More than a dozen hospitals in rural Michigan at ‘high risk’ of closing

Rural hospitals across the nation are struggling to stay open due to financial pressures. Michigan is among the states hit hardest.

Update: Rural hospitals in Michigan face a dilemma: Merge or not?

It’s been seven years since Cheboygan Memorial Hospital shut its doors, costing hundreds of jobs and jolting rural residents in the northeast Lower Peninsula.

But health care analysts now warn that more than a dozen rural hospitals scattered across Michigan risk the same fate, as fiscal pressures, staff recruitment troubles and dwindling patient numbers push them to the brink.

According to Chicago-based national health care consulting firm Navigant, 18 rural hospitals in Michigan are at high risk of closing – about one-in-four rural hospitals in the state, and ninth highest such percentage in the nation. Analysis by a University of Detroit Mercy healthcare researcher reached similar conclusions, citing more than 20 “at risk” rural hospitals in the state.

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Related: In Alabama, one rural town reached for its wallet to keep its hospital open

David Mosley of Navigant said the price rural communities pay when hospitals close extends far beyond the immediate economic impact and health care jobs that are lost.

He pointed to a University of Kentucky study this year that found rural patients averaged 11 additional minutes in an ambulance in the year after a rural hospital closed. Patients over 64 years old spent 14 additional minutes in an ambulance, doubling their ride time.

“You are an elderly patient with a heart condition. Your 20-minute ambulance trip to the hospital just became a lot longer,” he said.

In Iron Mountain along the Upper Peninsula border with Wisconsin, news on the future of the local hospital, Dickinson County Healthcare System, has been grim. It’s one of those on the Navigant list.

Chapter 11 bankruptcy could be in the works for DCHS,” read one headline in 2018, as the hospital board considered filing for bankruptcy.

Later that year: “Dickinson County Healthcare System needs nearly $24 million.”

Dickinson County Healthcare System board chair Margaret Minerick: “We need our hospital in our area. The hospital is critical.” (Courtesy photo)

Plans to sell the struggling hospital fell through in 2018, one to Wisconsin-based Bellin Health – which would have assumed $61 million in debt - and another to Marquette-based UP Health System.

Meanwhile, total inpatient days tumbled 15 percent in just two years, from more than 10,000 days in 2016 to 8,472 in 2018.

To shore up its financial position, the hospital pared its work force from 714 in 2017 to about 600 today. It imposed employee pension cuts and hired an interim chief to replace beleaguered CEO John Schon, who resigned in November.

Thanks to the cost-cutting measures, the hospital could be on course for its first profitable year since 2015. It posted an operating gain of nearly $750,000 through the first quarter of 2019.

Officials say they have fingers crossed the worst is behind them.

Related: New plans for Michigan psychiatric facility raise more concerns about care

“We are holding our own and our bottom line looks good,” board chairperson Margaret Minerick told Bridge Magazine.

“We need our hospital in our area. The big hospitals are an hour-and-a-half away in either direction. From that standpoint, the hospital is critical.”

Former Democratic U.P. congressman Bart Stupak is spearheading an effort to secure long-term financing for the hospital – perhaps as much as $25 million – through the U.S. Department of Agriculture’s Rural Development Agency. Officials say the funds would allow DCHS to settle outstanding debts and chart a more stable future course.

Stupak anticipates about half the loan would go to pay off debt and half to purchase aging equipment like MRI scanners and linear accelerators, the latter used in cancer treatment. He’s hopeful the loan will be approved this fall.

“Big picture, this will stabilize the hospital long term,” said Stupak, a partner in Venable LLP, a Washington D.C. consulting firm hired by the hospital after its negotiations for sale collapsed.

Still, Zigmond Kozicki, an associate professor of health administration at the University of Detroit Mercy, said warning signs continue to flash across rural Michigan, where hospitals struggle to find a stable business model.

“It’s a very big concern,” he said.

Kozicki analyzed 2017 federal financial data for Michigan and concluded more than 20 rural hospitals were at risk of closing, based on analysis of hospital balance sheets. He shared his conclusions at an April conference on small town and rural development.

