How Rural & Safety-Net Hospitals Can Thrive: John Beaman, Adventist Health

Transcript

CHAD MULVANY

On today’s episode of “Achieving Health,” I’ll be joined by special guest John Beaman, CFO of Adventist Health. He’ll share insights on how rural and safety net hospitals can thrive and stay financially sustainable. Stay tuned.

ANNOUNCER

This is “Achieving Health,” a podcast from Forvis Mazars, where we delve into the topics that matter most to healthcare organizations across the continuum of care. Our goal is to help you navigate the dynamic healthcare landscape and achieve health at your organization.

CHAD MULVANY

Welcome to “Achieving Health.” I’m Chad Mulvany. Thank you for joining me. For today’s conversation, I’m excited to welcome a special guest, John Beaman. John is the CFO of Adventist Health, a nonprofit integrated health system serving communities across the West Coast and Hawaii. Adventist is also the largest provider of rural healthcare in the state of California.

John, I know you’ll have a great perspective on today’s topic and I’m looking forward to the conversation. Thank you for being here.

JOHN BEAMAN

Thank you for the invitation. As you noted, Adventist Health is the largest rural healthcare provider in California. But we also have rural healthcare in Oregon and really in Hawaii as well. And so, this is near and dear to the heart of our mission, as well as the care and the practices that we put forth daily in the communities that we serve.

CHAD MULVANY

Yeah, no. And, John, just as a little bit of context for our audience, I know everyone knows California’s a big state, but typically, particularly as an East Coaster before I worked at CHA, you tend to think of it as San Diego, L.A., Sacramento, San Francisco. But once you get off the coast and even up the coast north, it becomes very rural very quickly.

So, you guys are providing care to a lot of square miles and also a lot of people. Could you start by telling your listeners a little bit about your background in healthcare and how you came to your current role?

JOHN BEAMAN

Absolutely. I’ve been in healthcare 30 years. I won’t go back, you can do the math of when that means I started. But I’ve had the opportunity to work both in faith-based, not-for-profit, and even for-profit healthcare. You know, for most of my career, I’ve been in some urban environments; Chicago, Denver, Florida. But across the my journey. I’ve also the chance to work progressively in more either rural environments or companies who had a mission and a calling to care for the people in these communities where nobody else was.

Ironically, one of those was with a for-profit firm where we had multiple rural health clinics and, again, towns we were in where we were the only healthcare provider. And that really echoed as I joined Adventist Health now about 20 years ago. That desire, that passion to care for people is what I found out here with Adventist Health.

Like I tell people, we authentically try to live our mission. Doesn’t mean it’s perfect, but how I believe that’s best shown is in the rural environment. I joined Adventist Health as a CFO for our hospital in Bakersfield, California, and also spent time in Simi Valley, California. The last 15 years have been at our system office, really in three different roles.

One, kind of corporate finance; two, actually ran all of our shared services, including HR, IT, really anything that that we chose to centralize. And then the last five years as the chief financial officer.

CHAD MULVANY

That’s great. Great background. Could you tell us a little bit more about Adventist Health for those who may not be familiar? Obviously largest provider of healthcare in rural California, but what else would be useful for the audience to know before we get into the meat of the conversation?

JOHN BEAMAN

Yeah, probably the biggest thing in addition to our footprint, which has spanned the states we mentioned, largely rural, also inner city. We have a hospital in inner city L.A., a hospital near downtown Portland as well. But beyond that, I think the most important factor to understand about our health system is we are 80% governmental payor based. So, our business model, ever since we began as a system in the 1980s, has been in places where either Medicare or Medicaid were the primary funding sources. Again, largely due to the rural environment or the aged environment, or both—dual eligible in many of our communities. It’s a part of our faith-based mission.

We do believe in caring for the entire person and being in these communities where we can show love and care for people that need it. And so, I’m proud of our health system. Our mission statement is living God’s love by inspiring health, wholeness, and hope. And again, we largely show it in places that need it.

