Joining Forces: Rural Hospitals Look to Affiliations to Stay Afloat

Scratch the surface of a rural town and chances are the healthcare, employment, and community linchpin is the local hospital. However, a fundamental challenge causing many rural facilities to shut down is the lack of ready cash flow for new equipment, construction upgrades, or staff retention.

Yet some hospitals are refusing to close up shop so easily and, instead, are pursuing other ways of keeping their doors open. Affiliations with a larger and stronger healthcare system is one such option for accessing desperately needed deferred renovation funds and upgrades while still retaining a sense of community identity.

Doing the due diligence
Along with shared resources, access to better technologies, cash infusions, increased supply chain vendor efficiencies, and improved performance through clinical integration, affiliations often offer the chance to become the primary care outpost branch of a prestigious urban system. Most rural facilities would find these benefits difficult to turn down.

But there’s a price to pay. Large system affiliations mean the local hospital board is subsumed to the stronger hospital, with former board members relegated to advisory roles with no decision-making authority. Hospital executives must ask themselves if relinquishing control after years of acting independently is worth the benefits of keeping a facility open.

Glossing over the required due diligence before signing an agreement is another danger. Are the systems technologically compatible? If one facility is currently operating on the mandated ICD-10 Procedure Coding System while the other hasn’t yet converted, billing will inevitably snarl. What about supply chain and vendor resource-sharing issues? What are the purchasing arrangements for each hospital? Are the radiological injectables or sutures in the operating rooms the same for both facilities?

Understanding renovation needs
Similar challenges apply to proposed construction upgrades. Are there any existing structural gaps between the two facilities? What, if anything, should be invested to bring the rural building current?

“Rural hospitals are frequently underinvested in physical assets and typically operate within older facilities where no significant upgrades have been made,” says Brian Haapala, managing director at Stroudwater Associates. “It’s in the best interest of the urban center to upgrade because they don’t want to put their name on [an affiliated site] unless it’s perceived as a quality organization.” As a result, urban systems will often modernize rural infrastructures for increased care delivery efficiencies by replacing CT scanners, building out new lab offices, or even expanding certain buildings.

The same applies to smaller rural facilities affiliating with larger, stronger rural facilities. Construction renovations have “universally been seen as benefits to the local organization and have thus reinforced the fact that the affiliation was an investment in the local hospital,” says William F. Streck, MD, president of Bassett Healthcare Network in Cooperstown, New York, which has pursued affiliation partnerships since 1984. “These [changes] have often resulted in smaller hospitals, but quite improved ones in terms of facilities. Since these changes have been discussed and approved by the local hospital boards, there is typically strong local understanding and support.”

Almost 30 years and several affiliation agreements later, the Bassett Healthcare Network currently offers care and services within six corporately affiliated hospitals, nursing facilities, health centers, and health partners in related fields. More specifically, the network is a rural healthcare anchor for people living in a 5,600-square-mile region in upstate New York.