Special Report: Hospital District Election — Rural communities grapple with keeping local hospitals open

Photo courtesy of Glen Rose Medical Center

Photo courtesy of Glen Rose Medical Center

Third in a series

By Kathryn Jones


The headline on the story read: “County takes measures to save SMH, establish hospital district.”

The newspaper account went on to describe how county commissioners favored establishing a hospital district to keep the local hospital – Stephens Memorial Hospital in Breckenridge, in this case – open. Enough citizens had signed a petition that the commissioners called an election on the issue.

Sound familiar?

As Somervell County voters contemplate whether to create a hospital district to fund Glen Rose Medical Center, Stephens County and the town of Breckenridge to the northwest are considering the same thing at the same time.

Formation of hospital districts are on the ballots in both Somervell and Stephens counties this Saturday, May 11.

Like GRMC, Breckenridge Medical Center and the Stephens Memorial Hospital Physician Clinic are currently owned by the counties in which they are located. And like commissioners in Somervell County, Stephens County commissioners have had to come up with large sums of money at times to keep the local hospital open. In January they had to borrow $600,000.

Unlike Somervell County, however, commissioners in Stephens County have given their unanimous support to forming a hospital district.

“This is the only way that we are going to be able to save our hospital,” Stephens County Commissioner D.C. “Button” Sikes told the Breckenridge American. “Without our hospital, Breckenridge and our county will be in danger of just drying up and blowing away.”

Stephens Memorial Hospital board manager Becky Downing told the newspaper said she was concerned that unless the hospital district passes, “there would be no way to continue the level of medical care we currently enjoy and we certainly cannot expect the care to be improved.”

Hospital officials have voiced similar concerns in Glen Rose. Ray Reynolds, GRMC’s chief executive officer, said that if the hospital district doesn’t pass, the doors won’t close immediately.

“But we do think that over the long term, that if the hospital district doesn’t pass, services will be reduced and then the long-term viability of the hospital is in question,” Reynolds said.

Larry Shaw, chairman of the Hospital Authority Board, put it another way: “We’re on life support right now.”

Somervell County commissioners have all said they do not want to see GRMC closed. But some, such as Larry Hulsey, the most vocal opponent on the court, do not think that creating another taxing district is the answer to the hospital’s financial problems.

The political action committee formed in Somervell County to champion the hospital district predicted that the initial tax rate in Somervell County would be 10 to 12 cents per $100 valuation. In Stephens County, the hospital district property tax rate there is expected to be set at 18.5 cents per $100 valuation if the district passes.

Rural hospitals and county governments throughout Texas have been grappling to find ways to fund local medical facilities at a time when many are in crisis. Some communities, including Dublin, Hico and Meridian, have lost their hospitals.

Lisa McClammy, chief nursing officer at GRMC, noted in a letter to the Glen Rose Current that she was born in the Hico Hospital and has lived in Hico her entire life. She said the closing of the hospital there had a “ripple effect” on the community.

“A major employer was eliminated, businesses closed, the population has remained stagnant because retirees and young families are reluctant to move to a community without a hospital,” she said. “Families also are reluctant to place their loved ones in nursing homes or assisted living facilities where there is not a hospital.”

Nearby Hamilton has been able to keep its hospital open and even growing after voters there approved a hospital district.

Efforts to build the hospital began in 1955. A 20-bed facility was constructed and the first patient admitted in 1958.

Like GRMC, in the early 1980s growing capital needs prompted the Hamilton hospital to explore an affiliation with Harris Methodist Hospital of Fort Worth. In 1982, Harris Methodist bought the hospital, only to close it five years later. Harris Methodist also had bought GRMC and was threatening to shut it down in 1990 when Somervell County stepped in to rescue it.

A group of Hamilton County citizens founded a non-profit corporation to raise funds to revive the hospital. Their efforts generated $250,000 in contributions and the hospital reopened in 1988.

In Hamilton, the hospital board began exploring the formation of a hospital district “to secure long-term financial security,” according to a history of the hospital on its website. The county attempted to get a hospital district passed, but failed.

In March 1990 the Hamilton County Commissioners Court tried again. Many “hotly contested community meetings” were held, the hospital’s historical account noted, but voters approved the hospital district in May 1990.

In Hamilton County, the hospital tax rate has been reduced due to “continued growth.” Its current rate is 15.85 cents per $100 valuation of property. In 2004 a 34-bed, 39,000-square-foot, $7.5 million facility was built to replace the old hospital. The financing was completed with revenue bonds.

In recent years the hospital expanded its services with a rural health clinic and lab, a fitness center, and a wellness center with rehab, physical therapy and a heated salt-water fitness pool. It also took over responsibility for the EMS, which in the past had been provided by a private company through a county contract,

“If you look at them now, they not only have a very viable hospital, but also medical staff,” Reynolds said. “I think that’s sort of a model to look at.”

Most public hospitals in Texas are owned by a hospital district. Only 10 county-owned hospitals exist, while 134 hospitals are owned by hospital districts.

