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Evaluation ofthe Grant Program for Rural Health Care Transition Ninth Semi-Annual Progress Report CMSUbra/y • C2-07-13 Ba7l5t0im0orSee,cuMriDty231!v2o<« Reportto Congress 1995 U.S.DepartmentofHealthandHumanServices HealthCareFinancingAdministration OfficeofResearchandDemonstrations CONTENTS [SIgPUBa'l^timoCrS2ee-.c0uMr7i-Dt1y32B1lv2d4.4 Chapter Page EXECUTIVESUMMARY • yi INTRODUCTION I 1 A. LEGISLATIVEHISTORYANDPURPOSE OFTHEGRANTPROGRAM 1 B. THENUMBERANDDISTRIBUTIONOF GRANTEES 3 II CONSORTIUMGRANTEES 6 A. THEROLEOFCONSORTIAAMONGRURAL HOSPITALS 6 B. AREWEAKHOSPITALSJOININGHOSPITAL CONSORTIA? 7 C. HOWWELLDOTHEMEMBERSOFRHCT CONSORTIACOMMUNICATE? 11 D. HOWWELLARETHERHCTCONSORTIUM PROJECTSPROGRESSING? 11 III SELF-REPORTEDPROGRESSOF1991GRANTEES 15 A. STATUSOF1991GRANTEES 15 B. PROGRESSOF1991 GRANTEES 15 C. PROJECTMODIFICATIONSANDPROBLEMS ENCOUNTERED 18 D. GRANTEXPENDITURES 19 ii CONTENTS(continued) Chapter Page IV SELF-REPORTEDPROGRESSOF1992GRANTEES .. 22 A. STATUSOF1992GRANTEES 22 B. PROGRESSOF1992GRANTEES 22 C. GRANTEXPENDITURES 26 V HOWDOAGINGFACILITIESAFFECTTHE HOSPITALS'OPERATIONSANDTHEIRGRANT PROJECTS? 28 A. WHYSOMEGRANTEESHAVENOTRENOVATED RECENTLY 29 B. DOESANOLDFACILITYAFFECTHOSPITAL OPERATIONS? 31 C. DOESANAGINGFACILITYAFFECTTHEGRANT PROJECTCHOICEANDPROGRESS? 32 VI SUMMARYOFPROGRAMPROGRESS 34 REFERENCES 36 iii TABLES Table Page H.i Financialandmanagementcharacter- isticsOFTHE 1990AND1991 GRANTEE HOSPITALS,BYMANAGEMENTSTRATEGY 9 11.2 COMMUNICATIONAMONGHOSPITALSINRHCT- FUNDEDCONSORTIA: 1990AND 1991 GRANTEES 12 III-1 1991GRANTEESTATUS 16 HI.2 PROJECTPROGRESSAFTER21 MONTHS,BY OBJECTIVE: 1991GRANTEES 17 IV.1 1992GRANTEESTATUS 23 IV.2 PROJECTPROGRESSAFTER9MONTHS,BY OBJECTIVE: 1992GRANTEES 25 iv FIGURES Figure page 1.1 "NUMBERANDPERCENTAGEOFELIGIBLE HOSPITALSAWARDEDRURALHEALTHCARE TRANSITIONGRANTSBETWEEN 1989AND 1992,BYSTATE 4 III.l AVERAGEGRANTEXPENDITURESAFTER21 MONTHS, 1991GRANTEES 21 EXECUTIVESUMMARY CongresschargedtheHealthCareFinancingAdministration(HCFA)withimplementing aprogramofRuralHealthCareTransition(RHCT)grants(OmnibusBudgetReconciliation Actof1987: P.L.100-203)andthenexpandingtheprogram(OmnibusBudgetReconciliation Actof1989: P.L. 101-239). Thegoalofthisprogramistohelpsmall(fewerthan 100beds) ruralhospitalsimprovetheirfinancialstabilityandmanagementcapacity. The programwasimplemented in September 1989and expanded inSeptember 1990. September1991,September1992,andSeptember1993. Sincetheprogrambegan,925RHCT grantshavebeenawarded: 184in 1989,212in 1990, 187in 1991, 163in 1992,and 179in 1993. Morethanone-thirdofthesmallrural hospitalsintheUnitedStateshavereceived program grants, and Congress has authorized $96 million over the past 5years for the program. The 1989 and 1990grantees completed their grant projects in September 1992 and September 1993, respectively. Currently, 496?.<*t;"e grantees have 3-yeargrants and are progressingwiththeirprojects. The legislation mandated that the HCFA Administrator report to Congress every 6monthsontheprogram'sprogress. Thisdocumentistheninthsemi-annualprogressreport. In it,wedescribetheprogressofthe 1991 granteesafter21 monthsandthe 1992grantees after9months. Thisreportisbasedonmonitoringreportssubmittedbythegrantees. We alsofocusontwospecialtopics: theroleoftheruralhospitalconsortiaamongthegrantees, andtheeffectofagingfacilitiesonthehospitals'operationsandtheirgrantprojects. These special topics are included because data are now available from a consortia supplement questionnaire for the 1991grantees and from supplemental interviews