No Margin For Error: Virginia’s Rural Hospitals Face Enormous Challenges

October 29, 2014

RICHMOND, VA – The Virginia Hospital & Healthcare Association (VHHA) today released a new report entitled “No Margin for Error: Virginia’s Rural Hospitals at a Crossroads.” The report documents the importance of Virginia’s 37 rural hospitals to their local communities and the challenges they face in today’s difficult operating and regulatory environment.

Speaking about the report, VHHA Board of Directors Chairman, John L. Fitzgerald, CEO of Inova Fair Oaks Hospital, said “Rural hospitals are the lifeblood of much of Virginia. They provide emergency medical care to those in need and preventative care that sustains communities. They also employ tens of thousands of Virginians and drive local economies. Unfortunately, by practically any measure, Virginia’s rural hospitals are under tremendous stress. The bottom line is that half of these hospitals are operating in the red, and some of them have been doing so for years. Our goal with this report is to highlight the unique challenges facing Virginia’s rural hospitals because even the slightest policy change can have dramatic effects on these hospitals and their services.”

“The future of Virginia’s rural communities is intertwined with their hospitals,” said VHHA President and CEO Sean T. Connaughton. “Virginia’s policy makers must coalesce around solutions that ensure a bright future for Virginia’s rural hospitals and rural Virginia itself.”

Key points outlined in the report include:

• In 82 percent of rural counties, health care is among the top five largest employers;
• Virginia’s rural hospitals are projected to undergo federal reimbursement and funding cuts of $183 million in fiscal years 2015 and 2016 alone;
• In 2012, seven of Virginia’s 37 rural hospitals had a negative net worth;
• During the same period, 20 rural hospitals had negative operating margins;
• Age-adjusted disease rates are notably higher in rural Virginia; and
• Nearly 80 percent of patients at rural hospitals are either uninsured or have publicly-funded healthcare benefits.

“Hospitals and the jobs they create are critical to our rural communities,” said Sean S. McMurray, CEO of Johnston Memorial Hospital. “Every job in one of our hospitals equates to two jobs elsewhere in the local economy. Losing practice areas or a rural hospital impacts jobs, hurts the health and wellbeing of local residents and significantly impacts a community’s ability to attract and retain other employers.”

Bill Flattery, Vice President of Carilion Clinic’s Western Region, said, “The larger social factors confronting much of rural Virginia also present unique challenges for rural hospitals. Most of our patients receive their health care through publicly funded programs that reimburse hospitals well below cost. Offering quality care at below cost is simply not sustainable over the long term.”

“In the past, Congress has attempted to address rural health challenges through targeted programs such Critical Access Hospitals, Low-Volume Hospitals and Medicare-Dependent Hospitals,” said David L. Brash, Wellmont Health System’s Senior Vice President for Business Development and Rural Strategy. “Unfortunately, funding for these and other programs are being reduced. Add to this cuts from implementation of the Affordable Care Act and cuts to Disproportionate Share Hospital funding, and our ability to provide comprehensive services to Virginia’s rural communities is becoming more difficult by the day.”

“Rural hospitals reflect rural Virginia,” said Mark Merrill, President and CEO of Valley Health. “If rural hospitals succeed, rural Virginia succeeds. If rural hospitals struggle, rural Virginia struggles. Let’s work together and succeed!”

“No Margin for Error: Virginia’s Rural Hospitals at a Crossroads” is the second in a series of reports aimed at informing the public and Virginia’s policy makers about hospitals and health systems and the unprecedented challenges they currently face.

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About VHHA: The Virginia Hospital & Healthcare Association is an alliance of 110 hospitals and 35 health delivery systems that develops and advocates for sound health care policy in the Commonwealth. Its vision is to achieve excellence in both health care and health.