When cattle farmer Greg Fleshman joined the board of Putnam County Memorial Hospital in rural northern Missouri in 2011, the hospital was on the brink of closing.
“Things we just falling apart financially and the morale of the employees. And it just seemed to get worse and worse,” he recalls. “Those were the darkest days.”
Putnam County Memorial’s story at the time was becoming all too common for rural hospitals across the country. What’s not as common is bold management that can completely turn things around. That’s what happened here.
Tighter Margins For Rural Hospitals
Putnam County has a population of about 5,000 and those residents tend to be a little older, sicker and poorer than the rest of the state. About a fifth of the county’s residents are uninsured and many of the rest are on Medicare or Medicaid.
Those same conditions are found in many of the nation’s rural areas. And as a result of lower reimbursement rates, combined with dwindling populations, many of these hospitals are operating at tighter profit margins and sometimes even at a loss.
The Rural Health Research Program at the University of North Carolina has tallied 53 rural hospital closings since 2010. And according to analysis by Maine-based iVantage Health Analytics, about one in ten rural hospitals are considered “vulnerable” to closing.
In Putnam County, the hospital had done what many others were doing: looking to save costs by reducing services and even staff. But as more and more county residents went to bigger towns to receive health care, the hospital nearly went out of business.
“One day I come in and we had about $8,000 in the bank,” Fleshman says. “We had a payroll of about $70,000 or $80,000 coming up.”
A report by Missouri State Auditor published found the hospital to be in “poor financial condition,” in 2011. It cited two years of operating losses and a failure to make a bond payment of $671,078 in August 2011.
By late 2011, the hospital’s CEO had left and by early 2012, so had the interim CEO hired to replace him. Fleshman says the board even began calculating the cost of closing.
“You can’t just close the door on this place,” he says. “You have to keep it heated and cooled. You have to keep someone for maintenance.”
The hospital's turnaround started with a phone call in the middle of February 2012. A local physician called up medical consultant Jerry Cummings who ran a consulting firm with his wife, Cindy Cummings, in Jefferson City, Mo.
“We were the only people that he was aware of that he felt could save the hospital,” Cummings says.
On February 28th, Cindy and Jerry Cummings made the three hour drive north to Unionville to present a proposed solution to the hospital’s board. Their idea? Rather than cutting costs, the hospital needed to grow.
In fact, several years earlier Cummings had offered some suggestions to Putnam County Memorial’s former CEO for how to help the hospital’s finances. The hospital had an unused 10-bed unit that he had suggested converting into a psych ward to bring in new revenue.
Cummings says he never heard back on the initial idea. But this time, the board asked the couple to run the hospital, with Cindy as CEO and Jerry as COO.
Rather than close its doors, the Cummings actually expanded the services the hospital provided. Within the first month, they brought in three new physicians. They used their relationships from their consulting business bring more specialties to the hospital like anesthesiology, gynecology and cardiology. They updated the hospital’s equipment.
Perhaps most significantly they were able to rally the community to pass a bond initiative worth more than $7 million, enough to buy out the hospital’s old debt and renovate the unused wing into a psych ward.
And patients started coming back.
“Our revenues went from $4 million to $22 million,” Cummings says, referring to the hospital’s gross charges. “Our average daily [patient] census, it used to be less than one patient per day. Our average daily census now is around 11 to 12 patients.”
The Way Forward
According to a paper published last November by the Health Panel of the Rural Policy Research Institute, more cash-strapped rural hospitals could benefit from expanded services.
“We think that’s the way forward for rural hospitals rather than just bunker down and saying that, ‘we can’t proceed,’” says Tim McBride, health care economist at Washington University in St. Louis and one of the paper’s authors.
The paper stresses the importance of local context. “A rural community of 1,000 needs a different system structure and set of services than a rural community of 10,000,” the authors note.
Parts of the Putnam County Memorial story certainly are unique. Passing a bond for the hospital, for instance, is something McBride describes as “pretty rare.”
But, he says when other rural hospitals evaluate how they meet their own missions, they should consider the viability of expanding in certain areas.
“We believe that rural hospitals often can provide very high quality services in what they do,” he says.
It’s not easy work. Board member Greg Fleshman remembered trying to raise money for the hospital: “People would say, ‘Is this just good money chasing bad?’ ‘What are you going to do?’ ‘What are you going to change?’ And it was hard to answer.”
But to Fleshman, it meant a lot to keep a hospital in the community he had lived his whole life.
“They saved my dad’s life, twice,” he recalls. “He had a heart attach and a stroke and they life-flighted him out of here both times. And that made it worth my efforts right there.”