As Iowa's rural hospitals grapple with challenges, larger health systems offer avenue for specialty care

Pamphlets on various care services are shown near the waiting area at Washington County Hospital and Clinics in Washingt
Pamphlets on various care services are shown near the waiting area at Washington County Hospital and Clinics in Washington, Iowa on Thursday, Sept. 26, 2019. (Jim Slosiarek/The Gazette)

Rural hospitals across the country often are the backbone of America’s smallest communities, and Iowa is no exception.

Iowa’s critical access hospitals, for example, not only are their community’s largest employer, they also can be the sole access to an emergency room for miles.

And considering the daily challenges rural hospitals face today, and no matter how important those facilities are, health care officials say closures are becoming more of a possibility.

“If that’s the national trend, I don’t know why Iowa specifically would be immune to it,” said Todd Patterson, chief executive officer of Washington County Hospitals and Clinics in Washington.

Because of this, Eastern Iowa community hospitals prioritize primary and emergency care for their county residents, but struggle to provide specialty services. That’s also why many urban-based health care providers play a role in helping their rural counterparts ensure access to services for more complex health conditions.

Of Iowa’s 118 hospitals, 82 are critical access hospitals — a federal designation for hospitals with 25 beds or fewer. An additional eight hospitals are designated as rural hospitals by the Iowa Hospital Association — also described as “tweener” hospitals, too large for a critical access designation but not enough patient numbers to meet urban distinctions.

Nationwide, rural hospitals are struggling. Since 2005, 155 rural hospitals have closed across the country, according to the North Carolina Rural Health Research Program — though none of those were in Iowa.


Sixteen of those closures occurred in 2019 alone. The latest was a hospital in Texas, which shut its doors in August.

According to an analysis from Chicago-based consultant Navigant, 17 of Iowa’s hospitals are at high financial risk, an indicator for a forthcoming closure.

The Iowa Hospital Association confirmed this report, adding that for fiscal year 2018, the average operating margin for Critical Access Hospitals was negative 2.7 percent.

At Henry County County Health Center in Mount Pleasant, Chief Executive Officer Robb Gardner said his hospital saw growth and kept costs contained, but fiscal 2018 was the “worst fiscal year on the income side that we’ve ever had.”

Gardner said people choose the quality of life offered in rural Iowa. But if the community’s main access to health care goes away, so do the draws of small-town life.

“I think if we don’t ensure access to health care, that tremendous thing is going to go away,” Gardner said. “If you lose your hospital and your health care, then why would people choose to live there?”

Rural hospitals around Eastern Iowa struggle to offer clinics for urology, cardiology, maternity services and other specialty care.

Specialty services not only are expensive and draw too low of a patient volume to cover costs, but also are difficult to staff with high-earning specialists in rural areas.


So to continue offering these services to their patients, critical access hospitals in Eastern Iowa have partnered with larger hospital systems based in urban areas, including in Iowa City.

“Rural medicine needs those urban hospitals for specialty care,” said Bryan Hunger, chief executive officer of Jefferson County Health Center in Fairfield.

Need for partnerships between rural, urban hospitals

Small hospitals across the state have specialty clinics, which Hunger described as a space available for lease by larger hospitals for use by their specialists. These specialists visit monthly or weekly and provide outpatient services closer to home for rural residents.

It comes down to patient volume, Hunger said. Larger hospitals have enough patients to justify employing one or more specialty physicians.

“I couldn’t employ a cardiologist on my own because I don’t have enough people here for them to see,” Hunger said.

“If they want to provide specialty care, rural hospitals generally need to partner with a larger urban-area hospital or clinic because none of us are going to have enough volume to do it on our own.”

Eastern Iowa rural hospitals often partner with Mercy Iowa City, an affiliate of MercyOne, and the University of Iowa Hospitals and Clinics.

In Jefferson County, cardiology, oncology and gastroenterology are among the services provided by groups from Iowa City.


Low patient volume and high costs drove a decision at Washington County Hospital and Clinics to close down the labor and delivery unit in June 2018, meaning pregnant women had to go elsewhere to deliver.

But through a partnership with midwives from the University of Iowa, Patterson said Washington County Hospital was able to reopen its prenatal services this past June — about a year after the obstetrics unit closed. The hospital still doesn’t offer birthing services.

Patterson was not the chief executive officer when the obstetrics unit closed, but he defended the decision, saying it was the right one considering the challenges the hospital faced.

The unit delivered 133 babies in the last year the unit was operating, or about one baby every three days. However, the unit still had to be staffed 365 days a year, 24/7, with at least two obstetrician-gynecologists on call.

“We had a really difficult time, especially with nursing support, finding the appropriate amount of labor,” Patterson said. “So we ended up using traveling nurses, which are good but much more expensive.”

When providing low-patient, high-cost services, the choice comes down to whether to risk the financial solvency of the entire hospital for a single service or ensure the strength of other services, such as emergency care.

Through partnerships with other health systems, Patterson said Washington County Hospital was able to find a compromise.

“Really, it’s not a huge expense for us because it’s provided by a different provider, and there’s not a lot of profit or margin on it either,” Patterson said. “It’s just a community service we provide because we felt like we needed to do something.”


Washington County and Jefferson County are independent organizations, unaffiliated with larger health systems.

Henry County Health Center has taken the concept of partnerships a step further. It has had a management agreement with Great River Health System, based in the Quad Cities, for about 10 years, said Gardner, Henry County Health’s chief executive officer.

