Rural Hospitals Brace for Managed Care’s Impact : Medicine: Small facilities already feel the pinch. But only those that can cut costs will survive, experts say.

Small, rural hospitals are hearing a rumble from the distant cities. It is the approach of managed health care.

Hospitals of 100 or fewer beds know that their imagination and hard work will determine whether the managed health-care thunderstorm brings nourishing rain or just passes them by.

In the state where the nation’s first hospital was built in 1751--Pennsylvania Hospital in downtown Philadelphia still is operating--small, country hospitals are struggling with low Medicare reimbursements, expensive technology, a lack of insured patients and a doctor shortage.

Now, small, country hospitals will have to show managed-care insurers they also can hold down costs.

And soon. By the turn of the century, 90% of all Americans will be under managed care, said Ann Zuvekas, a senior researcher at the Center for Health Policy Research at George Washington University in Washington.

“We certainly have some important steps to take if we’re going to survive,” said Timothy Churchill, president and chief executive officer of Windber Hospital in Windber, Pa.

The steps vary. Hospitals are merging, offering more outpatient services or letting staff go. All the steps are aimed at the bottom line.

Reducing costs is the way to attract money from managed care, a cost-controlling health insurance system. When a managed-care health insurer awards a hospital contract, it looks for a center that keeps costs low.

“If the small, rural hospital is able to keep its costs down so it can compete with the regional hospitals, the 400-bedders, then it has a fighting chance,” Zuvekas said.

Cost is one more area where small hospitals are at a disadvantage.

Most rural patients are elderly, and Medicare reimbursements in rural areas frequently do not pay the whole cost of care. Medicare assumes that urban hospitals have higher overhead costs and need higher reimbursements.

In addition, large hospitals buy supplies in bulk and get a discount that small hospitals cannot command.

And having fewer patients, small hospitals cannot always balance the high cost of caring for a very ill patient with the low cost of treating somebody less sick. One AIDS patient or a premature baby can blast a hole in the budget.

Under managed care, insurers hold down costs by keeping the gates to medical treatment. The hospital no longer has the final say about what a patient needs; the insurer does. And the hospital does not bill the insurer--the insurer dictates how much it will pay.

“If you say, ‘I’m sorry, I can’t take that,’ then they find somebody who can,” said Carolyn Roberts, president of a small, rural hospital in Vermont and former board chairman of the American Hospital Assn. in Chicago.

To compete, Churchill has cut Windber Hospital’s staff by 5% and has frozen wages for more than 18 months. He has lent office space to doctors in hopes they will send more patients to Windber, and patient admissions are growing.

In the fiscal year ending June 30, 1993, the hospital lost $550,000. A year later, it was in the black, if only by $5,000.

Next, Churchill is looking for a partner, a major hospital offering the most advanced care available to help treat patients and share costs to attract managed-care dollars.

Churchill’s search illustrates another effect of managed care: It drives hospitals to join in alliances and networks in hopes of impressing managed-care insurers.

“If managed care is coming to your region, size matters,” said John Russell, president and chief executive officer of the Hospital Assn. of Pennsylvania.

Managed care is only the newest of many troubles that country hospitals have faced. For decades, they have scrambled to pay for technology that becomes ever more expensive with each new development.

Last year, volunteers raised $8,375 with a turkey dinner and other fund-raisers for a $9,539 external pacemaker for Bucktail Medical Center in Renovo, population 1,800, in central Pennsylvania.

Buying a secondhand portable X-ray to replace the 1951 model had to wait.

Besides technology, there are operating costs.

“We borrow. We lease. We steal,” President Tom Pregent joked. “Tile, paint, office chairs, whatever.”

Bucktail has no obstetrics unit, once fundamental to any hospital. Thirty-seven beds have been converted into a nursing home. But it has an emergency room and maintains a helicopter pad for emergencies it cannot handle. As a member of the Geisinger hospital network, it sends seriously ill patients 70 miles to the 577-bed Geisinger Medical Center in Danville.

Like many rural medical centers, it has become less of a hospital and more of a steppingstone to full, modern care somewhere else.

Rural patients seem to accept that they might have to travel.

John Davis, a heart patient at Soldiers and Sailors Memorial Hospital in Wellsboro, near the New York state line, was not annoyed about taking an hourlong trip to a bigger hospital for a high-tech test.

Davis remained loyal to Soldiers and Sailors. He and his neighbors still need it to have their gall bladders removed, ear infections treated and broken bones set.

“You pass down the street and you see the nurses and the doctors,” said Davis of Blossburg. “It’s a big family.”

Also on the positive side for small, country hospitals is their ability to change faster than the big, slow ones.