Achieving Financial Sustainability and Access in Rural Health Care Through Cooperative Efforts Among Existing Health Providers 

To many, the prominent attention given to critical access hospitals (CAHs) in rural areas implies that rural health care can be “transformed” by addressing only CAHs. New state efforts in response to Rural Health Transformation Program (RHTP) funding should examine collective solutions among all existing rural health care providers. This will create more wide reaching and sustainable solutions for rural populations. Specifically, states can establish Rural Regional Organizations for Cooperation (RROCs) to build more robust and sustainable health care solutions for rural areas.  

Different Types of Rural Providers Have Common Challenges  

The nation’s 1,377 CAHs represent 65% of rural hospitals but only 7.5% of health care facilities in rural areas (see Table). The remaining 92.5% of rural health care programs are represented by other facilities substantially funded by the federal government, including federally qualified health centers (FQHCs), rural health clinics, skilled nursing facilities located in rural areas, sole community hospitals, Medicare dependent hospitals, and rural emergency hospitals.  

Number of Rural Health Facilities by Type

Providers in Shared Rural Geography Have Common Challenges  

Different categories of rural health care programs and facilities operate independently, with separate governance and leadership. However, most share common characteristics and circumstances:  

1. Lower commercial payments for patient services than providers in urban areas  
2. High reliance on various forms of federal funding, e.g., Medicare, Medicaid, other federal agency programs and grants 
3. Small operating budgets  
4. Challenges related to small economies of scale and lack of leverage for pricing with vendors 
5. Perpetually weak balance sheets which compromise their access to commercial financing and limit their ability to meet capital needs   
6. Prescribed, independent Boards focused singularly on the performance of one individual facility  
7. Higher costs to recruit and retain providers in rural areas 

In addition, rural facilities often compete to serve a share of the needs for the same population — a challenge that has gotten tougher in recent years. For example, the elimination of certificate of need (CON) programs in many states has removed historical barriers to large clinical competitors, such as ambulatory surgery centers, insurance-owned physician organizations, and pharmacy providers of acute care.  

Finally, the demand for inpatient admissions in rural areas has declined. The rural population has receded over the last two decades. This loss is exacerbated by an industry-wide decrease in inpatient utilization rates, particularly for less complex diagnoses. This trend has reduced the use of all bedded facilities in rural areas, moving patient care demand to outpatient programs and facilities.  

Rural Regional Organizations for Cooperation  

To support rural health more effectively and efficiently, the federal government and states should leverage existing program and facility investments. The addition of new funding from the Rural Health Transformation Program (RHTP) creates the opportunity to develop economic and strategic benefits for rural health care providers working together in RROC initiatives.  

RROCs can be statewide or cover a smaller region and number of facilities within a state. While RROC development in each state will be unique, common elements would include: 

1. Developing a plan to optimize existing investments and use RHT funds to support programs and facilities to care for a shared population. 
2. Identifying and addressing priorities in each rural geography including, at least, access to essential services, care coordination, and achievement of economies of scale. 
3. Identifying the most effective form of organization to execute and manage the plan. This may be common governance or a voluntary commitment of facilities to adopt shared responsibilities for executing a plan for unified management. 

State Offices of Rural Health are funded by the federal government in all 50 states. These offices can work in cooperation with the Medicare Rural Hospital Flexibility (FLEX) program to explore cooperative efforts supported by any state. Today few rural health organizations have extensive cooperative initiatives; there is great opportunity to expand this model. Existing examples include:  

• Rural Wisconsin Health Cooperative (RWHC): One of the oldest and most successful rural health networks. RWHC provides member hospitals with shared services, collective group purchasing, shared recruitment and clinical quality initiatives. It has achieved economies of scale to reduce cost for each hospital. It improves patient care standards for all member providers. 

• Sakakawea Medical Center: Beginning in 2011 Coal Country Community Health Center (a FQHC) and Sakakawea Medical Center (a CAH) in North Dakota began a deliberative process to work together. They assessed community need of a population of 15,000, determined the means to manage inherent conflicts and barriers, and set out to reduce redundancy. They established a joint mission and strategic plan, appointed a shared CEO reporting to the two independent Boards, and have established partnerships with SNFs, District Health Units, and the area ambulance services. They optimized the organization of primary care and ancillary services, and rationalized relationships with tertiary care providers. The organization engaged in a purposeful process to reduce redundancy, share staffing, recruitment and retention programs, and created an integrated network to serve the population and insurers. The results of their efforts have created substantial advances in operating performance and dramatic improvement in their balance sheets. 
  
• Wilderness Health (WH): A collaborative of individual providers working to improve health care in Northeast Minnesota and Northwest Wisconsin. It has pursued a series of economic and clinical initiatives among providers who are not commonly owned. WH includes Aspirus, St. Luke’s Hospital, four critical access hospitals, a small district hospital, a government-controlled hospital, and a private multispecialty clinic. Wilderness Health has established shared savings initiatives among the members, continuous improvements in operating standards across all sites, data integration, and an accountable care organization. 
  
• Western Healthcare Alliance (WHA): More than 30 years ago, WHA was formed to serve rural health care providers in Colorado. The organization has established certain in-house services (leadership training, internal consulting, and peer networks). It established a clinically and financially integrated network. WHA acquired a collection agency and offers accounts receivable management services. It has negotiated discounts with a regional group purchasing organization and for a broad range of clinical and professional services. 

Recommended Policy Actions  

Federal and state action can support the development of RROCs. The federal government can: 

1. Provide transformation funding to support planning and transition of facilities, programs, and services within any RROC.  
2. Revise the rule that enables Medicare Advantage programs to pay CAHs less than CMS- determined costs for services, so both the CAHs and RROCs receive appropriate compensation. 
3. Enable economic and governance coordination and collaboration among the various federally funded programs and services in rural areas.  

At the same time, state legislatures and regulators can: 

1. Establish policies and funding to enable creation of RROCs that align with individual state policies and rural health needs. State regulatory and planning agencies have an opportunity to prescribe a framework for creating and implementing RROCs, including timeframes for action.  
2. Clarify state CON and anti-trust laws or regulations to allow for the existence and possible expansion of RROCs with clearly established guidance. For example, recent Colorado legislation establishes a framework for independent hospital collaboration and protection from antitrust scrutiny with a pre-approval process by state agencies. 

A Long-Term Solution 

Current investments in rural health and RHTP funding present a unique opportunity to create durable, long-term solutions to meet the health needs of people who live in rural areas. The federal and state governments should encourage comprehensive planning in rural communities that address access to care while encouraging operational efficiencies across multiple health care facilities. As states are implementing federal rural health transformation funding, they should consider developing RROCs, which can be designed to improve population health while lowering the total cost of care.