CFOs of rural hospitals must be diligent and creative in their financial strategies.
Ohio-based Community Memorial Hospital (CMH) closed its doors permanently on August 31 due to financial difficulties. The closure will have a big impact on the surrounding community, but it didn’t come as a huge surprise.
In May of this year, the hospital temporarily suspended its services. When its Chapter 9 bankruptcy petition was denied, the health system found no viable option to remain operational and was forced to close.
The root of these challenges, according to reportsstemmed from a 2016 sham lab settlement that ordered the hospital to pay $25 million to insurance companies.
The hospital also faced problems with its new electronic health system in 2021, and changes to Ohio’s Medicaid payment system in February 2023 further strained finances.
In another blow, the hospital was hit by two cyber attacks, leaving it with liabilities and security concerns.
ua statement, CEO Bill Cherry said most of the hospital’s staff had lost their jobs and the building and equipment would be sold.
Being a critical access hospital (CAH), the impact of this closure cannot be understated, and much of the community in Northwest Ohio and Northeast Indiana will now struggle to find care nearby.
“They’re going to have to drive 30 miles or more to get care,” Cherry said. “There are a lot of elderly people in the community and many of them don’t drive or don’t like to drive, so it’s a challenge to go and get their health services.”
Regulatory environment and strategic response
The closure of CMH highlights a persistent problem in the health sector: the financial viability of small and rural hospitals.
Calls for systemic reforms to support the financial stability of small and rural hospitals will need to be heard. Some viable solutions include adjusting reimbursement rates, providing targeted financial assistance, and investing in technology and telemedicine to improve access and efficiency.
External financial director
Over the past decade, rural hospitals have seen a pattern of closures, s 192 rural hospitals are closing Since 2005, CFOs of rural organizations must implement rigorous strategies for financial profitability in order to remain operational. They may also need to strategize more aggressively than urban health systems to avoid financial trouble.
The most unique obstacle in CMH’s case was its bogus laboratory contract. Although this may have been a rare occurrence, managers of rural health systems must carefully consider third-party contracts to avoid similar mishaps.
Cybersecurity is another issue, for all healthcare systems, as well as rural ones. By now, it is well known that cyberattacks are becoming more common in healthcare, and healthcare systems must be prepared with strong cyber security measures. Without them, a cyber attack could be the last straw when combined with other challenges. Rural health system CFOs should invest in high-quality cybersecurity measures to reduce risk.
Marie DeFreitas is the finance editor for HealthLeaders.