Fayette County is the latest victim of hospital closings in Tennessee as many rural health care facilities continue to struggle financially.

Methodist Healthcare-Fayette Hospital closed in late March, bringing to four the number of shuttered hospitals in West Tennessee after Gibson General, Humboldt General and Haywood Park Community called it quits in 2014.

“I know this is happening across the state. Something needs to be done,” says Fayette County Mayor Rhea “Skip” Taylor.

“I’m not sure exactly the answer, but they need to loosen the regulations, give us a little more freedom,” he adds. “The hospitals need a little more freedom to be a little bit more creative or figure out a way to fund this.”

When Tennessee Gov. Bill Haslam opted against setting up a state exchange when the Affordable Care Act took effect two years ago, the Tennessee Justice Center, a nonprofit law firm focusing on health care for the poor, reported 54 hospitals across the state were at risk of closing or coping with “major cuts.”

Hospitals are hamstrung by the Affordable Care Act even though it was designed to increase the number of insured patients.

They receive what is called disproportionate share hospital payments for treating uninsured patients. But when the federal law passed, they agreed to reductions in those funds, in addition to less in Medicare and Medicaid payments, believing they could afford those cuts if everyone had insurance, the Tennessee Justice Center states in a white paper.

Without expanded TennCare, they’re “stuck” providing care to uninsured patients on tighter budgets and won’t be able to survive without Medicaid expansion, according to the paper.

One or two patients a day

Methodist Healthcare-Fayette had dealt with hard financial times for about 15 years, with only 10 to 15 patients a day filling its 46 beds, Taylor says. By the time it closed, the norm was closer to one or two patients a day.

The county seat, Somerville, has about 3,100 people, but Fayette’s population of 39,011 is concentrated largely on the west side, with most residential and business development closer to Shelby County. Consequently, when those residents need health care, they look toward Memphis hospitals.

Even as Fayette County’s population grew, its hospital in Somerville began to lose business. And when it shut down this year, it was losing between $1 million and $1.5 million annually.

But that doesn’t mean it wasn’t needed.

“That took the emergency room out of Somerville. Now the nearest emergency room is in Shelby County,” Taylor notes. “For some residents, that’s added another half hour to 45 minutes to get to an emergency room.”

Fayette County, which runs its own ambulance service, added a fourth ambulance and is considering a fifth to make emergency runs to Shelby County hospitals, he says.

The hospital’s closing also hurts economically, Taylor says, with Fayette less likely to attract businesses if people have poor access to health care.

Where money is tight

Tennessee hasn’t lost many hospitals yet, but that doesn’t mean it won’t, especially in rural settings.

“(Rural hospitals) don’t have the resources … to sustain when you’ve got levels of uncompensated care these guys have,” says Craig Becker, executive director of the Tennessee Hospital Association.

“Knowing TennCare doesn’t pay you what your costs are, they just don’t have the resources to fall back on, whereas your larger institutions might have some assets, some stocks and things like that, some investments they can live off of.”

Urban hospitals also get paid more and they tend to net more commercial business than those in rural areas, Becker says.

Safety net hospitals, which provide much of the care for low-income and uninsured people, are “up and down,” says Becker.

Vanderbilt University Medical Center and University of Tennessee Medical Center are doing fine, Becker says, but some inner-city hospitals not locked in with good commercial payers are having problems for a number of reasons.

The economy hasn’t rebounded as quickly in rural Tennessee, for example, and that handcuffs hospitals surrounded by smaller populations, making money tight.

During the recessionary period of 2008 and 2009, roughly 40 percent of Tennessee’s acute-care hospitals, 61 of 136, showed a negative operating margin, meaning expenses were greater than revenue, and that was almost equally split between rural and urban hospitals, Tennessee Hospital Association figures show.

Out of 66 rural hospitals and 64 urban hospitals, each group had 28 running in the red. Four of six safety net hospitals were in the hole during those years, figures show.

Rural facilities suffer

Hospitals started showing stronger financial health in 2010 when the economy improved, even as three facilities closed. Still, about 35 percent, 42 of 133 facilities, showed a negative operating margin, according to THA figures.