CHAD MULVANY

And you know, from an outsider’s perspective, particularly in my time at CHA, you guys really, I do think, live that mission and embody it, particularly with some of the choices that you guys made, which was really refreshing to see. You know, many rural and safety net hospitals continue to face significant margin pressure. What do you see as the biggest threats to their financial sustainability over the next 3 to 5 years?

JOHN BEAMAN

You know, the business model of healthcare is a very tenuous structure. Often we talk about it like a Jenga puzzle. And I think especially in rural healthcare, where we have found multiple ways to support the delivery of care, again it’s largely going to be governmental reimbursed. And to me, the biggest risk factor, there’s two big risk factors to delivering healthcare in these areas.

One, there’s not a lot of new industry in these areas. So, the amount of employer-based insurance is likely not going to get higher, right? And so, the first risk is it’s going to be more and more based on governmental reimbursement. Which goes right to the second risk is as—and rightfully so—as state and federal governments look to balance their budgets, they have to look at all of their spend.

And I completely agree that that healthcare should not be ignored. What I would acknowledge is that the systems and the structures that have been put in place over the last 30 years to support the delivery or paying for the delivery of care, especially in safety net locations—again, defining safety net as a place where there’s not a lot of healthcare provided in areas that it’s largely governmental reimbursed—in those areas once you start to tinker with that Jenga puzzle, if any of you have kids or friends or, you know, Saturday night game nights, whatever, and you play it, all it takes is pulling that wrong, you know, little block of wood out of the puzzle and it all comes crashing down.

And so, I think the, you know, the lack of new industry, lack of new economic models to support diversification of insurance in these communities is the primary risk. But it definitely leads me to the second where governmental policies with some good intent but unintended consequences, perhaps, of destroying the fabric of the business model and the community.

CHAD MULVANY

So, and I think that’s a great analogy with the Jenga puzzle. The one that I use is the Christmas sweater. Pull the wrong thread and next thing you know, it unravels.

Which threats do you think are most kind of within a hospital’s control, given that, you know, kind of to sum up what you said, there’s probably not any new revenue coming into these communities, and if anything, it’s probably going to see cuts? And so, which of these are within hospitals control, which of these are going to require some type of policy intervention?

JOHN BEAMAN

The areas; I’ll start with the policy intervention. At its core there needs to be a payment construct that ensures that care can be sustained. And I would keep it simple. There’s a couple of metrics that are common to any business, one of them being an operating margin, where you need to have enough revenue after expenses to cover not just your current operating needs, but the ongoing capital investment needed, especially in a hospital or a clinic structure, to keep it viable.

And so, the first thing that’s going to need to be policy-driven is just some dependability around the business model in this environment. It can’t, it’s more fragile than, you know, a big suburban hospital or big metropolitan area. And so, that stability and dependability needs to be in place because once it’s there, to your question, you can start to make changes that are more in the hospital, or health system’s, or healthcare delivery’s control.

And inside of those I think you’ve got how you staff, how you access the needed care, because in many of these environments you’ve got telehealth opportunities, you have other ways to care for the communities that I do think are more in the control of the leadership of those hospitals. It requires partners, requires others, but if the economic construct is stable, the team can start to envision the most quality-effective, cost-efficient way of delivering care.

CHAD MULVANY

No, I think that makes a lot of sense. You know, as we talk about sustainability for rural hospitals, rural providers, safety net hospitals, when I think about really over the last five to 10 years, I really feel like their sustainability has been standing on a three-legged stool, one leg of that stool has been state-directed payments and the ability now to go up to ACR, which, obviously, OB3 changed.

We’ve got the 340B drug discount program, so, savings on drugs. And then coverage expansion that came through the ACA. And obviously with OB3 we now have the Medicaid community engagement requirements, which will start to chew into that leg of the stool. So, thinking about those work requirements, what kind of education, either through patient financial navigators or through partnerships with the community organizations, is Adventist providing to those who are going to be impacted by these work requirements, who may not know they’re impacted, to help them remain covered?

