Iowa Public Television


Rural Hospital Survives

posted on June 22, 2001

Between 1989 and 1998, more than 450 community hospitals in the U.S. closed. A concern to most urban areas, losing a hospital is a crisis for rural communities. According to the Federal Department of Health and Human Services, most of the 49-hundred remaining rural hospitals operate with at least one in three beds empty. Lower occupancy is one problem. But the "managed care" restructuring of the 1980s also is having an impact. Medicare reimburses rural hospitals at a lesser rate, contending the institutions are located in lower cost locales. As a result, some rural hospitals have closed. Others have been sold to larger health care conglomerates with deeper pockets.

No one knows the challenge of keeping a hospital open more than one community in southwest Arkansas. As producer Nancy Crowfoot reports, the town has saved its hospital -- not once, but twice.


prayer mtg., Mayor "I ask you to give us guidance Lord and give us wisdom."

It is National Prayer Day and the mayor of DeQueen, Arkansas leads a small number of his community's 85-hundred residents in a noon-hour prayer outside City Hall.

It wasn't too long ago, the mayor led these same residents, and the rest of the town, on another endeavor -- one to save the town's only hospital.

He would need more than a prayer to accomplish his goal.

Chad Gallagher, mayor, DeQueen, Arkansas

"The day that Dallas-based company's unannounced visitor came to my office and said, 'unless you can help us find a buyer in 60 days, we're closing your hospital'. Well that afternoon, we had our first steering committee meeting."

Mayor Chad Gallagher and the other residents of DeQueen had thought their healthcare needs were solved in 1984, when the locally owned hospital was sold to a major out of state healthcare corporation. But in the spring of 1999, Mayor Gallagher said the most recent corporate hospital owner -- Triad of Dallas, Texas -- had lost $1 (M) million dollars in the DeQueen operation … and wanted out.

If the hospital were allowed to close, Gallagher saw the loss of more than just immediate access to healthcare … which included an emergency room, two operating rooms, and an obstetrics unit. His town would also lose 210 full- and part-time hospital jobs that totaled a $5 (M) million dollar annual payroll.

There was a fear without a local hospital, local industry might move … and opportunities to recruit new business and industry would be nil.

Mayor "You know, every industry we recruit, the first thing they ask me is, ‘mayor, tell me about your local healthcare and about your local schools.'"

Saving the DeQueen hospital included help from the Arkansas congressional delegation to prevent Triad from closing it while the mayor and his steering committee sought a buyer. When none surfaced, the community decided to buy the facility.

The initial sale price was negotiated down to $4.5 million … but the town had just $2 million. It was the money saved and invested from the 1984 sale of the hospital.

So the mayor sought financial assistance, and hoped for administrative help as well, from nearby hospitals.

Chad Gallagher, Mayor, DeQueen "I called one and they chuckled quietly as they said 'no, we would not be interested at all.' And the second one I called was St. Michael's."

Christus St. Michael is a not for profit hospital about 65 miles south of DeQueen in Texarcana, Texas.

Don Beeler, CEO, Christus St. Michael, Texarkana, TX "When we first entered the discussions, we weren't sure how we were going to develop the relationship."

"The way we ended up structuring it, is that we converted the hospital to a not for profit within the financing of that transaction. We do not own the hospital."

Instead, Christus St. Michael loaned DeQueen $3.5 Million dollars to help finance the purchase.

Don Beeler intvw., CEO Christus St. Michael hosp., Texarkana "This was a business decision but it was also a mission decision. Is there risk? Yes. But we felt it was a risk that was certainly worth taking."

In exchange, while not required, Christus St. Michael may get some patient referrals from the DeQueen hospital. The Texarkana facility also has two representatives on the nine-member DeQueen hospital board, but has no day-to-day oversight.

That's being done by Craig Cudworth -- who comes to DeQueen by way of Quorum Health Resources -- a management company specializing in hospital administration. Cudworth has worked at four rural hospitals in the last ten years as basically a short-term "trouble shooter." He was hired to get the DeQueen hospital out of debt, which he did, he says, by making cuts in what he calls the "corporate" overhead of the previous owner.

Craig Cudworth, CEO, DeQueen Regional Medical Center, DeQueen, Arkansas

"The corporation that was here before provided business office services for physician practices. The physicians basically, and owned a couple of physician practices. We stopped that. "

Cudworth says, that cut and other changes, brought the hospital to $80,000 in the black during the first year of local control.

With the hospital now in "stable" condition, the mayor is more optimistic about successful recruitment of new business and industry. For example, a manufacturer of evaporative cooling fans moved to town just last December. The economic incentives alone were most persuasive … a rent-free building for two years and up to $50,000 to cover the company's move and pay the salaries of some of the future employees to be hired. But Vice President of the company, Donald Bickley, says the move would not have happened without access to a local hospital.

Donald Bickley, VP Global Design Intervention , DeQueen, Arkansas

"In any industrial type atmosphere the safety of your people is very important and having a hospital adjacent in the nearby area is only just minutes away from our facility.

Global Design Intervention intends to employ 20 people by this summer … and 33 by next year.

Growth is also on the horizon for the DeQueen hospital. Now affiliated with Christus St. Michael – the two hospitals are sharing the $600,000 cost of renovating a building on the DeQueen hospital campus to be an outpatient rehabilitation center.

And in the next two years, the DeQueen hospital hopes to build three medical clinics in nearby towns not served by a hospital.

Such expansion may seem too fast for a facility whose doors were slated to close just two years ago. But the CEO of the DeQueen hospital is confident the expansion … and the community's involvement in managing the facility … will keep it alive and well.

Craig Cudworth, DeQueen hosp. "But the control is local and that's the important thing. I think that's the thing that's made this hospital pull out and put it on the road to survival."

Slug mayor prayer mtg. "God, we really do thank you that we live in a country like America."

The mayor believes the road to survival for the hospital is the same road that has helped stabilize his community and will provide the foundation for economic development and growth.

For MTM, I'm Nancy Crowfoot.


Tags: health care hospitals news rural