Hospital featured in national publication

BENTON — Hervey Davis, Franklin Hospital Chief Executive Officer, and Pat Schou, Executive Director of the Illinois Critical Access Hospital Network, have combined their efforts to tell the story of how Franklin Hospital was saved from closing its doors.

“Franklin Hospital was on the chopping block twice but hospital board, community, state and national diligence and cooperation saved local access to healthcare,” Davis said. “Today, the hospital is fully operational, financially secure and growing. We serve as an example that when all looks bleak for a small, rural hospital, there is hope.”

Davis said the hospital nearly closed 20 years ago and he believes telling the steps to Franklin Hospital’s success can help other rural hospitals in trouble today.        

“Franklin Hospital competes with five prospective payment system hospitals and Franklin County suffers from high unemployment and a large indigent population,” Davis said. “As a result, a third of Franklin County patients are either covered by Medicaid or are uninsured. This directly influences the payer mix of the hospital.

“The Clean Air Act Amendment of 1990 caused utility companies to stop buying the local deposits of high-sulfur coal, whose burning is often associated with production of acid rain,” he said. “As a result, mines closed and jobs were no longer plentiful. Profitable operation of hospitals in the area became difficult.”

Davis said in 1995, the Franklin Hospital District Board was told by its auditors that, absent an influx of cash, the hospital would close. “Fortunately, Southern Illinois Healthcare (SIH) had, at that time, as part of its mission, horizontal integration of the area’s healthcare market. SIH presented a management contract, which was signed with the hospital in late October 1996. That averted Franklin Hospital’s closure the first time.”

Davis said many small, rural hospitals suffered under the federal prospective payment system in the late 1990s (before institution of the Critical Access Hospital (CAH) program), and SIH incurred losses of more than $10,000,000. Five years after saving Franklin Hospital from closure, SIH leaders realized the hospital’s operations were not sustainable.

“In 2001, SIH informed the Franklin Hospital Board that it would no longer manage and operate the hospital,” Davis said. “The board tried to sell the hospital through a broker, but there were no takers due to the area’s financial history. By spring 2002, Franklin Hospital owed large management fees to SIH and had no access to funding to remain open. Hospital board members, thinking there was no other choice, voted to close the facility.

“Distraught community members contacted the Illinois Department of Public Health (IDPH) seeking another option,” he said. “Two weeks later, after IDPH helped commission a financial feasibility study, the hospital board again voted—this time to remain open. In the four months that followed, the hospital stripped services down to the bare minimum, downsizing to two beds, keeping only the emergency room and essential services open. A loan for operating capital was secured. Through hard work and sheer tenacity, the hospital reassessed and revamped.”

Davis said operations were restored in time, despite the region’s continued economic hardships. “Access for our neighbors was pared down, but never lost,” he said. “This is a key element for struggling hospitals to bear in mind today.”

Davis said what worked was bringing in the right leadership and the fortuitous alignment of the right partnerships. “Working with the Franklin Hospital Board, the community leaders contacting IDPH found the timing to be perfect,” he said. “After I was recruited, the task at hand was to restart hospital operations and manage with an unbelievably tight budget. As a newly-hired CEO, not only was I tasked with rebuilding the medical staff, but also with reopening basic hospital departments and once again generating
community confidence in the hospital and its medical providers.

“With our administrative team, new relationships with both the community and state agencies were forged,” Davis said. “During this period, the Franklin Hospital Board of Directors gave me its support and acted on the tough decisions necessary to restart an operation from scratch. Everyone had to be on the same page, being creative and committed to the long term success of the hospital. The community was fully behind its hospital, recognizing not only the need for healthcare access, but also its role as an economic catalyst for maintaining and growing local businesses.

“We have come full circle, and the 360 degree engagement of all entities — from our local hospital board to our patients, the community as a whole, and state/federal agencies — tells our story,” he said.

Davis said today, Franklin Hospital’s emergency room volume is about 6,700 patient visits per year, down from 9,600 in 2004. “Rural Health Clinic visits for 2016 are projected at slightly over 23,000, up from zero in 2004,” he said. “Franklin Hospital has been able to shift many unnecessary, avoidable emergency department visits to its rural health clinics. This reduces overall cost of care by moving provision of care to less expensive outpatient modalities. Emergency room registration costs a patient (or an insurance company) over $2,300, whereas a rural health clinic registration comes in at around $136.”

Davis said between 2005 and 2015, hospital revenue grew by 27 percent and expenses by 16 percent. “Revenue growth is important in keeping a hospital viable, but we have never shifted from our mindset of our tightest budget days, believing it is equally important to proactively control expenses,” he said.

He said the payer mix has also radically changed through the years. “In 2010, nearly nine percent of revenue generated was for “self-pay) or uninsured patients,” Davis said. “By the end of 2015, the percentage had dropped by roughly six percent, and the total charges dropped by nearly half, if adjusted for inflation.”

Davis said a great deal of the hospital’s success can be attributed to the state’s willingness to expand Medicaid. “In states where the Medicaid program was not expanded, many rural hospitals like ours have closed.

“Our message is, “You, too, can keep your doors open. You can find solutions. Continuing to bring healthcare home to your citizens is possible, and it is priceless.”

The full article is featured in Arkansas Hospitals, Spring 2016 edition.