JOHN BEAMAN

Well, you just nailed it. The biggest issue out there is people just simply may not know. I mean, you’re thinking about a population of people who don’t have a steady income, who are likely focused with how do I care for my family? How do I provide for my basic needs? A complex healthcare ecosystem is not going to be something they are proactively thinking about how to navigate. What we’ve done in the short term is partner with our managed Medicaid parties in each county. So, California and Oregon really have sub constructs, you know, outside of the state’s mechanism where there’s a managed care plan, who has been charged with managing the delivery, the payment, the benefit design, so to speak, of Medicaid inside of each of those counties.

And so, our first step, we have great relationships with these plans in most of our counties, again, primarily because we know we need each other, right? And so, first thing we’ve done is really partner with them on education. We are staffing, either directly or through them or through other third parties, in our EDs, in our clinics. People, when a patient shows up for a necessary service and they are confused, they don’t know, they’re uncertain, right?

They’re at their most vulnerable point from a care and personal perspective, but have resources right there when they need it to help them navigate accessing the coverage that they are ready for. You mentioned the work requirement rule. So, outside of that is more broader education around what that means. And so, that obviously has to be a little bit more proactive than waiting for them to show up.

But again, the key partners are the same for us. Really three; the managed care organizations, there’s some community social worker and other teams, often there’s grant funding for those that either us or their social work firms can access directly. And then the third one is what we would normally call financial assistance teams. But it’s really those three groups that that we’ve partnered with, the first two being more proactive in nature in the community, where those people go on a routine basis to connect to them before they need care. The financial assistance team, as the term would suggest, more reactive and partnering with them if they come to the ER or a clinic.

CHAD MULVANY

No, I think that’s a great approach, working with all three of those groups, particularly the MCOs because they—obviously they have a vested interest on a number of fronts in working with the hospitals on this beyond, you know, stable enrollment. It’s more reflective of how their PMPM is priced, obviously lose enrollment, they lose piece of that PMPM.

And then obviously they have an incentive to keep folks on coverage, getting care in the appropriate setting as opposed to falling off coverage and having conditions get exacerbated and showing up in your ED. You know, on the back end, as you think about both the work requirements and the changes that we’ve seen in exchange enrollment, is Adventist considering changes to policies related to revenue cycle or financial assistance to accommodate some of these shifts in coverage?

JOHN BEAMAN

Not necessarily to the revenue cycle. And you did note the other big impact. I mean, you can see some of the early publicly traded healthcare companies and their financial results mentioned the loss of exchange business because people can’t afford them with some of the subsidies going away. We’re not necessarily looking to change our back end revenue cycle processes. Really more of the front end. Your earlier question combined with this one, it’s all about patient engagement.

It is about helping each individual understand how they can access coverage, what role they play, whether that’s just as simple as, you know, getting their documentation in, fulfilling work requirements, whatever it is, it’s that proactive engagement, really on the patient access, financial assistance, community engagement paths, that is where our focus is right now.

CHAD MULVANY

So, how does Adventist define financial viability for a rural or safety net hospital that may never consistently generate strong operating margins?

JOHN BEAMAN

I would put qualitative and quantitative components there. From a qualitative perspective, there are communities we are in that literally have a singular stop sign, period. I mean, not even a stoplight. And so, from our perspective, we really do follow a hub-and-spoke mentality where there’s a hospital as a hub within a broader geography, maybe the geography’s a full county. But we place clinics—rural health clinics, other types of clinics—in these communities where there simply, if we weren’t there, we know that those people would not have the ability to access the care they need in a broader, you know, at all. They’d have to find transportation, they’d have to find a way to travel a long way. And if it’s acute and if it’s urgent, absolutely. That’s likely what all of us would do.

But you said something in the last question. The key here is more preventative, right? How do we keep people healthy? They’ll benefit by working in their communities. And it limits the, you know, the ER volume. At times, it gets clogged up and delays care. So, first of all, sustainable has to be there, there’s the ability to support a physician or two with the right amount of specialties within a community.

The broader the community, the bigger the population in a geography, the more it can support a hospital. So, we actually do have some math around it that gives us the ability to know, hey, these people need these services, and if constructed well, we can provide them, from a clinical perspective, with high quality and at a cost point that is sustainable.

