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Capital Needs of Small Rural Hospitals
To gain insights into the capital needs of small rural hospitals and the hospitals access to capital, a survey was mailed to administrators of 950 rural hospitals with under 50 beds. The survey asked respondents to estimate the total cost of bringing their facility into compliance with current laws, including fire codes and the requirements of state inspection agencies. To gain insights into hospitals access to capital, the survey asked respondents whether their hospital could qualify for a million-dollar loan. Survey data were combined
with financial data from 1998 cost reports to allow a comparison of hospital financial needs to available resources.
The study will report on:
- The average cost of bringing small rural hospitals up to code;
- The percentage of small rural hospitals that can obtain a $1 million dollar loan; and
- The financial condition of hospitals with access to capital difficulties.
Publications
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Capital Needs of Small Rural Hospitals
Author(s): Jeffrey Stensland, Julie Schoenman, Curt Mueller, Andrew Singer
Date: 05 / 2002
Examines the capital situation of rural hospitals with fewer than 50 beds to determine the total cost of bringing each facility into compliance with current laws, as well as the facilities' cost of borrowing and ability to borrow. Key results include: 38 percent report having deficiencies that, by law, require renovation or remodeling; the median cost of correcting those deficiencies is $1,000,000; most hospitals will need to, and have the ability to, borrow funds to correct the deficiencies; and the hospitals that report being unable to obtain loans tend to be older, low-volume hospitals with operating losses. Study concludes that due to the poor financial condition of hospitals that lack the ability to borrow, a new federal loan program does not appear to be the answer to their capital needs. Rather, improving access to capital depends on improving hospital profitability. The authors offer three options. 1) Medicare policy could provide hospitals in regions with very few patients an adjustment that would allow low-volume hospitals to earn a profit on Medicare patients. 2) Medicare policy could be adjusted to allow Medicare to directly pay a portion of hospitals' charity care and bad debt burdens. 3) Policy makers could set up a technical assistance program operated at the state level to assist rural hospitals in improving their financial condition.
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