Rural hospitals, however, saw little financial improvement with 27 operating in the red, while out of 60 urban hospitals only 15 operated with a negative margin.

From 2011 to 2012, the state lost three more hospitals, one rural and two urban facilities, but the Affordable Care Act hadn’t taken effect at that point.

In 2013, the last year for which THA provided statistics, out of 130 hospitals, 42 showed a negative operating margin, including 27 of 65 rural facilities, 14 of 59 urban hospitals and one of six safety net facilities.

The picture is much worse if hospitals have to depend entirely on patient payments to pay the bills, backing up Becker’s point that hospitals have to find other ways to prop up operations.

During 2011, the roughest of the last six years, the association shows 88 of 131 hospitals had negative patient margins, which includes all payer sources. Out of 67 rural hospitals, 54 showed negative patient margins, while 30 of 58 urban hospitals and four of six safety net hospitals had negative payer margins.

The association figures show some improvement in 2013 when 78 of 130 hospitals had negative payer margins, including 47 of 65 rural hospitals, 31 or 59 urban hospitals and five of six safety net hospitals.

Spreading out

The news for hospitals isn’t all doom and gloom, though, in 2015.

Saint Thomas Health, which is part of Ascension Health, put together a regional strategy and acquired full ownership this summer of four hospitals it co-owned with Capella for three years: River Park in McMinnville, Highlands Medical in Sparta, DeKalb Community in Smithville and Stones River in Woodbury.

“This gives us greater presence across communities of Tennessee,” says Karen Springer, Saint Thomas Health’s president and CEO.

“The facilities were doing well. As a matter of fact, we approached Capella to buy them. They were not really for sale.”

St. Thomas tightened its belt during the three-year period, improving operations through several initiatives and saw better health care outcomes, stronger financial sheets and better ability to support charity care.

Legislative agenda

Gov. Haslam pushed for passage of Insure Tennessee in special and regular sessions this year but couldn’t muster enough support to bring the measure to a floor vote of the full House or Senate. It died in Senate committees twice.

Using a waiver approved by the U.S. Department of Health and Human Services, Haslam’s plan was for Tennessee to gain access to $1.2 billion in taxes paid as part of the Affordable Care Act. Some 280,000 working Tennesseans caught in a coverage gap would receive help with vouchers through employers or healthy incentive arrangements.

“We hope Insure Tennessee expansion would pass, but it’s going to be a tough slog. That would definitely help, another 280,000 people insured so it cuts down on the number of uninsured,” Becker says.

“If you look at other states who have done expansion it’s made a difference there as far as cutting down on their uncompensated care.”

St. Thomas’ mission is to serve all patients with special attention to the poor and vulnerable. Consequently, it says passage of Insure Tennessee would improve overall health care to people who are uninsured and fail to qualify for other programs, or “those who fall through the gap,” Springer says.

“They would have access to care, including preventative care and health screenings leading to improved, lower-cost, high-quality care,” she notes.

In addition, TriStar Health has fully endorsed the Tennessee Hospital Association in support of Insure Tennessee, saying it is important to provide increased health-care access for patients close to home.

In rural Somerville, uncompensated care played a role in the closing of Methodist Healthcare-Fayette Hospital, roughly 15 to 20 percent of the facility’s costs, according to Mayor Taylor.

“It was just lack of business and the cost to keep the place open,” he says.

Consequently, Fayette County is looking for a replacement facility, either a standalone emergency room, which he says Tennessee is “loath” to support, or an acute care center where Somerville residents could receive treatment in emergency situations.

The biggest difference between the two, according to Taylor, is an emergency room would have to accept every patient while an acute care center wouldn’t have to treat people unless they have insurance or some other method to cover the cost.

“We’re right on sort of a bubble,” Taylor says. “We’ve got a lot of folks out here talking to us, but when they start looking at rooftops and concentration of people, we just can’t entice a lot of folks to move here for that one area. So we’re struggling.”

Sam Stockard can be reached at [email protected].