You mentioned outside, I think the caveat to your question was maybe not a sustainable financial situation. We would start then by saying, can the care at least cover the clinical cost? Because I think the benefit that a system like Adventist Health provides is the ability to scale the overhead functions in the background to a price point that does at least have a path for them to support themselves and some routine capital improvements.

As an example, you know, IT, revenue cycle, those are expensive functions to operate, and they’re increasingly more expensive as technology changes and as payers become more adaptive in how they, you know, interface with the billing process or even the prior authorization process. But a benefit I believe we bring to that rural environment is we have the scale, being the largest rural health provider in California, to reduce the cost for some of those high-cost services and help a rural environment then have the revenue to cover both the clinical delivery of care and then the kind of administrative costs as well.

CHAD MULVANY

Yeah. And you know, John, that that piece that you said about the scale and the ability to provide the back office function in an efficient manner as opposed to having multiple independent hospitals try to replicate the revenue cycle, an instance of Epic, etc., is so critical, and I’m afraid that that’s something that the policy community is missing in the conversation about affordability, where integration activities have been painted as kind of one of the drivers of costs, when in reality they are one of the drivers of continued access in rural and safety net areas.

JOHN BEAMAN

You are absolutely correct. It’s at times very frustrating that the ability to have an honest conversation of the value of scale is just, you can’t have it because the view on it is if you’re a health system, the only reason you want to grow and expand is to drive cost up, when in reality a lot of the waste in healthcare is on the back office side.

It’s the duplication of resources and the billing processes. And one of the biggest risks is also on the back office side, as we’ve looked at rural hospitals that end up needing help, some often in bankruptcy. We’ve looked at, one of the biggest issues we found is the technology debt. Once a hospital, especially, gets behind on IT improvements, it’s a downward spiral because you get behind and then the cost becomes too great to do the investment to catch up to parallel.

So much of your revenue processes today are also based upon the adequacy and the modernization of your IT infrastructure, you know, from clinical documentation all the way to the billing. Then then you lose the ability to keep pace with the payors, and so, you end up having debt that you can’t afford to lift up your IT infrastructure.

And on the back end that starts to evidence itself in lower cash collections, because you haven’t been able to keep your systems updated to navigate an increasingly complex payor environment. You just start a downward spiral. And to me, that is the benefit a system can bring. It’s not in rising costs. It’s actually in driving costs down and providing a sustainable back office cost structure for the rural hospitals and clinics to be financially sustainable.

CHAD MULVANY

Yeah. No, I think that’s spot on. And the other thing that I’d add to it and it was implied in your comments, but in addition to being able to afford that back office technology, as it grows in complexity, you need an increasingly sophisticated workforce that that a standalone hospital or a smaller system isn’t going to be able to attract like an Adventist can. And so, it’s both the ability to afford it, but then the ability to service and make it work.

JOHN BEAMAN

Chad, you nailed it. And what we’ve started to do on the workforce side is seek to find people who want to live in the rural environment. And we’ve done two or three things that I think are, I wouldn’t call them innovative, but they support the comment I just mentioned. One is we have one of only two remote nursing schools in the state of California, in the town of Sonora, where the primary school is over in the Napa Valley area, Pacific Union College.

But the students who are from Sonora, who live in that rural community, can attend college at home, basically, and get their nursing practicum, their clinicals, and their degree. And since they’re from that town, they’re much more ready and want to live there. And I think that’s the secret is it’s hard to, well, first of all, back to the affordability.

You can’t bring in contract labor indefinitely in a rural environment. The cost, the payment structure doesn’t support it. But if you can find people who are from the communities whose family generationally are there, who want to live there, train them, equip them, I think you got a winning combination. The other area is physicians, and we have a rural residency program that is in about, I think, six communities right now.

And our goal is to graduate 100 physician residencies there on an annual basis. Again, people who choose this residency program because it is rural based and again, much more inclined to stay on and live in these communities post post-presidency.

