Rural hospitals — and some urban ones — struggle for financial fitness

As mayor of a small town in rural Alabama, your daily concerns should be public safety, sanitation, economic development and such — not trying to keep the city’s hospital open.

But that’s a hot topic for Mayor Sheldon Day in Thomasville, where the city’s four-year-old hospital is about to be auctioned off.

That city’s potentially dire health care situation is becoming too common across the state as smaller hospitals cut services just to stay in business and worry about care for their most vulnerable residents.

Northeast Alabama Regional Medical Center in Anniston, for instance, is turning a second hospital location into an urgent care facility. 

The reasons behind this are complex and include federal reimbursement rates, affordability of coverage, gaps in Medicaid, low wages in some areas and doctors who would rather practice in large cities.

Thomasville Mayor Day points out, though, that the problem of ailing hospitals isn’t confined to rural areas.

“All hospitals in Alabama are suffering more and more,” he says. “The crisis of rural hospitals closing at an alarming rate cannot be ignored.”

The CMS — federal Centers for Medicare and Medicaid Services — formula pays larger hospitals more for the same services, Day says.

“Alabama gets less reimbursement than most other states per claim and rural hospitals see less individuals than larger more populous areas,” he says.

Rural areas have a higher percentage of uninsured, too, plus fewer people in general to pay the bills. That can make it hard to lure doctors.

“These three factors alone are extremely detrimental to rural hospitals and are the major causes of the funding shortfalls in rural hospitals all over Alabama,” Day says.

“This coverage gap is another huge part of the issue for hospitals in rural areas,” he adds.

Almost 10 years ago Thomasville leaders and the Healthcare Authority of the City of Thomasville decided to support construction of a new acute care hospital — Thomasville Regional Medical Center.

“We passed a sales tax to support the project and continue to do so,” says Day. “Since this tax was passed specifically for health care, the funds are dedicated to that purpose and that purpose only.”

The initial hope was that TRMC would bring “a new level of advanced health care to a vast rural region,” Day says. Now, the hope is that someone like Progressive Healthcare will buy it.

He’s not kidding about that vast part. Thomasville is 75 miles from Meridian, Mississippi; 100 miles from Mobile, Tuscaloosa and Montgomery; and 120 miles from Birmingham.

“We know of many patients who have utilized TRMC for emergency care who would likely not have survived the extended trip to another health care facility if TRMC had not been here,” he adds.

“Lack of access to quality health care in rural areas has proven to be more fatal and health care outcomes are worse simply because of limited access to quality care where they live and work.”

One big issue seems to be that coverage gap, where hardworking individuals make too much for Medicaid but can’t afford private insurance.

Providing government health care coverage for those who can’t afford it is one favored option. Expanding Medicaid is controversial, though.

If Alabama adopted traditional Medicaid expansion, at least 174,000 more people would be covered, according a KFF Health News report cited by NPR in a May story. Like many issues, it boils down to politics.

“The connection to Obamacare remains a stumbling block in Alabama’s Republican-dominated state legislature,” the article said.

The Alabama Hospital Association, Blue Cross Blue Shield and state legislators are looking at ways to “close the gap” using federal funding.

The “All Health” initiative would close the coverage gap over time, Day says, and “have a profoundly positive impact to struggling rural hospitals in the future.”

Day is in his seventh term as mayor of Thomasville, population roughly 5,500. More than 50,000 work or do business in the Clarke County town several times a week.

TRMC’s struggle is unique in one respect. In a quirk of timing, it did not benefit from federal reimbursement for COVID treatment. TRMC opened in March 2020 as a 29-bed facility and immediately began dutifully caring for COVID patients. Federal funds later poured into thousands of other hospitals, but reimbursement was based on 2019 numbers — just months before TRMC opened.

As a result, Thomasville’s sparkling new hospital “was caught in no-man’s land,” Day says, and didn’t get the money.

In Anniston, too

Anniston is seeing some of the same problems.

The City of Anniston recently provided an infusion of cash for its hospital — $400,000 for fiscal year 2024. Business partners donate, too.

“Alabama has the lowest Medicare wage index in the nation, impacting Medicare payments to hospitals,” says Louis Bass, president and CEO of the Health Care Authority of the City of Anniston, as he echoes Day’s observations.

“This low reimbursement rate, when coupled with the lack of Medicaid expansion, makes it difficult to operate profitably,” says Bass.

Recruiting physicians to rural areas is difficult because they make less there, Bass notes.

A proposed bill in the Alabama Legislature called the Rural Hospital Investment Program could help some hospitals if passed, Bass says. It would create a tax benefit for donations. It won’t help RMC, though.

One suggestion 

Danne Howard, deputy director and COO of the 138-member Alabama Hospital Association, agrees on the major issues contributing to the rural health care crisis like insurance coverage gaps.

“There’s no one single answer” to fix it, Howard says.

But a specific initiative would help.

“There is one thing that the state of Alabama could do. It wouldn’t solve everything, but it would by leaps and bounds provide some stability into not just the rural systems but our entire health care delivery system,” Howard says.

“That is closing the coverage gap using resources available for expanding Medicaid,” she says. “If you think about it, providing a way to have access to care through insurance coverage really changes everything.”

If nothing else, think of it in financial terms, she suggests. “It’s a workforce initiative,” Howard says.

The state commissioned a survey asking about the biggest barriers to keeping a job.

“Number one was transportation. Number two was health,” she says.

Many people who want to work can’t because they have uncontrolled diabetes and can’t afford insulin or nutritious food, for example.

“As a result, they miss a lot of work and they can’t hold down a job. If we could get a healthier workforce, then that increases workforce participation,” she says. “There are studies from other states that show once they expanded Medicaid the workforce participation rates increased,” and disability applications decreased.

In Alabama, if you are somewhat healthy, childless, between ages 19 and 64, Howard says, you don’t qualify for Medicaid no matter how little money you make.

Many people want to work, but “go on disability simply to have health care coverage,” she says.

“It’s an economics driver,” Howard says. More working people means more tax revenue.

“If we were to do this, it would have a greater impact on the state of Alabama than all the automotive manufacturers combined,” she says.

If rural hospitals cut key services like labor and delivery, “urban hospitals do not have the capacity to absorb their volume. Every link in this chain has to be supported for the whole delivery system to stay healthy.”

Deborah Storey is a Huntsville-based freelance contributor to Business Alabama.

This article appears in the July 2024 issue of Business Alabama.