Being designated a critical access hospital may allow small rural community hospitals to achieve profitability and financial stability and enhances the ability of rural hospitals to receive investment grade ratings, according to a report by Fitch Ratings. In the past 7 years, one in five of the country’s hospitals has converted to CAH status. But although Fitch predicts that Medicare spending for the CAH program will grow, increased scrutiny of the program may cause some hospitals to lose the designation. And the designation alone does not necessarily result in an investment grade rating, because these hospitals remain inherently more vulnerable to industry pressures and adverse events.
Fitch counsels all CAH hospitals to focus on good management practices and cost controls. “Fitch expects investment grade CAHs to demonstrate a low-cost structure relative to their peers and a solid track record of operating profitability prior to and after receiving the designation,” the report says. “Solid liquidity is also important as it provides flexibility for a CAH to absorb adverse events and fluctuations in operating performance.” Fitch also advises CAHs to expand clinical programs and enhance physician coverage by partnering with their tertiary referral institutions; maintain low nurse turnover rates to avoid agency costs; tightly manage construction projects to avoid delays and excessive costs; and balance future capital spending without damaging financial flexibility. Read the report (requires registration).
