THE BANKRUPTCY OF for-profit Steward Health Care, in which six hospitals were sold and two others closed permanently, has left a deep scar across the Massachusetts health care sector. Will it ever truly heal?
The Steward crisis has left many Massachusetts residents with the belief that when a hospital enters bankruptcy, it is never to emerge again. Heywood Healthcare – the nonprofit community hospital and health care system that I lead, comprised of the community hospital in Gardner, a critical access hospital in Athol, and a medical group – is proof that this doesn’t have to be the case. Hospitals can enter bankruptcy financially overwhelmed and emerge in better condition.
Long-term sustainability of this sector, however, will be elusive if the dynamics of our health care system do not change. In particular, Medicare and Medicaid rates for hospitals must be increased to bridge the yawning gap between the rates paid by commercial insurers and public insurers that cover patients who are low-income, elderly, or have a disability – or all three.
Community hospitals also need government help in covering costly electronic medical record technology, perhaps through an enterprise license funded by the state that would ensure full “interoperability” – so that medical records could be shared among hospitals when patients get some care at a community hospital and specialty care at an academic medical center. We also need preservation of the federal 340B drug pricing program, which protects hospitals and patients from high prescription drug costs and is vital for safety net hospitals.
What is the nature of the problems facing community hospitals?
Medicare reimbursement continues to decrease for all physician services, including those provided in hospitals, while Medicaid reimbursement remains too low. Commercial insurers pay better rates than the public payors; when public insurers cover disproportionally more patients than commercial insurers, the revenue coming into the health system is significantly decreased. This is the case with safety net community hospitals, such as Heywood, where we serve a higher percentage of people on lower-paying public insurance.
On the expense side, community hospitals face additional obstacles. In exurban or rural areas, they have to pay clinicians more than urban or suburban hospitals to attract professionals to these more remote areas. Physicians at community hospitals have less “bench depth,” meaning they must do more and carry greater responsibility, as well as deal with much more on-call time.
Due to their size, community hospitals also have less bargaining power and frequently pay more for supplies and equipment than larger systems. Many technological enhancements, such as remote patient monitoring systems that detect high blood pressure in maternity patients, are very expensive and can generally only be funded through grant programs. Innovative “hospital at home” services that provide hospital-level care, but in the comfort of one’s home, are impractical with a low density of rural patients that require excessive travel for visits by a care team. Best-in-class electronic medical record systems that maximize efficiency are cost-prohibitive for community hospitals.
So, community hospitals tend to be paid less, yet their biggest expenses – talent, technology, and innovation – are higher, and this creates a slanted playing field. Nonetheless, community hospitals, including ours, pride themselves on the delivery of high-quality care regardless of patients’ ability to pay.
This model would not work in any other industry. Consider, for example, an auto manufacturer that is required to sell its top-of-the-line model to all customers, in exchange for whatever the customer can pay. When Panera Bread tried this concept in six new stores, it was deemed unsustainable – all six stores closed.
The reality is that when local hospitals close and local residents are then pushed into a larger system, our communities are harmed. People must travel much farther for their care and are less likely to get regular care. Jobs move away and small businesses that supported the local hospitals close.
We do not need to imagine what happens. Take a look, for example, at the town of Ware, which saw the last services of its Mary Lane Hospital close in 2023. It has become a health care desert. Residents now travel over 10 miles to get hospital care and over 20 miles for specialty care. Even primary care is limited to a few providers in town. It may be too soon to quantify the impact, but it will be felt for many years.
Heywood could have been next in line to close, but we persevered thanks to the active involvement of state and local officials. From reviewing financial projections to discussing service consolidations before implementation, the state provided significant technical assistance and ensured that our grants for school-based care – the program that allows us to provide medical services in K-12 schools in Athol and Winchendon – remained in place during the bankruptcy process.
There are many things that community hospitals do well. We collaborate with local industries to create jobs, clinical sites, and training for community colleges and trade schools. We partner with local schools and municipalities to provide care to children without taking them out of schools. We serve as a hub to reach underserved communities with limited transportation resources. We provide preventive care and reduce health care costs. But it is an uphill battle.
Community hospitals cannot do more with less. If, as a Commonwealth, we value them, then we need to invest in them and protect them. In return, strong community hospitals will improve health and quality of lives in our communities and lessen congestion at our medical centers. We need to address the funding disparities that ail community hospitals and account for and address the particular challenges – remote locations, more acute medical needs, and heavier dependence on public insurance – that threaten their viability.
The Legislature’s recent passage of the Nurse Licensure Compact, which allows nurses from other states to practice in Massachusetts under one license, is now helping to address persistent nursing shortages. But, federal and state policy makers need to address the reimbursement gap, help us bridge the gap with IT financing, and preserve 340B drug pricing. We also need their leadership in efforts to further train and develop the workforce and ease administrative burdens.
While we survived bankruptcy, we know that sustained investment and commitment is critical to our future. Even as a nonprofit, we must always operate with a margin. As is often said, no margin means no mission. This will cost more up front, but aren’t healthier communities and residents worth it?
Rozanna Penney is the president and CEO of nonprofit Heywood Healthcare, which exited bankruptcy in September.
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