, a potential cardiac catheterization laboratory — are not typical territory for a 100-bed independent hospital. Mr. Hodshire frames them as a deliberate effort to keep patients from driving 40 to 60 miles to larger systems for care they could access locally. He needs a positive margin to fund growth and expand access to care. Additionally, as nearby facilities close, those patients need somewhere to go.
“Just four weeks ago, a hospital forty minutes away from me just shuttered their doors completely,” Mr. Hodshire said. “Sturgis Hospital closed their doors; shut the lights off on a Friday afternoon. Done.”
More than 730 rural hospitals are currently at risk of closing nationally, with half facing immediate risk, according to analysis from the Center for Healthcare Quality and Payment Reform. Mr. Hodshire sees the closures as inseparable from the policy decisions driving them and the community consequences that follow: lost employment, diminished economic activity and patients without a nearby option when they need care.
His growth strategy is also a deliberate shift in how the hospital thinks about where the most expensive care happens — and how to move it.
“The most expensive place in healthcare today is the walls of my hospital,” Mr. Hodshire said. “You don’t have a lot of CEOs today talking about how do I keep people out of my hospital.”
But that’s what needs to happen. The answer is expanding outward through mobile health units, community-based pain management and hospital-at-home programs so the hospital can be reserved for the most acute patients. The philosophy behind specialty service growth is similar. If patients can access oncology, urology or cardiac care in Hillsdale rather than an hour away, they stay in the local system and drive additional revenue
But adding capacity and services isn’t easy. Entry-level clinical staff — medical assistants, medical office receptionists — have become the bottleneck between recruiting a specialist and actually opening a clinic.
“I have found the surgeon but have not been able to bring the clinic online because I don’t have the entry level staff and the frontline staff to be able to get that done in a timely manner,” he said.
HR-1’s Medicaid cuts won’t be easily reversed and the Rural Health Transformation Fund won’t cover the losses. Hospitals need foundational investments over time instead of one-time surges of cash.
“When you strip out of hospitals like Hillsdale $6 million from very bad legislation that was enacted, we are now on the receiving end of that with very little representation, very little recourse, and we have to make it work,” he said. “That is what is most concerning right now as we look at the federal landscape. That’s a challenge. The federal government is going to say it’s up to the state to make the hospital funding whole and come up with the difference in the average commercial rate. You have states across the union who aren’t doing very well economically. They see losses from their communities. Individuals aren’t coming back after graduation and staging in the states. The states aren’t in a position to cover the difference, and yet the safety net hospitals in our communities will dry up, which means access to care is strangulated and quality of care is diminished.”
There is an opening for the next generation of rural healthcare leaders to take charge and innovate. Rural hospitals need technology and advanced tools to diagnose and treat patients within their communities in addition to expanding services. Mr. Hodshire is considering non-traditional partnerships and strengthening oncology and urology in the coming years.
“I’m optimistic about what the future holds for our growth strategy and our strategic plan,” he said.
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