In light of national trends, it could be that Michigan’s been fortunate thus far. According to a 2018 federal report, 64 U.S. rural hospitals closed from 2013 through 2017, about 3 percent of all rural hospitals. About three-fourths of those closed were in the South.

The report attributed the closures to “multiple factors,” citing a decrease in patients seeking in-hospital care and cuts to hospital payments by Medicare insurance for patients 65 and older. The North Carolina Rural Health Research Program, a branch of the University of North Carolina, counts 106 U.S. rural hospital closings dating to 2010.

Kozicki likened the challenges of rural hospitals to that of a restaurant with a shrinking customer base. Both have money going out for fixed costs but not enough coming in.

“How much does it cost to operate the restaurant? Is it sustainable over time?”

Rural Michigan hospitals continue to face demographic trends that eat at their bottom line: They sit in regions that are graying and draining people. Counties throughout the U.P. and northern Lower Peninsula suffered population losses from 2010 through 2017.

Michigan has 11 counties with a median age over 50, tied with Montana for most in the nation. All are in the rural northern Lower Peninsula or U.P., led by Alcona County 100 miles north of Bay City, with a median age of 56. The state’s median age is just under 40.

Beyond that, rural hospitals suffer other disadvantages that push down profit margins.

To stay competitive, they need diagnostic tools like CT and MRI scanners that can cost upwards of $2 million each. But those machines get less use in rural hospitals than at busy urban hospitals – and thus less revenue to pay for their cost. Rural hospitals staff costly 24-hour emergency rooms that tend to be chronic money losers, especially with lower patient volumes.

“An emergency department has fixed costs – there are things you have to do whether or not anyone shows up,” said Laura Appel, senior vice president of the Michigan Health & Hospital Association.

“Nurses and doctors have to be available. You have all the technology that has to exist whether there are 100,000 patients a year or 50,000 or 10,000.”

Laura Appel of the Michigan Health & Hospital Association: “You have all the technology that has to exist whether there are 100,000 patients a year or 50,000 or 10,000.” (Courtesy photo)

In the meantime, as they try to stay afloat, rural Michigan hospitals continue to cut services like labor and delivery that have become a luxury they can no longer afford.

Fifty miles west of Cadillac, Munson Healthcare Manistee Hospital closed its labor-and-delivery service at the end of May, as the number of hospital births had been on a steady decline. It had just six deliveries in March.

Northeast of Grand Rapids, Sparrow Carson Hospital in Carson City closed its obstetric ward in May 2018, citing dwindling births. South of Battle Creek near the Indiana border, Sturgis Hospital ended birthing service and hospice programs in December.

In the 1980s, there were more than 220 Michigan hospitals. Today there are 133, of which about 80 have obstetrics units, according to the Michigan Health & Hospital Association.

Eleven rural hospitals have shut down labor-and-delivery since 2008.

That leaves residents in much of rural Michigan a half hour or more from a hospital with an obstetrics unit or even a practicing OB-GYN.

Appel noted the Cheboygan hospital reopened weeks after it closed in 2012, rebranded as McLaren Northern Michigan-Cheboygan Campus, as it was absorbed by the sprawling McLaren Health Care system which owns hospitals throughout the northern Lower Peninsula. But while it has an ER and outpatient services, it offers no inpatient care.

As federal funding rules define it, it’s no longer a hospital.

But Appel said that could be the model some rural hospitals turn to in the future. She pointed to proposed federal legislation that could assure Medicare funding for such facilities, even if they are technically not hospitals.

GOP U.S. Sen. Chuck Grassley of Iowa has touted a bill that would let small rural hospitals continue to receive Medicare payments if they drop inpatient care and shift to emergency and outpatient care.

“I would be willing to predict we would see them transition to something that looks less like what we traditionally think a hospital is,” Appel said.

Still, as with closed OB wards, that would leave rural residents longer drives for care if they need hospitalization.

In Sault Ste. Marie, Chippewa County War Memorial Hospital has twice imposed a 10 percent pay cut on employees, in 2014 and in 2018, as hospital use fell from 12,402 inpatient days in 2012 to just under 10,000 in 2018.