conducted for 40selected 1991 and 1992grantees. SPECIALFOCUS:THEROLEOFCONSORTIAINTHERHCTGRANTSPROGRAM Manypolicyexpertsagreethatinareaswithscarcehealthresources,healthcareproviders should work cooperatively, not competitively. The RHCT grants program promotes cooperationbyencouragingapplicationsfromruralhospitalsintendingtoformaconsortium orpursueaconsortiumproject. Hospitalconsortiaarerelationshipsthatprovideaframeworkforhospitalstoundertake jointactivitiesandtakeadvantageofeconomiesofscale,butallowhospitalstomaintainlocal autonomy. Developingeffectiveruralhospitalconsortiacanbedifficult. Thesmall,financially vi distressed hospitalshavethemosttogainfromaconsortiumrelationship. Thesehospitals havefewresourcestobuymanagementexpertise,andinsufficientpatientbasestosupport manyservices. Byworkingtogetherinaconsortium,thesehospitalscoulduseeachotheras managementresourcesandprovidejointservices. Buttheseweakhospitalsaretheleastlikely tohavethetime,resources,ormanagerialexpertisetoformruralhospitalconsortia. Thegrantprogramishelpingsmall,financiallyweakhospitalsovercometheseresource constraints;theyarejoiningRHCT-fundedconsortiadisproportionately. TheRHCT-funded consortiumhospitalsstaff30bedsandhave6physicians,onaverage,whiletheindependent hospitalsstaff39bedsandhave10physicians. TheRHCT-fundedconsortiummembers,also have loweroperatingmargins,generatelessrevenuefromtheirworkingcapital,and have olderfacilities. Inaddition,theRHCT-fundedconsortiaarelesslikelytohaveaphysicianon theirhospitalboardsthanarenon-RHCT-fundedconsortia-amanagementcharacteristicthat hasinthepastcorrelatedwithgoodconsortiumprojectadoption. Thus,theRHCTgrants programispromotingconsortiumformationamongthesmall,financiallyweakhospitalsthat maynothavethemanagementstructureneededtoensureprojectsuccess. Despitethedifficultiesfacingtheconsortiumgrantees,theyreporttheircommunication iseffective,andthusfartheyaremakingprogress. Thevastmajority(98percent)ofthe grantees in consortium projects funded in 1990 and 1991 felt that their consortium communicationiseffectiveallormostofthetime. Ofthe21 consortiareportingprogress, 9haveimplementedconsortiaprojects,and7haveformedtheirconsortia(althoughtheyhave notimplementedanycollaborativeprojects). However,sixoftheconsortiahavestopped pursuingthehospitals'collaborativeprojectsandarepursuingprojectsindividually. SPECIALFOCUS: THEEFFECTSOFAGINGFACILITIES Toexploretheeffectsofagingfacilitiesonhospitaloperationsandprojectprogress,we interviewed the 40grantees with the oldest facilities-those that most recently renovated between1951and1973. Thesegranteesaregenerallysmallpublichospitalslocatedprimarily intheMidwestthatfacesomestartlingphysicalconstraints. Afewarewoodenstructuresthat donotmeetfiresafetycodes,somelackhandicapped-accessibleentrances,andseveralhave placedtheiradministrativeofficesinformerclosetsbecauseoflackofspace. The 40granteescited twomajor reasonswhytheyhave notrenovated theirfacilities. Theseare:(1)thehospitalcouldnotaffordtorenovate,orcouldnotaccesscapitalfinancing toundertakearenovation;and(2)thehospitaladministrationfeltrenovationwasunnecessary. Two-thirdsofgranteesfelttheirfacilitiesneededsometypeofrenovation,and38percenthad planstorenovate orwereintheprocessofrenovation. Therenovationsincludedadding space for additional outpatient services and long-term care services and consolidation of servicestoimprovehospitalstaffingpatternsandpatientflow. vii Mostofthegranteesfelttheiragedfacilitiesnegativelyaffectedtheirhospitaloperations. Themostfrequentproblemisthatthebuildingsweredesignedtomeetinpatientcareneeds, andasaresult,areinefficientforprovidingoutpatientservices. Severalgranteesalsofelttheir