rural community

The Socioeconomic Impact of Disruptive Healthcare on Rural Communities

This missive attempts to address the following issues pertaining to the potential ramifications of the transformation of rural health from a cost-plus fee for service model to a value-based, consumer driven healthcare model:

  • Employment: It is not unusual that the local hospital is the largest or second largest employer in a rural county or community. As such, the rural hospital is a dependable source of employment providing reasonably good jobs with good benefits. Healthcare employment is general not dependent upon ebbs and flows in the economy. Healthcare is a good community asset providing economic benefit through out the community and is an integral part of any economic development plan. The community is wary of any change in a healthcare system that would jeopardize local employment.
  • Risk Aversion: The local hospital is a public asset. The board of trustees and the administration is charged with maintaining that public asset. Consequently, emphasis is placed on maintaining the status quo rather than innovation that could provide a brighter future.
  • Stranded Capital: Changes in the way healthcare is delivered may make the existing hospital obsolete. The community may have invested considerable resources in renovating, adding to or replacing legacy facilities. That investment and the obligations created through loans or bonds may represent of significant community burden unless an avenue is found to earn revenue in a new model.
  • Trust: The public has long held the belief that the medical profession will do what is best for them. For the most part, that trust has been well placed. Unfortunately, the trend has been to remove that decision making interaction from the physician and vesting it in third party payers. This has left the public less trustful of the medical profession and fearful of a faceless system that controls their lives.
  • Leadership: Under the above listed circumstances, finding leadership to shepherd the process of transition with decisive but incremental steps to a well defined outcome is difficult but vital to success.


The above listed traits place the local community health system if a vulnerable position relative to disruptive influences. There are those that see an opportunity to profit from providing high quality low cost medical care without the regulatory burden and trappings of a medical model that is becoming obsolete. Once that trend begins, it will be impossible to stop it. It is better to be a participant in the new model than a victim of it

The first priority is the acceptance of inevitable change in the way that healthcare is provided in rural America. The normal human reaction to impending change in any culture is to deny that change is necessary. In the case of rural health, this position is augmented by the argument that rural health delivers quality healthcare at a lower cost than competing urban systems. In many cases, this is true. However, excelling in performance in a system that is dysfunctional and economically unsustainable is not a virtue.

That being said, the issues stated above are real and if not addressed in a reasonable manner, will create strong emotional resistance to a long-term rural health solution.

It is therefore recommended that the following approach be taken to alleviate anxiety, address cultural concerns and address financial considerations:

  • Creation of a for-profit wellness district with a three-part ownership. The proposed three owners to be the local physician group or groups, the local business community and the local hospital. The ownership positions are not necessarily equal. The local hospital or hospitals are most likely not-for-profit, county-owned or community-owned entities. Therefore, legal structure must be put in place to allow a not-for-profit entity to be a participant in a for-profit enterprise.

The advantage of this arrangement is that it allows the local hospital or hospitals to maintain their critical access hospital designation without disruption while simultaneously transitioning to a low volume, value-based model.

  • Proceeds from the wellness district can be used to repay outstanding bond or loan obligations. The Wellness District itself, as a for-profit entity, would pay taxes to the county and become an asset rather than a potential public burden. Keep in mind that the cost of capital to design and build a hospital represents only approximately 9% of total costs over a twenty-five year life of the facility. Under these circumstances, the increase of functional efficiency on the operations side of the ledger can offset the repayment of capital expenditures.
  • In the employment arena, the potential of negative impact on employees is greatest among those that do not provide direct patient care in the CAH system. By running parallel models, those persons providing collection services, reporting, responding to government regulations and negotiating with third party payers would be absorbed into the new market-based system over a period of time and with new responsibilities. Through the reduction of systemic waste and duplication, the opportunity exists to provide an increased number of jobs directly impacting the wellbeing of patients and the community.
  • Healthcare in general is one of the most risk-adverse industries in world. Rural health takes risk aversion to another level. Very few members of the board of trustees, the administration or the staff are willing to try anything new or innovative. They see the risk as being far greater than the reward. While the most efficient method of transitioning to a new system is to move quickly, the reality is that the healthcare industry shudders at the thought taking a leap of faith. Therefore, others must go first, take the risk and then they will follow when they determine change is in their best interest. In this case, we must create an alternative, show that it will be successful and allow the transition to occur without being confrontational.
  • Leadership with an unwavering commitment to a vision of the future is paramount for the success of any enterprise. This is particularly true of the transformation of healthcare.   As with most other endeavors, leadership coalesces around the value stream. In a direct-care model, patient revenue enters the system through attribution to the most often seen physician. The physician is in a position make medical judgements in conjunction with the patient’s wishes. It would follow that the physician plays the starring role.
  • Trust is easy to talk about but difficult to attain. Trust is achieved through consistent competence and integrity. The public will support and maintain loyalty with an organization that gains their trust.

In summary, I believe that there is an acceptable method of transitioning from the current unsustainable public system of rural health to a dynamic, agile self-sustaining rural health system that delivers high quality at the lowest possible cost. This document offers a pathway to aid that transition. It is recommended that the local providers embrace the inevitable changes that are occurring and in doing so secure a bright future for rural healthcare.


“Never change things by fighting existing reality. To change something, build a new model that makes the old model obsolete.” Albert Einstein