Atlanta journalist finds not all struggling rural hospitals are worth saving

By Yamil Berard

Stories about financial problems and financial manipulation have always been my favorite. Often underneath a bad situation or dysfunction are bad regulations, bad decisions, bad actors or a combination. All these factors were present in a recent three-part series I wrote about rural hospitals in Georgia.

The series, “AJC Investigates the Future of Rural Hospitals,” began Sept. 24 after I wrote about two rural Georgia hospitals that summer that had announced they were closing. One article was published July 28 after Southwest Georgia Regional Medical Center announced it would close, and another ran Aug. 20.

My editor and I talked about whether more hospitals would shut down amid the pandemic and whether we could provide a new perspective on the years-long efforts to save rural hospitals.

With this in mind, I researched what had been reported about what ailed these hospitals. I found they often had experienced low occupancy rates, competition from other hospitals, an aging and dwindling population and costs because of rapidly changing technology.

One 2020 study I came across on the state of rural hospitals across the United States echoed the usual concerns that policy researchers had been making for years. But another study suggested that some rural hospitals seemed to matter more than others.

Like everyone else, the researchers examined financial distress among rural hospitals. But they also analyzed whether a hospital was essential to the community it served, the levels of utilization in each hospital, the geographic area and the population it served.

This analysis led to these questions:

What if only three people on average are in the hospital at any one time?
Does that mean a hospital should stay open or close?
What happens if a larger and better-financed hospital is not far away?

These and other questions led to my hypothesis that some rural hospitals may not be worth saving. I thought my editor might consider this premise to be insensitive toward those hospitals and the communities they served and so would not want to pursue this approach. On the contrary, she was intrigued.

Experts chime in

I began calling legislators, health care experts, and financial consultants and explained my reporting premise. I found they were not only onboard, but also they wanted to take the idea a step further.

“Oh yeah, nobody has gone there for years. I don’t even know how they made it that long,” one legislator told me about a hospital in Commerce, Ga.

“Gosh, this is something I’ve been saying for years. How can you keep some of these places open?” another asked in an off-the-record comment.

One health care consultant said: “Would you really want to have your baby there at that place that delivers two babies a year? Come on. Let’s be serious here.”

Financial experts had similar comments, “You know those health care people are funny with numbers, right?” asked one financial consultant. “They build things for tons of money in the middle of nowhere and then expect patients just to pop up out of nowhere. Look at that place in Fitzgerald. Nobody is having babies out there anymore. Everyone is 80. Why do you build an obstetrical and postpartum ward in a place with 4,000 people who are way past childbirth?”

I spent hours with knowledgeable health care experts who spoke off the record about the critical financial factors that affect hospitals, including the mix of payers, occupancy rates, food-service costs, and even more routine factors — like how long it took to order Band-Aids and pay the bill for them. While these factors may seem inconsequential, a hospital that can’t afford to pay for Band-Aids or Q-tips is likely to have limited resources to afford high-quality care.

After these discussions, it became clear that state and longstanding federal programs to address funding gaps for rural health care facilities had limited success. My editor urged me to expand my research into analyzing why.

At first, we talked about visiting the hospitals to find sources in rural hospitals who could talk about these issues. But travel restrictions due to the pandemic instead necessitated that I identify sources through word-of-mouth and social media. One source would recommend another and that source would recommend still another person. By the time I called several of the recommended sources, one or more of them would help move the reporting forward.

I also sought out stakeholders who had a role in how hospitals performed by supporting, running or working at the facility: county administrators, local elected officials, hospital administrators and employees. I also interviewed residents of these rural towns and patients of these hospitals.

It became clear that, in many cases, the hospitals that were in greatest peril had made poor decisions that contributed to their demise. One hospital went on a building spree to attract more patients, but the patients never showed up because many in that facility’s service area moved out of town. Another invested in postpartum and delivery services when most pregnant women were willing to drive to a larger hospital nearby with better equipment and more skilled staff.