Hospital CEO David Jahn said it’s cut about 80 jobs in a year to compensate for lost revenue. The hospital’s also among those on the Navigant at-risk list.

Jahn said the hospital struggles to attract and retain staff, which will be crucial to its bottom line. It’s been trying for two years to replace one of two staff orthopedic surgeons, positions he said collectively represent 10 percent to 15 percent of hospital revenue. The hospital is also trying to replace its sole staff urologist, who departed late last year.

David Jahn, CEO of Chippewa County War Memorial Hospital in Sault Ste. Marie: “Our goal would be to remain independent, but how long in the future would we be able to do that?” (Courtesy photo)

“When you are at a rural hospital, you might be on call every other day. New doctors coming out (of medical school) don’t want anything to do with that,” he said.

Jahn noted the hospital posted a $1.7 million loss in 2017 followed by a $4.5 million loss in 2018, while showing a modest profit of $150,000 the first few months of 2019.

While the hospital’s always been under local control, Jahn said it’s had informal talks about affiliation with larger health care systems that include McLaren Health, Spectrum Health in Grand Rapids and Traverse City-based Munson Healthcare.

“Our goal would be to remain independent,” he said. “But how long in the future would we be able to do that?”

Michigan Health Watch is made possible by generous financial support from the Michigan Health Endowment Fund, the Michigan Association of Health Plans, and the Michigan Health and Hospital Association. The monthly mental health special report is made possible by generous financial support of the Ethel & James Flinn Foundation. Please visit the Michigan Health Watch 'About' page for more information.

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Val in Midland
Wed, 06/12/2019 - 8:54am

Not mentioned is whether lack of health insurance is a factor in the dwindling customer base.

Wed, 06/12/2019 - 11:37pm

Maybe Midland has the right approach, develop a regional specialty that will draw people from a wider area to support the infrastructure of the whole hospital. For how many years has the Mayo Clinic been serving the world not just the local residents?
Maybe Marquette needs to explore that approach, what condition/treatment would draw people from Wisconsin, Ontario, and as far south as Midland [the southern edge of northern Michigan?

Wed, 06/12/2019 - 9:22am

Once again, you suggest throwing $ at a problem instead of looking for the root cause. The collusion that exists between the medical profession, pharmaceutical companies and the insurance companies regarding pricing is criminal. I was recently billed $150.00 for a gel coat pad, 3x3x1 inch thick. Amazon pricing was 39.00 with free shipping.
People are not able to afford “affordable health care” so they go without until an emergency exists. Administrators are looking at bottom lines only, not at real costs and solutions. They decide to close marginal or unprofitable locations, with no thought given to the overall community impact. If the administrators would do the jobs they were hired to do, put pressure on their suppliers and insurance providers, they would start to realize a better return on investment.

Wed, 07/17/2019 - 11:18pm

Healthcare is unaffordable so people go without. Most countries have public healthcare.

Robyn A Tonkin
Wed, 06/12/2019 - 11:59am

No, lack of health insurance is not a factor in dwindling customer base. Also, administrators are doing the job, often incredibly heroically, that they were hired to do.

I think the comments appended to this article by Val and Joe point up the information disconnect between what I call "True Out County Michigan" and the rest of the state, and metropolitan areas anywhere in the US.

We live in Watersmeet Township, about a mile from the state line with Wisconsin. A guy from about a hour away in Wisconsin bought our used dishwasher. He seemed amazed by where we lived, which to us is woodsy, but well within the reach of a store and a gas station. "Wow" he said. "You'll really out here. It's good you're retired. With no cell reception, you couldn't make a living today. How long does it take you to get plowed out?" I explained that we get plowed out often, that we had jobs and a small business before the advent of cellphones, and that we are not The Real Yoopers. The Real Yoopers live north of the border area.

