Critical access hospital River's Edge bucks rural trend, plans expansion after profitable year

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After years of losing money, River's Edge Hospital in St. Peter, Minnesota posted a profitable 2015 and is considering expanding the facility, an uncommon story for a rural, critical-access hospital.

Hospital officials say they hope the small community outfit can serve as a model, resisting acquisition by larger entities and operating successfully on its own merits.

"St. Peter is a community of around 10,000 people, counting the college, and we see so many things in the news … that small hospitals are failing or being eaten up by bigger groups," said hospital spokeswoman Stephanie Holden. "So we're kind of an anomaly here, being so successful and seeing growth. The staff and everyone here at the facility is doing a good job at making that happen."

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The strong performance at River's Edge bucks a national trend. In 2015, the National Rural Health Association, which represents about 2,000 small hospitals across the country, released data revealing that 48 rural hospitals have closed since 2010, while 283 are in trouble.

Declining federal reimbursements for hospitals under the Affordable Care Act is one of the main drivers of the recent closures, particularly in the South, where hospitals have been hit hard. The law cut back on Medicare, but it also reduced payments to hospitals for the uninsured, a decision based on the assumption that states would expand their Medicaid programs. Unfortunately, which many states have refused to expand that program.

Minnesota isn't one of those. The state expanded its Medicaid program in 2011, which the state's claims brought coverage to about 84,000 previously uninsured Minnesotans.

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Generally, rural hospitals suffer from other disadvantages that include declining populations, a disproportionate number of elderly and uninsured patients, the cost of expensive equipment that is frequently underused and the need to pay doctors a little extra as an incentive to work in remote regions.

In some ways, small hospitals' struggles mirror those which took place 30 years ago. A 1983 overhaul of the Medicare payment system, dubbed the "prospective payment system," established fixed reimbursements for care instead of paying based on a facility's reported costs. Large and efficient providers were rewarded, but 440 small hospitals closed before the system was revamped in the late 1990s to help them out. Part of that revamping was a creation of the designation of critical access hospitals for some small, isolated hospitals, which exempted them from the fixed payment system.

Whether similar federal measures will be needed to assist rural hospitals in the latest struggle remains to be seen. But so far, River's Edge has found a way to survive.

CEO George Rohrich credits the fiscal about-face to a partnership with the Orthopaedic and Fracture Clinic of Mankato, which has contributed to a spike in orthopedic surgical procedures at the hospital. Now operating with 10 beds, River's Edge hopes to expand to include 25 beds, for which it already has the appropriate license. The expansion could cost $4.5 to $6.5 million.

"This (orthopedic) program has ramped up," said Rohrich. "We're hitting full capacity once or twice a week. All beds are occupied."

He called the 10 existing beds a "limiting factor," and said an investment in additional beds would help the facility to post further strong financial gains in the future.

Expansion talks are still in the early stage. Hospital Commission members have approved a $123,000 contract with a Tennessee-based company, American Health Facilities Development, to look into cost and feasibility. The proposal must then pass muster with the St. Peter City Council before construction goes out to bid.

Orthopaedic and Fracture Clinic CEO Andrew Meiers said he's hopeful the plans will come to fruition, and said his group will be working closely with the staff at River's Edge to make sure the new space fits clinicians' needs.

He praised the partnership, claiming it's been mutually beneficial.

"It's hard sometimes, depending on where you're located, to have the input you want on patient care and be able to control costs and quality," said Meier. "We saw St. Peter as a facility where we could have more input … and partner in a much more meaningful way.

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"Our hope is to build a boutique orthopedic hospital," he said. "Right now the majority of everything is orthopedics. They've worked really closely with us to develop a good joint program, good education for the patients, and good quality on the floors."

Rohrich said River's Edge is proof that, in a climate of acquisition and ever-growing health conglomerates, it's still possible for the little guy to survive.

"It's a 'Little Engine That Could' kind of story," he said. "We've been recognized nationally for satisfaction and outcomes. We had a great financial year, and that will be eclipsed by our performance in 2016."

Twitter: @JELagasse