COOK— Across the country, nearly a quarter of rural, small town hospitals are at high risk of closing in the near future due to financial concerns, according to a study published earlier this year …
COOK— Across the country, nearly a quarter of rural, small town hospitals are at high risk of closing in the near future due to financial concerns, according to a study published earlier this year by Navigant, a national health care consulting firm. Here in Minnesota, the study found that 19 hospitals, including 12 that are considered essential, were at high risk of closure.
For hospitals, particularly independent hospitals like Cook’s, located in towns of under 1,000, the risks are that much higher, as limited patient loads and difficulty recruiting staff pose the biggest financial hurdles for small facilities.
When a rural hospital locks its doors for the last time, the ripple effects can reach far beyond the impact to area patients. For many small communities, like Cook, the local hospital is often the community’s largest employer, providing middle-class wages and benefits that flow throughout the local economy.
An economic study, produced for the Cook Hospital in late 2015, shows just what a significant economic factor healthcare has become for this small community— with a total annual economic impact of $18.5 million. With 104 employees, the hospital injects about $6.7 million in direct payroll into the community each year. As employees spend those wages in the area economy, they support 76 additional jobs in the community, creating another $2.7 million in additional payroll income. Additional non-payroll spending by the hospital, totaling $5.7 million, generates additional spending of approximately $3.5 in other sectors of the economy. And those numbers do not include the employment, payroll, and additional economic impact from the Scenic Rivers Health Services Clinic located adjacent to the hospital. Combined, the two facilities have made Cook a remarkably vibrant health care center for the area’s often-isolated rural population
With expenditures of about $13 million a year, the Cook Hospital likely would not survive were it not for factors such as its Critical Access designation, which provides the hospital enhanced payments from Medicare. Yet, perhaps the biggest factor that allows the Cook Hospital to remain financially viable is the hospital district levy, which has generated $1.39 million annually in recent years to support capital improvements and operating costs for both the hospital and the local ambulance services in Cook and Orr.
For the Cook Hospital, the levy is the difference between keeping the doors open and the lights on or closing the doors for good. “It’s critical,” said Cook Hospital Administrator Teresa Debevec. “Our CFO would certainly tell you it’s critical.”
The hospital district’s board of directors is set to decide this week whether to increase the levy for the first time in five years, to $1.49 million. That’s a seven-percent increase, not even enough to keep pace with the rate of inflation in the healthcare sector.
Even so, hospital board chair Liz Dahl said it’s not a decision the board takes lightly. “This is done with a heavy heart, but we don’t want to see our hospital close,” she said. “We have to stay up-to-date with the modern medical equipment and in a small hospital it takes time to recoup those investments because we don’t have the patient volume.”
The hospital levy, which directs more than half of its proceeds to capital improvements, has allowed the hospital to upgrade its facilities in order to stay competitive in the health care sector.
“It’s really been a big success story,” said Debevec. “The upkeep of our facility is so important.”
The bulk of the proposed levy increase for this year, however, is earmarked for operating expenses. A noticeable decline in the use of the hospital’s imaging equipment this year has contributed to a drop in revenues that’s beyond the hospital’s ability to comfortably cover through budget cuts, said Dahl. “We’ve been able to keep our belts tightened the last five years,” said Dahl, but she noted a number of developments that are affecting revenues, such as more aggressive efforts by Blue Cross to try to limit the use of some testing procedures to control outlays by the state’s largest private insurer. She said the hospital is also going to need to upgrade its medical records system, which could cost close to $1 million.
At the same time, the hospital is paying more for staffing these days, in large part due to the ongoing workforce shortage. At any one time, the hospital is likely to have between six and ten workers on the floor who are employed by private employment agencies, because the hospital can’t find qualified staff to hire. Dahl said those agency staff cost the hospital considerably more than hiring their own people, but without qualified applicants, the hospital has little choice.
The higher levy, if approved, will have a modest bite for taxpayers, notes Dahl. “I’ve been telling people it’s about ten bucks for every $100,000 in value on a homestead.”
Dahl said the impact to taxpayers in the district could be less if Greenwood Township, with its roughly $400 million in property value, were to join. “We’re carrying Greenwood township on our back,” said Dahl. “I know some people probably won’t be pleased to hear me say that.”
Greenwood residents have resisted requests from hospital officials in recent years to join the hospital district, out of concern that the property-rich community would wind up paying the bulk of the district’s levy. But Dahl said some Greenwood residents work at the hospital and many utilize the facility’s services on a regular basis. “We’re a regional hospital. If everyone shared the burden, it would be less for everyone.”