CHAD MULVANY

And, you know, John, the thing that I love about the virtual nursing school example to allow individuals to train in their hometown, in a rural area, and then work there, and you talked about it at the top. A lot of these areas don’t have great economic prospects. If you’re a young person looking to work, and here you guys have found a way to create good jobs that come with benefits that pay well in a rural area. So, it’s supporting the town, it’s furthering economic development. So, I think it’s just a win-win all the way around.

JOHN BEAMAN

Yep, I appreciate that. I know there’s studies that have been done about the economic impact of hospitals. And maybe the other piece of this puzzle that you’ve hinted at through your questions, the Jenga puzzle, is beyond just how does the hospital or health system itself stay intact. Once the healthcare system crumbles, the whole economic environment of the community crumbles.

9 out of 10 times, the hospital is the biggest employer in these communities. And I think you’ve been leading me to that conclusion with your questions here where the policies don’t work, which leads to hospitals in these rural environments getting behind and investing in themselves, which ultimately leads to dire circumstances which could lead to closure.

And if that happens, the whole community, it really is impacted, sometimes beyond repair. And so, this is not just a discussion around sustainable rural healthcare. In my mind, it’s a discussion around what does it take to have communities that can thrive, period. You know, outside of the urban areas across our country?

CHAD MULVANY

Yeah. No, John, I think that’s spot on. What approaches have proven most effective in determining which services a rural hospital should preserve, expand, or partner on or discontinue?

JOHN BEAMAN

Yeah, that’s often, I mentioned a little bit earlier a lot of the work that we end up doing in these communities. And a lot of it starts with how big the population is. You know, there’s great public data on the types of care needs in each population. We have to do a community health needs assessment every three years.

And so, as we do that community health needs assessment, it really highlights what services are absolutely important that we provide directly in the community, because it’s just core. It’s, again, giving them health, helping them become healthy, not just caring for them once they get sick. Around that is wrapping, then, services we can access through partners.

For Adventist Health, sometimes that could be another Adventist Health facility. I think about our Central California network that’s got fantastic hubs in Hanford and Bakersfield. And then clinics that surround really filling the entire area between Bakersfield and Fresno. And so, we have the ability there to be that wrapper to either a small hospital or a clinic that’s in these rural environments.

In other communities, it may be a different health system, you know, that we need to partner with for specialty access or higher end care. But it’s starting with the data, knowing exactly what is needed to be delivered locally so that the people, you know, if they’re our moms, our dads, our grandparents, they had access to what was essential for them on a, you know, point basis, and then what could we wrap it in through ourselves in some markets or through other partners in others?

CHAD MULVANY

No, I think that’s spot on. I guess my my follow up question on that would be, you know, there is what the data will tell you, what the economics will support, but how do you balance that with community needs and expectations around access?

JOHN BEAMAN

It’s a great question. And those are hard conversations because many people have lived there and can remember a time when that hospital was able to provide a lot of services, every service that they could imagine, you know, needing. And the reality is, back to the current reimbursement structure that’s in place today, that’s just not possible.

And I’d also suggest from a quality perspective—and this is often what resonates—the community is better off by knowing they have access to a hospital that does, you know, thousands of these on annual basis versus 10. The services that wrapper these higher-end procedures and treatments are ready for them in these other environments.

And so, to me this conversation can’t be about what you’re losing, it’s about we are actually thinking about and planning for the best care for you. And often that quality, you’re going to want these services to be provided by people who that’s what they do every day versus once in a while. And so, I think that’s the conversation that that’s often needed in these communities. It’s not about loss. It’s about we are actively planning for everything you need and making sure it is of the quality you deserve as well.

CHAD MULVANY

Yeah. No, John, I think that point about quality is incredibly important. And that’s one of the things that I think a lot of folks in the community may miss is that, yes, you could provide the service absent the economics, but given the volume that’s done, the team’s not getting enough reps that you could do it at the rate of quality, that it should be done.

And so then how do you figure out how to provide that care at a place that is getting the reps to do it? So, no, I think that’s a great point. What role do virtual care partnerships and other innovative delivery models play in maintaining access, particularly to specialists, while also improving or supporting financial performance?