When we moved here 40 years ago, there was a hospital in Phelps, WI, that had OB/GYN capability, and surgical capability. Today, it is a fallen ruin, long abandoned, the roof laying on the second floor. Doc Eichoff had a surgery and clinic in Land O Lakes, WI. Today there is a basic clinic, run by the Aspirus System, out of Wausau, WI, in Land O Lakes. The Aspirus system, Ascension, and Marshfield Clinic system vie for the dwindling patient pool of N. WI--Aspirus pretty much has the western UP sewed up, hence DCMH's woes. Also, DCMH is in Iron Mt, where the VA facility for the UP and N. WI is located. The population up here is dwindling and ageing, and the VA gets the vet guys. Gunderson, a lower midwest medical powerhouse, is rumored to be in negotiation with Marshfield for the two to merge. Marshfield used to be the powerhouse in N. Wisconsin, and UP residents went there as well. Today, the dwindling population in both places, which is mostly old and on Medicare, has left Marshfield with an unwieldy glut of clinic and hospitals that are a huge money drain.

We are lucky that we live 28 miles from a Critical Access Hospital in Eagle River, WI. As far as ambulance time, what ambulance. If you're able, you drive yourself or a family member drives you, to the hospital. There is a volunteer ambulance in Conover, WI, that is in desperate need of new blood in the form of young volunteers. And you're probably not going to want to wait for it if you can get yourself there. I have made that run when minutes counted.

The biggest problem is the dwindling, ageing population up here. The people who are left are often sick, on public assistance or somehow getting by on Social Security.

I get my medical care at the Lac Vieux Desert Health Center in Watersmeet, Michigan, which belongs to the Lac Vieux Desert Band of the Lake Superior Chippewa. The Tribe, with incredible generosity, opened their gorgeous state of the art clinic to anyone who wants to come. I have excellent health care for the first time in decades.

Peter from the Sault
Wed, 06/12/2019 - 12:09pm

I don't understand why people think businesses and services of all types should just be available for anyone, no matter where they live.

Thu, 06/13/2019 - 9:28am

Peter, you don't think that emergency services are a necessity, no matter where someone lives? If War Memorial closes, are you going to try to cross to Canada if you or a loved one is having a heart attack or stroke or is bleeding profusely? Many folks here already travel to Petoskey or Marquette or Traverse City for specialists (which can mean facing treacherous weather in the winter), so it's not as if we have a glut of health care options. Forward-thinking leaders understand that lack of health care will increase the population flight from rural Michigan. Personally, I know several people who have reluctantly left the U.P. because they could not get adequate care for their medical conditions here. Health care is a necessity; it is not a purely capitalist, market-driven endeavor.

Dusty Deflandres
Wed, 06/12/2019 - 1:02pm

Isn't Obamacare great? Aren't you all glad you got what you wanted?

Kim Silfven
Wed, 06/12/2019 - 2:51pm

Perhaps it's time to look at healthcare less as a business and more as a right just as we look at education, and cut the entire for profit stance that controls the healthcare a business, and fund both appropriately. If it's good enough for something as important as public education, it's good enough for public healthcare. We trail the world in both areas. I expect the CEO's of the healthcare industry (and generally speaking, healthcare shouldn't be an industry any more than should education) will spend more time (and money) arguing why this country needs healthcare as a business.

Wed, 06/12/2019 - 9:56pm

You need to get out in the world, at least to Ontario, to see how that right to care is delivering service. They are spread farther with far fewer and to control cost they have centralize all the major testing equipment, such as MRIs, CTs, they have gone to geographic monthly quotas for certain treatments/care [this is per relatives caught up in the service limitations].

The problem isn't the for 'profits', they are motivated to make their facilities pay and will commonly try adding other services to supplement the hospitals.

The problem is a dwindling demand and a dwindling supply of highly skilled professional that are in high demand in high volume markets.
I have to say my live saving meds[generics] are $5 each a month at Walmart's, the anti-biotics are free at Meijer, Those seem cheap to me, and be old enough to remember when those drugs weren't available at any cost, they seem like 'miracle' drugs to me.
The reality is balancing the availability of care to the alternative. Since I have been treated to diseases that we most assuredly terminal in my youth, and being treated for chronic conditions that family member die of in my youth. I am grateful for what has been created in my lifetime and feel those developing and providing it have earned their compensation, am glad they are investing their profits in developing new drugs that cure conditions that are incurable.