We ultimately published a three-part series and a few follow-up stories that complemented the series. For example, we wrote about a hospital closure that read like a eulogy. The story brought forward the hospital’s historical significance, reflecting how it was perceived in its heyday and the circumstances that allowed it to flourish. In a follow-up to the hospital-eulogy story, we told the tale of another rural hospital that had turned things around and seized on opportunities that others had not.

Finding financial answers

In doing my due diligence, the most critical steps in reporting this series were collecting records on the hospitals’ financial conditions. From these reports, I could identify examples of waste and mismanagement at some rural hospitals and the burden on taxpayers of costly bond projects, all of which helped to make the stories more compelling.

One resource was the online municipal bond clearinghouse called Electronic Municipal Market Access (also known as EMMA), which stores debt and financial data for hospitals that issued bonds over several decades. On this site are bond issuance documents and audit reports that provide a comprehensive view of how money was disbursed across service lines, such as payment for salaries and other costs. EMMA also is useful because it will highlight ongoing claims and lawsuits filed against the hospital that can affect its bottom line. For example, I learned of a $23 million claim against a rural hospital that would almost guarantee the hospital’s demise if affirmed.

Another resource was an online service that provides free hospital-specific cost data to media. Cost Report Data Resources LLC provided hundreds of pages of cost reports that detailed occupancy rates, payer mix, federal reimbursements and other drivers describing how a hospital is serving patients and making money. The company provides the reports for free to media outlets.

Once I had these data, I asked hospital officials to answer the cost reports. Some of those officials spoke only on background but were critical to helping me understand the data. I would encourage any reporter who seeks to understand and use these reports as a basis for reporting to rely on an expert when questions arise.

A significant part of the series involved reviewing the failure of state and federal efforts to strengthen rural health care. In my research, I found that the federal government hadn’t done much to devise any long-term solutions, and its formulas for Medicare and Medicaid reimbursement had largely contributed to the inefficiency and wastefulness that caused many hospitals to close. For example, because many of the hospitals had very low occupancy rates, the administrators spent an exorbitant amount of money on food, laundry services and cleaning. This information was available in the cost reports we obtained.

We also asked a health care consultant and certified public accountant to review those reports. In his review, he identified and verified wasteful spending. In my interviews with him, he said the cost for food, laundry services and cleaning at a low-occupancy hospital was as much as three times higher than the cost of those same services for guests staying at a luxurious hotel, such as a Ritz-Carlton.

In Georgia, my research found that state officials hadn’t done much to sustain these hospitals. Under one state-run program known as the Rural Hospital Tax Credit, individuals and corporate taxpayers earned income tax credits if they contributed to eligible rural hospitals. Under that program, some 30 of the state’s most impoverished hospitals got nearly $60 million in 2018, state records show. But the money disproportionately went to hospitals in better-off areas. One of the hospitals that received some of the money was forced to close in October.

As it was published, the series got a lot of attention and generated dozens of emails. Some readers asked why we didn’t mention the failure to expand eligibility for the state’s Medicaid program when the federal government would have covered 90% of that expansion cost. Georgia is one of 12 states that has so far decided not to participate in the federal-state Medicaid expansion program under the Affordable Care Act.

While Medicaid expansion in Georgia would have eased the financial strain on the state’s rural hospitals, my editor and I decided early that the expansion question would not be part of our focus, because doing so would not have provided a solution to the financial problems these hospitals faced long term.

We got some surprising feedback, too. Many rural advocates praised our work as sobering information that needed to get out to the public. Most readers agreed that sweeping reforms were needed to keep struggling hospitals in business.

We also got a lot of pushback from hospital administrators who said they were doing the best they could with limited resources.

At least one hospital administrator who had overseen poor decision-making and mismanagement demanded that the newspaper publish another story that cast her facility in a better light. My response was to point to that hospital’s financial documents, showing the facility was at 23% of capacity and losing millions every year. Such an article would not reflect an accurate picture of the hospital’s financial condition.

For more information, here are links to each part of the series: