photo by: Jim McLean/Kansas News Service

Bob Matthews, a member of the SCK Health board, listens as hospital officials explain their decision to cut services so the hospital can qualify for a new federal program to subsidize its operations.

Arkansas City, Kansas — JoLynn Foster isn’t happy about it, but she’s convinced the only way to save her hometown hospital is to shut part of it down.

“There’s no other alternative,” said Foster, a longtime resident of Arkansas City, a town of about 12,000 people south of Wichita.

Foster and about 100 other residents of the southeast Kansas town recently attended a meeting about the fate of SCK Health, Arkansas City’s only hospital. They listened as hospital officials explained their decision to restructure SCK Health so that it can qualify for enough federal money to keep it open and delivering limited, but essential services.

The restructuring is necessary, said CEO Jeff Bowman, because the hospital is awash in red ink. After losing more than $3 million last year, it’s on pace to lose at least that much this year.

“We’re continuing to lose a quarter of a million a month,” he said despite cost-cutting moves such as closing the obstetrics unit and eliminating travel. “That’s not sustainable,” Bowman said.

A lifeline for rural hospitals

Under the new federal program, SCK Health could qualify for a subsidy of $3.2 million a year plus a 5% increase in Medicare payments by becoming a federally designated “rural emergency hospital.” However, obtaining that designation would require the hospital to effectively close its inpatient unit and limit the services it provides to emergency and out-patient care.

Bob Matthews, a member of the hospital board, doesn’t like the idea of scaling back services but said he’s convinced it’s the only way “to keep us above water.”

Arkansas City not alone

On a per-capita basis, Kansas is home to more struggling rural hospitals than any other state. Kansas has 104 rural hospitals – and more than 80% of them are losing money, according to the Center for Healthcare Quality & Payment Reform, a nonprofit think-tank. More than half are deemed to be “at risk of closing.”

The biggest problems for rural hospitals? A low volume of patients, combined with a high percentage of Medicare and Medicaid patients and payments from private insurance companies that, like those from government programs, don’t cover the cost of providing services.

In the case of SCK Health, the fact that Kansas hasn’t expanded Medicaid is also a factor.

Kansas is one of 10 states that hasn’t accessed additional federal dollars under the Affordable Care Act by expanding eligibility for the health care program for low-income people and those with disabilities.

The Kansas Hospital Association estimates that Kansas would have received an additional $6.2 billion in federal funding if it had expanded Medicaid when the opportunity arose in 2014.

The cost of empty beds

A study of SCK Health records by the Hospital Association found that on an average day, only four of the facility’s 49 inpatient beds were occupied. That’s according to Jennifer Findley, the KHA vice president who oversaw the study.

“It doesn’t take much knowledge of healthcare to say, ‘wow, how do you keep the doors open if you only have four customers a day,'” Findley said.

The cost of staffing and maintaining so many underutilized inpatient beds can erase any profits made on emergency and out-patient services, Findley said.

“The economics just don’t work,” she said.

As a rural emergency hospital those empty beds would no longer be an issue because SCK Health would be required to transfer patients who need more than 24 hours of care to other hospitals.

Only a few Kansas hospitals are actively seeking designation as rural emergency hospitals but many more could follow, Findley said.

“Data that we’ve collected over the past four or five years shows that we have around 40 hospitals with an average daily (inpatient) census of two or less,” she said.

But some health care experts are urging caution. They say the beds that hospitals would be required to give up could prove essential in emergencies.

“It’s hard to imagine what would have happened during the (COVID-19) pandemic if all of these small rural hospitals had already closed their inpatient units through programs like this and there was no place for people to go,” said Harold Miller, president of the think-tank tracking the struggles of rural hospitals.

In a recent interview on New York public radio station WNYC, Miller said a better solution would be for the federal government to pay hospitals to maintain what he calls “standby capacity.”

That may be a good idea, but it’s not an option for rural hospitals that are currently struggling to keep their doors open.

Time running out

Jeff Bowman, the CEO of SCK Health, said when he moved back to his hometown after a successful business career in Texas, he agreed to do what he could to save the hospital. As things stand, he said the lifeline offered by the rural emergency hospital program is the only path forward.

“I didn’t come back here to close the hospital,” he said. “I came back here to make it sustainable, and this is an opportunity we didn’t have until now.”

SCK Health can’t officially apply for designation as a rural emergency hospital until officials at the Kansas Department of Health and Environment revise state licensure regulations. With the hospital continuing to post losses, Bowman said he’s hoping to proceed with the application process by early this summer.