Where can we find practice management tools for our hospitals, clinics, physicians, other health providers?

Once upon a time in rural America, a country doctor would wait for his patients’ fall crops to be harvested before expecting payment, or accept a couple of plump and squawking hens in exchange for setting the broken arm of the neighbors’ 12-year-old son. This scenario—what might be termed the sole-practitioner/agrarian economy model—is now uncommon, if not already extinct, even in deep rural or so-named frontier areas of Texas.

In fact, the more acutely rural, in terms of isolation and population density, the area, the less likely it is to have access to a doctor. The Texas county of Loving, which hugs the southern boundary of New Mexico at the westward buttress of the state, and has been declared by the 2000 U.S. Census as “the least populated county area in the United States,” possesses neither a hospital nor a physician to service the healthcare needs of its 67 residents.

It is only a slight exaggeration to say that if a rural family doctor from the past expected to be paid with chickens, today’s rural family physician fears being paid “chicken feed.” Rising malpractice insurance rates (which have driven many family medicine practitioners from the once rewarding practice of obstetrics), combined with the advent, and sometimes subsequent demise, of HMOs, along with a heightened demand for medical specialties and Balanced Budget Act reimbursement upheavals have left many rural primary care physicians and their patients high and dry.

This is, of course, a simplistic assessment. It is not within the scope of this Toolbox component to explain, or account for, all the influences that have contributed to the practice management pressures rural and small town physicians now face.

The other half of any study of rural provider clinical management issues must include a discussion of the role played by community hospitals. Even in the rare event that a physician owns an outpatient clinic, he or she must have access to an inpatient facility.

Rural physicians and community hospitals are mated by necessity, and community hospitals themselves have reeled in recent years, from blows even more powerful than those absorbed by physicians. While rural hospitals are often one of the largest employers in town, they have little clout with employers or payers beyond their service area. Access to capital funding is limited, but community hospital needs for capital investments in new equipment, facilities and technologies remain high.

Compared to larger facilities, community hospitals have less flexibility in reducing fixed and variable costs, cannot adapt quickly to the demand for more customized consumer services or the movement of services to non-hospital settings, work with smaller, more operationally focused staffs, and have difficulty recruiting and retaining physicians and/or board members with broad-based business experience. The trend profile of rural hospitals since the late 1980s has been: fewer hospitals, falling inpatient margins, decreasing occupancy rates and increasing outpatient revenue as a percentage of total revenue.

Rural and community hospitals, operating on slimmer profit margins to begin with, were slammed especially hard by key provisions of the Balanced Budget Act (BBA) of 1997, which hit all hospitals with revenue reducers, through restructuring Medicare and Medicaid reimbursement formulas.

Some community hospitals have been able to take advantage of the few revenue enhancers offered by the BBA, including creating limited service Critical Access Hospitals (CAH), through the Medicare Rural Hospital Flexibility Program, participating in the Medicare-reimbursable Program of All-Inclusive Care for the Elderly (PACE) or receiving reimbursement for telehealth professional consultations, if located in a federally designated Health Professional Shortage Area (HPSA).

Other strategies rural hospitals have employed to survive include leveraging technology to bring care to the patient, for example, mobile catheterization labs or telemedicine applications. Rural or community hospitals have also discovered ways to create economies of scale by linking with other non-competing hospitals of similar size and product offerings to build hospital cooperatives, for purchasing groups or share service organizations.

Rural and community hospitals have also found some success in accessing new capital sources or skill bases by using contract management services, participating in clinical trials with university or private hospital systems, using mid-level providers in lieu of or in addition to physicians and devising hospital-based insurance plans.