Because they create another taxing entity, though, hospital districts often are controversial. The election campaigns generate some heated debates. Many of the opponents of the district in Somervell County contend the main problems with GRMC are management-related and stem from the county’s overreliance on the Comanche Peak Nuclear Power Plant, its largest single taxpayer, which is now seeing its valuation decline as the plant ages.

One self-described “loose-knit group” calling itself the Somervell County Anti-Tax Brigade has taken out ads in a local newspaper to criticize the hospital’s management, operations and “lack of transparency.” The Glen Rose Current conducted an interview with a member of the brigade, but is not publishing it because the member refused to go on the record and be identified.

Shaw noted that some people just want an emergency room facility in Glen Rose. But if they want more, someone has to pay for it, he said.

“If the voters want a full-fledged hospital, it’s only reasonable that you have to have more tax,” Shaw said. “We spent a long time looking at other options.”

GRMC is not unique in its financial problems. Rural hospitals in general face many challenges that their urban counterparts don’t.

For example, rural populations tend to be older and poorer than urban populations, according to the U.S. Census Bureau and American Community Survey. The hospitals in rural areas also tend to be smaller and have seen a dramatic shift of care to outpatient services, the American Hospital Association’s annual survey of more than 4,000 community hospitals found.

They also are more likely to offer home health, skilled nursing and assisted living, the survey concluded.

Because smaller hospitals don’t have the volumes of patients but still have to provide quality care and even buy some of the same equipment, they don’t have the economies of scale that larger hospitals do. That means overhead is more and reimbursements are less.

“Together these challenges – small size, service mix, dependence on public programs and high numbers of uninsured – make small and rural hospitals less able to weather financial fluctuations,” the hospital association concluded. It added that the economic downturn also hit many rural hospitals hard, leading some of them to cut services or even lay off staff.

Increasing amounts of “uncompensated care,” which is made up of bad debts and charity charges, have eroded rural hospital’s bottom lines as well.

Of the public acute care hospitals in Texas, hospital districts provide the highest amount of uncompensated care – about 86 percent in 2010, the Texas Department of State Health Services found.

Almost 60 percent of rural hospital revenues come from public programs – that is, Medicare and Medicaid, according to an analysis of the American Hospital Association’s annual survey data.

Over half of GRMC’s patients are on Medicare and Medicaid – and 4 to 5 percent — are uninsured, Reynolds said.

As reimbursement payments decrease, “there is nowhere to shift costs,” he said.

Some rural hospitals, including as GRMC, have formed “strategic alliances” with metropolitan hospitals so they can offer more services, improve quality and leverage their resources. GRMC has such an alliance with Baylor Health Care Systems.

Reynolds conceded that voter approval of a hospital district will not change the financial dynamics facing rural hospitals.

“What it gives us is a non-operating revenue stream and we have that now from the county,” Reynolds said. “That’s been appreciated, but certainly the county has its limitations and so…the district. But, no, it doesn’t really solve any of the operational issues that we’re dealing with.”

Back in Breckenridge, hospital officials said they are feeling optimistic that voters will approve a hospital district. No one wants more taxes, they noted, but voters need to ask themselves what services they are willing to pay for and how much they’re worth.

“A good friend put it best when he compared a local hospital to a police and fire department,” Stephens Memorial Hospital board manager Kevin Simmons said. “He hopes to never need them but he is very thankful they are there should the need arise.”

2 Responses to Special Report: Hospital District Election — Rural communities grapple with keeping local hospitals open

  1. Larry P. Smith Reply

    May 10, 2013 at 9:57 am

    A great final report with legitimate comparisons.
    The anti-tax argument is a sham. Taxes are already keeping the hospital open thru Somervell County. A Hospital District provides a better business plan and shifts responsibility to a locally elected board which allows Commissioners Court to concentrate on their electd duties.
    Either way, we pay for it and a Hospital District is the better way.

    More than half of the counties in the state of Texas have voted FOR hospital districts. They can`t all be wrong and the rest will or they do not have the need.

    Courage and common sense should prevail in this election and our medical care will be preserved.

    Vote YES!

  2. Kitty Burns Reply

    May 10, 2013 at 6:54 am

    Great article Kathryn, very informative! I have already cast my vote FOR the hospital district, but if I had not this article with its good information would definitely have swayed me if I was on the fence. Personally, I am happy to pay a little more in taxes to support our wonderful hospital than to have my taxes raised anyway because of the hospital debt and not have the great medical care to go with it.Not only would we be paying more in taxes without a hospital, we would all be spending more in gas to get medical care, which for some people that would be at least once a week. I would not like having to travel a further distance to get medical care in a true emergency. I am considering moving my 86 year old mother in with me later this year, but would not feel comfortable doing that if there were not the great medical care that we already have in place here. We moved here from Dallas 11 years ago with 5 children because of the schools and the town having a hospital that had a great reputation for anything we might need. Seems like a total no brainer to me- pay a little more and have what we want and need in this town!

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