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Rethinking your rural hospital strategy? Answer these 4 guiding questions.

June 6, 2019

    More than 100 of America's rural hospitals have closed in the last nine years. And as inpatient volumes lag and profit margins shrink, rural hospitals will continue to face challenges to their solvency. 

    In response, more hospitals are weighing downsizing their current footprint or investing in alternative sites of care, such as the micro-hospital, that don't have the overhead costs associated with traditional acute-care offerings.  

    Follow these 12 tactics to build the hospital of the future

    Over the last several months, we've worked with several rural hospitals facing financial pressure as they grappled with decisions about the future of their facilities. In each case, the ultimate goal was to identify the site's ideal future state, including its bed demand and mix of services.

    While each system is unique, there are common considerations organizations should weigh when thinking about the future of their rural facilities. Here are the four major questions we answered for each organization we worked with:

    1. Is the current state sustainable?

    First, organizations must evaluate the sustainability of the facility's current state. To do so, organizations should look at their:

    • Financial performance: Evaluate total revenue, operating costs, and margins for the last several years to determine if financials are trending negatively.
    • Historic volumes and market share: Along with finances, observe inpatient volumes and market share trends to determine what is driving poor performance. Are you losing market share, or is your case mix less lucrative?
    • Current utilization: Calculate your current occupancy rate for inpatient beds, operating rooms, and ED treatment spaces to identify areas of underutilization.

    For the organizations we worked with, the combination of negative margins, declining share, and excess capacity led to one conclusion: The current state was not sustainable and required restructuring.

    2. What services does the site need?

    To identify the ideal future state of the facility, an organization's first step is determining the ideal mix of services based on your patients' needs. Organizations may start by evaluating their current case mix to determine which services to maintain and which to divest. Next, consider investing in additional services based on market demand and the competitive landscape.

    3. What facility footprint best supports these services?

    After choosing the right services, decide on the type and size of the facility. For your inpatient, surgical, and emergency services, forecast the number of inpatient beds, operating rooms, and ED treatment spaces needed to maintain an ideal level of utilization.

    4. How can we effectively implement this new model?

    However, a perfect service mix and facility structure are useless without an effective implementation strategy. For the organizations we supported, there were two common considerations for implementation: system coordination and community communication.

    For the system piece, consider how the altered site will fit into the overall system structure and how patients will be triaged across sites, particularly if you choose to divest any current services. Finally, restructuring a rural hospital often has an emotional impact. Organizations must be sure to develop a clear communication strategy to mitigate negative responses and garner community buy-in [1].

    [1] Hazan, The hospital of the future, pg. 24-25.


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