agedfacilitieshurtphysicianrecruitmenteffortsanddamagedcommunitysupport. Theseagedfacilitiesdonotappeartoaffecteitherthehospitals'choiceofaprojector theproject'sprogress. Onlyfiveoftheinterviewedgranteeswereusingtheirgrantfundsfor construction projects-a proportion comparable to the rest ofthe grantees. In addition, comparedwithallgrantees,aslightlyhigherproportionofthegranteeswithagedfacilities wereonschedulewiththeirgrantprojects. GRANTEESTATUS Amongthe350hospitalsawardedgrantsjn1991and1992,316arestillactiveand34no longerhavegrants.Fiveofthe34inactivegranteesdiscontinuedtheirgrantsbecausethey closed. Duringthepastbmonths,17granteeslefttheprogram. Twohospitalsclosed,eightleft thegrantprogramafterbeingreclassifiedasurban,andsevenvoluntarilyrelinquishedtheir grants. Thestatusof1989through 1993granteesasofSeptember30,1993isasfollows: GranteeStatus 1989 1990 1991 1992 1993 MonthsSinceAward 24 12 Continuing 162 154 179 Completed 174 181 DiscontinuedGrant 6 26 22 7 HospitalClosed 4 5 3 2 TotalAwards 184 212 187 163 179 TotalFiscalYearFunding(Millions) $83 $17.8 $24.4 $23.0 $22.8 viii 1991GRANTEES: PROGRESSAFTER21 MONTHS After21 months,themajorityof1991 granteesareonschedule,andmorereportedbeing onschedulethan6monthsearlier. Themostfrequentgrant-supportedactivitiesarerecruiting (63percent of grantees), staff training and development (60percent), and equipment purchases (58percent). Grantees have finished some activities, especially establishing inpatientservicesandaddingswingbeds. Despitetheirprogress,thegranteesreportedbeing behindscheduleinsomeactivities,includingrecruitinghealthprofessionals. Theinabilityto recruithealthprofessionalshasbeenaconstantproblemforthegranteessincetheprogram began. 1992GRANTEES: PROGRESSAFTER9MONTHS Ninemonthsintotheirprojects,the1992granteeshavemadeconsiderableprogress.The majority(59percent)wereonoraheadofschedule. Similartothe 1991grantees,themost frequently pursued project activities are purchasing equipment (72percent), recruiting (68percent),andstafftraininganddevelopment(59percent). Theactivitygranteesmost frequentlyreportedasbehindscheduleisestablishinginpatientservices. Thisactivityrequires thecooperationofnonhospitalpersonnel,whichleadstodelaysintheearlystagesofaproject. IX I. INTRODUCTION A. LEGISLATIVEHISTORYANDPURPOSEOFTHEGRANTPROGRAM Congressionalconcernsaboutthefinancialandoperationalviabilityofruralhospitalsand theaccessofruralresidentstohealthcareledtotheenactmentoftheGrantProgramfor RuralHealthCareTransition. Inthelegislation,CongressmandatedthattheHealthCare FinancingAdministration(HCFA): Establish a program of grants to assist eligible small rural hospitals and their communitiesintheplanningandimplementationofprojectstomodifythetypeand extentofservicessuchhospitalsprovideinordertoadjustforoneormoreofthe followingfactors: (1) Changesinclinicalpracticepatterns (2) Changesinservicepopulations (3) Decliningdemandforacute-careinpatienthospitalcapacity (4) Decliningabilitytoprovideappropriatestaffingforinpatienthospitals (5) Increasingdemandforambulatoryandemergencyservices (6) Increasingdemandforappropriateintegrationofcommunityhealthservices (7) Theneedforadequateaccesstoemergencycareandinpatientcareinareasin whichanumberofunderutilizedhospitalbedsarebeingeliminated... Each demonstration project . . . shall demonstrate methods ofstrengthening the financial and managerial capabilityofthe hospitals involved toprovide necessary services.1 'OmnibusBudgetReconciliationActof1987(P.L. 100-203,Section4005[e]). 1