JOHN BEAMAN

Yeah, I think obviously telehealth is a big aspect in these communities. I think even for Adventist Health, often we partner with other, larger health systems and identify ways to create even broader access than we can provide in some of these. I mean, I think it starts with an honest conversation of “what does that community need and who’s best to provide it?”

And being honest again, even Adventist Health can’t always be the one provider for everything. Sometimes we need to partner with another, maybe it’s an academic institution, for some quaternary type work, etc. But it’s all in the theme of how can a patient, how can a community member in this rural environment have coordinated care that feels seamless in the handoffs from their local primary care physician, perhaps going to the hospital, having a telehealth consult with another.

If they do actually have to physically go to another location, it feels coordinated, it feels connected, and the transition back to their community, if they do have to travel, is handed off nicely to the people locally to do the follow-up care. That’s so much easier said than done well consistently, if nothing else, for the billing processes that are in the background.

Again, I’m the CFO and so it’s top of mind for me and how I support that is how do I make sure that the economics from the person’s perspective is well communicated? And I wish I could tell you we’ve got that figured out with all the handoffs that I just mentioned. The best environment where we’re able to manage that is where we actually take some of the financial risk ourselves, where we are the payor.

In California, you can have what’s called a Limited Knox-Keene License, where we’re able to really act like the coordinator from a health plan perspective of this care. That is the model that gives us the ability, the best ability to have a seamless care and financial environment for the person. In others where that’s not in place, you know, between physician bills, hospital bills, multiple different places, again, goes back to your earlier threads in our conversation around the current reimbursement and business model.

The complexities of it, I think, are multiplied for someone who lives in a rural environment because if they need increasingly higher level of care, the number of bills they receive from the number of different providers is just exponential versus someone who, you know, lives in L.A. and goes to a big L.A. hospital and it’s just all there, right?

So, and even that’s complicated. So, I think these questions, these themes really do tie together. And back to maybe an earlier question of what can be changed by policy, I think solving that, the bigger picture will need both policy help, but there’s a lot that the healthcare providers can do together to simplify billing practices and handoffs.

That really is a lot of where Avenue Health focus is today. And like I said, like in Central California and Northern California, we’re blessed to be able to have the hospital and clinic structure. So, it’s really just sometimes that quaternary, higher level of care that ends up needing to go outside of the system, so to speak.

CHAD MULVANY

Yeah. And you know, John, I think you’re absolutely right about kind of, you know, the example that you used, somebody needs specialist care. Primary care sets it up. They get a tele-visit. They may need to go someplace and be seen in person. You know, that’s one of the benefits of the degree of clinical integration that Adventist has achieved across the system.

Obviously, it gets a little harder if you have to refer outside that, as you alluded to. But I think that’s also one of the things that policymakers are missing in this conversation about integration.

JOHN BEAMAN

It is. I mean, consolidation is not the right way to describe healthcare entities coming together. It really is integration. We are trying to integrate care so that a person in these communities can have seamless care for all their needs at the highest level of quality and at the lowest cost. And I am a firm believer in that value proposition.

And it’s impossible for a standalone hospital in a rural environment to get there. Unless there is a function of employment, like a large industry that’s nearby that gives that community hospital a good balance of employer-based insurance as well as government-based insurance.

CHAD MULVANY

You know, John, we talked a little bit about the virtual nursing school earlier. And obviously that’s an attempt to address the labor shortage and labor costs remain a major challenge. In addition to the virtual nursing school, what strategies have you found most effective for recruiting and retaining clinicians while controlling workforce expenses in rural markets?

JOHN BEAMAN

I think it’s starting from the grassroots. We over the years have had intentional relationships with schools, often starting in the high school, that help students understand what is possible going into healthcare as a career. We’ve started medical assistant schools in several of our rural communities, and like I said, we’re now moving to the RNs and the physicians.