Tue, 07/30/2019 - 10:41am

I'm happy for you getting your meds cheaply. My disabled daughter ran up prescription bills in 2018 of $40 thou for the year. Thankfully she has Medicare Part D and Medicaid to pay for them. But that just means the taxpayers pay for her drugs while the pharmaceutical CEO's and stockholders get rich. Something is wrong with this system.

Wed, 06/12/2019 - 3:49pm

To Dusty: Obamacare has nothing to do with this argument. Millions of people are grateful to have any health insurance that they didn't have before...period. And the health care centers that care for these patients are glad to have the business. Dwindling population in rural areas is the biggest culprit here. Starting in the late 1970's I worked at a small hospital which used to be in the boonies but now was in the exurbs. It eventually closed because we couldn't attract any physicians who are trained in urban areas and don't want to work alone away from other colleagues and little to no technology. They have never trained to work in isolation. In my case, the hospital needed to be closed but we had others close by so no harm done except for being the town's largest employer. But once a hospital closes, it will never re-open. Also, having a population with consistent health insurance makes a big difference because physicians want to establish a practice anywhere they can't make a living. Young people don't want to live an isolated lifestyle anymore. It's just too hard to make the long commutes and raise kids in areas with no healthcare and no schools.

Wed, 06/12/2019 - 11:20pm

Not being a medical professional, and only knowing the medical system as a patient the thoughts I offer are from experience in a far different profession.
The article gave the sense of an all out effort to return to or maintain a system that was created and succeed in the past. The reality is that when the future is not like the past we need to change how we think about how we achieve the desired results.
In the past hospitals were built for the efficiencies of the facility and staff, maybe it is time to drop the model of the past and turn the pyramid upside down. I don't know what the walls limiting the thinking in rural hospitals are, but rather then have multiple central hospitals for efficiency, why not a distribute triaging network of very small facilities with a sophisticate transportation system to a single hospital. Much like what the military does in combat zones, triage and do minimal care and transport the patient via high speed specially equip helicopter, what is flight time from any part of the UP to Marquette or Sault Marie or even Petoskey? The point of the pyramid changes from close best available care to rapid access to most effective care? What if that includes the potential patients learning their role/responsibilities in getting treatment.

What if the shift is too developing a rapid diagnosis method in which the patient is attached to a tablet by themselves or someone in close proximity, or issue them a specialize version of an iWatch.

It maybe time for the thinking to change and focus the results before trying to keep the established delivery system.
Maybe it is time to have a structured conversation with potential and current patients to talk about their on concerns and how they could be addressed. The key is about the future and not lamenting the past.

Timothy Rhoades
Thu, 06/13/2019 - 10:57am

I wish we could get a list of the at-risk hospitals.

James Roberts
Sat, 06/15/2019 - 6:42pm

Can always count on Bridge to define another right. We all have the right to have access to the healthcare we need wherever we choose to live. Sounds great but afraid the economies of scale our huge state and country would require is impossible. Places like the UP are great for certain lifestyles and when i was young i thought living on a lake in the woods would be the ideal. Common sense kicked in when i realized it was not smart to be an hour away from a real hospital for the inevitable. We all have the right to live where we choose and we make those decisions based on all these factors. Access to many basic services are difficult for these places but i am sure Bridge believes the right to an air ambulance to your lake in the woods should be the next step. Of course i know the income issue makes it more difficult to move but once again, priorities.

Wed, 06/26/2019 - 2:36pm

Duane: You are correct in that we can never return to the "old ways" because small towns don't have the populations they used to have. The system you describe in your post is what we have now...Rural facilities have become "critical-care access" facilities who feed their patients into larger hospital systems. Some of them can do routine surgeries depending on how they are staffed. When I moved to Michigan I choose my town because it had a hospital that could take care of all except sub-specialties. A system for acute care that comes to rural areas isn't going to happen. If patients value close-by acute care, they will have to move. Evolution....sigh.