Great River Health not only provides specialists for outreach clinics, but Henry County Health also can use administrative services, such as information technology support, through this agreement.

“That has been a very positive partnership for our health system and, I believe, for our region,” Gardner said.

Challenges for Iowa’s rural hospitals

A variety of factors — including low insurance reimbursement, complex patient needs and difficulty recruiting a workforce — contribute to the challenges Iowa’s health care system faces. The state’s smallest hospitals often feel the greatest impact.

A challenge unique to Iowa is the structure of its payers, said Kirk Norris, president and chief executive officer of the Iowa Hospital Association, which represents the state’s 118 hospitals.

There is only one dominant commercial insurance company in the state — Wellmark Blue Cross and Blue Shield — meaning there’s little competition among reimbursement rates.

In addition, government plans — which reimburse providers at lower rates than commercial insurers such as Wellmark — tend to be the largest payer percentage-wise for rural hospitals.


“In rural Iowa, we are getting older, and that’s where a higher percentage of Iowans live in poverty,” Henry County Health’s Gardner said. “Even though we’re busier, approximately 70 percent of our revenue was for governmental-insured patients. That doesn’t cover our costs.”

Medicare tends to cover only about 99 percent of costs, hospital officials said.

Medicaid, which is run by managed care organizations in Iowa, also has been a source of criticism for hospitals of all sizes.

Providers say the private insurance companies that handle the program have been late or inaccurate on their payments to health care providers for services they provide to Medicaid members.

This has been so commonplace that some hospitals have entered into arbitration with the companies to obtain payment.

Virginia Gay Hospital, a 25-bed facility in Vinton, filed a federal lawsuit this past year seeking $91,000 in unpaid claims from the managed care organizations for services provided between 2016 and 2017. The lawsuit is pending, and hospital officials have not agreed to a settlement.

Physician recruitment a problem statewide

One of the main challenges faced by Washington County Hospital and Clinics is physician recruitment, Patterson said.

“We’ve recently hired some nurse practitioners and other advanced practitioners, but finding physicians is really a challenge,” he said.

It’s a hurdle felt across the state, which ranked 46th out of the 50 states for the number of active physicians per 100,000 patients in 2016, according to the Association of American Medical Colleges. And according to a 2019 study from the Association of American Medical Colleges, the United States is expected to see a shortage of up to 122,000 physicians by 2032.


Not only are there not enough physicians to meet the needs of an aging population in Iowa, but rural facilities struggle to attract potential employees away from urban areas such as Iowa City or Des Moines.

One physician at Wayne County Hospital in south-central Iowa hopes to find a solution to this challenge by creating a one-year fellowship for family medicine graduates.

Under Dr. Joel Wells’ direction, fellows learn obstetric surgical procedures while preparing newly minted physicians to work in rural areas — where they may be the only provider of these services for many miles. The plan is to take on just one fellow a year.

“The goal is to create doctors who feel prepared to go into a rural or frontier area,” Wells said.

A shifting industry for hospitals large and small

While urban hospitals can provide a solution for rural hospitals struggling to provide certain services, these larger facilities are not immune to the same challenges faced by Iowa’s smallest hospitals.

Nationwide, the latest trend among larger health systems attempting to adjust to a shifting health care landscape is to sign formal agreements with other hospitals.

As a result, the nation’s health care systems are moving from small, locally controlled markets to regional or even national powerhouses.

The number of mergers, acquisitions and joint operating agreements among health care systems has been “significantly higher” in the past four years than it was during the past few decades, noted Anu Singh, a managing director at consulting and research firm Kaufman Hall.

In fact, the country has hit four straight years of 100-plus transactions.


“Our record-keeping as far back as we can go, we can’t find another period of time where that happened,” Singh said.

According to the latest report from Kaufman Hall, there were 46 announced transactions between hospital systems in the first two quarters of 2019. That includes a deal between Iowa’s UnityPoint Health and South Dakota-based Sanford Health, which is expected to be finalized by year’s end.

It’s unclear how this trend will affect the state’s independently owned rural hospitals, but it “certainly could” have a major effect, said Keith Mueller, director of the Rural Policy Research Institute Center for Rural Health Policy Analysis at the University of Iowa.

These larger systems could have more capital to enter into the smaller markets, either by establishing their own outreach clinics or buying the smaller hospital.

“One of the fears in rural America, not just in institutions but in communities, is one of these systems is going to come in and buy our hospital,” Mueller said. “Then (they) close it down and leave us with nothing or just with some storefront-type care that is not really what we need in our community.”

Not every hospital needs to be part of a system to survive, Mueller said, but if rural hospitals explore their options carefully, they could achieve a goal through a formal agreement with a larger system.

But Mueller was optimistic about the health care systems established in the Midwest, based on their mission statements and business models.

“I’m struck by their dedication to making sure that the communities they’re in are getting what those communities need,” Mueller said. “It’s not empire building.”


About this series

“Seeking a Cure: The Quest to Save Rural Hospitals” is part of a collaborative series that includes The Gazette along with the Institute for Nonprofit News and INN members IowaWatch, KCUR, Bridge Magazine, Wisconsin Watch, Side Effects Public Media and The Conversation; and Iowa Public Radio, Minnesota Public Radio, Wisconsin Public Radio, Iowa Falls Times Citizen and N’west Iowa Review. The project was made possible by support from INN, with additional support from the Solutions Journalism Network, a not-for-profit organization dedicated to rigorous and compelling reporting about responses to social problems.

Beginning Monday, the entire series can be read at

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