So, if you think about the progression, to us, it’s all about capturing the interest of people when they’re first starting to think about, okay, what’s, you know, what am I going to do with my life, right? The question all of us have to face at some point, and giving them a vision that if you choose to stay where you are,

I mean, these rural communities need young families to stay there to help them grow, be vibrant. If you choose to stay there, you want to stay there, Adventist Health can partner with you on that entire journey and keep it economically feasible for you as a person. So, you know, go to MA school, get a solid job starting out if you want to then train to be a nurse, go on to be a nurse.

And for those who want to go into the physician field, we also have a path for you after you go through med school as well. And so, I think it’s really, Chad, starting early and engaging the local community people in that longitudinal career journey. I think it’s better for the communities themselves long term. And to your point, it keeps our costs down because instead of contract labor or heavy recruitment cost, we’re building a pool of people who are from there and ready to serve.

CHAD MULVANY

No, I think that’s great to focus on early in the education process as they start, as individuals start to think about their careers. Shifting gears a little bit, among rural and safety net hospitals that are outperforming their peers financially, what common characteristics have you observed over the course of your career, given that you’ve spent a lot of time thinking about and working with rural and safety net hospitals?

JOHN BEAMAN

Yeah, you know, I’ve seen some hospitals who have done better than others. And ironically, it’s probably not different than larger institutions, even in an urban or suburban area. We haven’t talked a lot—we’ve hinted at it—but the broader healthcare economic system has been built upon a fragile balance, intentionally or unintentionally built over time, where commercial or employment-based insurance, and really surgeries, generate more revenue than the direct cost. Whereas medical services and governmental care at best cover their costs and often don’t. Like Medicaid, by and large, doesn’t come close to covering the direct cost for the care.

And so, the ecosystem has been based on this delicate balance of assuming you’ve got a good proportion of all services, surgical versus medical, and all payors; commercial, Medicare and Medicaid. And so, the rural hospitals who do better over time, coincidentally or not, are those who often have a strong surgery program or have, like I said earlier, a local employer that’s of size and scale that they have a balanced payor mix. I would say the other factor, maybe taking from highly profitable or just more sustainable, would be those that belong to a system.

And I’m not saying that just to proclaim that our model is the best. We have lots to learn and grow in as well. But I do believe going back to the ability to have scale that enables us to invest in the IT and revenue cycle, supply chain processes, legal. I mean, healthcare is increasingly complex, employment rules and other legislation continually changes.

And so, we’re able to support these rural environments across that gamut of support services that keeps those overhead costs low. I’d say the first one is just, you know, in general, having that balanced mix of payor and services. But the second tier would be those who belong to a system that can help deliver care with lower overhead cost.

CHAD MULVANY

And that’s a great observation. You know, John, as we start to wrap up, when you think about rural healthcare 10 years from now, what do you believe will look fundamentally different than it does today? So, how do you see the roles of hospitals, technology, workforce models in reimbursement evolving and kind of what should rural leaders or health leaders do to position their organizations for success?

JOHN BEAMAN

I believe advocacy around safety net hospitals is the number one thing many of us can do today. Like where we started, having a dependable business model for rural healthcare, and I would put even urban safety nets because they share a lot of these same dynamics as a rural hospital inside that definition.

To me, that’s the number one thing to solve, because once there’s a stable, dependable business model or reimbursement model for these types of health delivery systems, everyone benefits. The governments benefit because they have a better picture of what their costs will be, and the people leading care delivery in a day in-day out basis understand how to manage their processes and scope of services and costs to deliver within the economic environment. I’d say the second thing that may look different, you know, 10 years from now is, what type of care models or structures are in some of these communities?

I expect that as states become more innovative of what can be delivered, we may see more freestanding emergency rooms, you know, with some observation beds as an example. Some of those constructs could be in these communities with ready access to, you know, full acute care hospitals, kind of going back to that hub and spoke.

So, I think the reimbursement model advocacy, priority one get that landed. Two, again, would be can we, from an advocacy and a care design, continue to be innovative to deliver in more advanced ways because with technology and AI and telehealth, much more opportunity to deliver some care without the full high-cost acute setting in every environment. And then three, even with all those solutions, I expect more and more of these will be delivered from systems versus standalone, because the investment in technology is going to be, it’s going to have to be done at scale. It’s going to be too expensive to do one-off. And if nothing else, the thought process to identify what technology is going to be the one that makes it for the long term, it takes a lot of experts.

I mean, AI being a buzzword, I have full confidence, can have a dramatic improvement in how certain care processes are are done, especially in rural environment. But if I’m a CFO at a small hospital all by myself, how do I know which one is just, you know, got a flashy marketing campaign versus one that’s really going to make a difference and be here 10 years from now?

Because I know that I only got a limited amount of resources and I can’t, I have to make good bets, good investments. I can’t, I don’t have the ability to, you know, make a bad one now and then and still recover. So to me, those are the three things that I envision, are necessary for the next five to 10 years and will drive us perhaps will look different.

But what won’t look different is high-quality care, you know, loving the people in these communities and, you know, relentlessness and making sure we can have a sustainable environment so that we can be there for them when they need us the most.

CHAD MULVANY

If you were advising a newly appointed rural hospital CEO or CFO today, what are the two or three actions you would recommend to improve the organization’s long term financial stability?

JOHN BEAMAN

I’d say two things: one; identify who your most aligned partners are. The reality is most of us get into healthcare, we either just love the people in our communities and want to find ways to care for them. And we’re often a little bit of action junkies, right? We love the, the 24/7 action that a hospital or full service organization brings.

But having said all that, I would channel both of those passions into conversations about the reality of healthcare and identify what other health system partner is most aligned to you. Culture, mission, strategy that you can trust to be your partner. You don’t have to join that organization, you know, day one or even ever. But it’s absolutely an imperative to know that for the benefit of the people in your communities, you have partners they can trust on because you trust them.

So, to me, that’s number one. And number two, be engaged with other healthcare organizations and advocacy and forums. You mentioned the California Hospital Association. There’s other associations that often are focused on the rural and safety net providers. And be engaged there because the collective voice is what will make a difference with the state and federal governments. It’s hard for, you know, one voice always to be heard. But, man, you bring voices together that create clarity, that come up with ideas that come up with solutions, engage. And so, I appreciate the time that may take, but it’s well worth it.

CHAD MULVANY

Yeah. And John, thank you. I think those are both great points. But as somebody who’s worked at both state and national hospital associations, I’m going to double down on your call out because as someone who’s written those comment letters, who’s had those conversations with regulators, the more voice that you can have from a provider, or even if you can bring a provider into the room, it one, jacks up the credibility and it two, just helps you make more effective, be more effective, and drive the point home about what happens in financing drives directly down into access and outcomes.

So, John, it’s been a great conversation. We’ve covered a lot. What haven’t I asked that I should have?

JOHN BEAMAN

Chad, I think you’ve covered really the most important pieces. I can’t think of any questions you haven’t asked. I would simply reaffirm people who have chosen to live in these rural environments, could be because their family’s from there, could be because they’re farmers, or their passion lies with the type of work that’s done in those areas. They need high-quality, cost-effective care as much, if not more, than anybody else because of the type of work they’re doing and the families that they’re called on to support.

And so, finding both advocacy solutions, finding the right partners, provider, other partners, to me, all goes into really a collaborative, mission-based focus for all of us to make sure that our people, our family members who live in these environments, can have care for generations to come. So, I appreciate the time and, thank you for the opportunity.

CHAD MULVANY

John, thank you very much. Appreciate your time and couldn’t think of a better way to close this out. So, thank you again and thanks to our listeners for listening in. You can follow “Achieving Health” on Apple Podcasts, Spotify, Amazon Music, or wherever you listen to podcasts. You can also now find us in the Health Podcast Library.

If you want to learn more about the topics we discuss here, be sure to check out the show notes for related content. You can also subscribe to our Healthcare FORsights and follow us on LinkedIn to get regular insights and updates. And I welcome you to reach out to me or my co-host, Shawn Stack, and the team at Forvis Mazars if you have any questions about how these topics may impact your organization.

Shawn and I will be back next week on Wednesday, September 30, for the next round of “Washington Watch” updates. Until then, here’s wishing good health for you and the communities you serve.

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