Pending hospital closure mirrors woes of small hospitals

A district hospital in the San Diego area of Southern California will close its doors next month and is a microcosm for the struggles many smaller hospitals face across the country, the San Diego Union-Tribune has reported.

Fallbrook Hospital, which is operated by the Fallbrook Healthcare District, will cease operations on Nov. 17. Instead, it will offer outpatient services in conjunction with Palomar Health and Tri-City Medical Center, significantly larger hospital operators in the region.

"Smaller and independent hospitals are going to continue to fall by the wayside," Glenn Melnick, a healthcare economist with the University of Southern California, told the Union-Tribune. "This trend will accelerate because you've got to be part of a big network that has deep enough pockets to bear that risk."

Hospitals lose money on patients insured by Medi-Cal, the state's Medicaid program, as well as Medicare, according to the Union-Tribune. And smaller facilities tend to struggle to get favorable rates from private payers to provide enough cash flow to continue to survive.

That has pushed smaller hospitals and systems--with annual revenue of less than $4 billion a year--to seek partnerships with larger providers, observers say. But Fallbrook struggled to find a larger partner, according to the Union-Tribune.

Meanwhile, hospitals have become much more technology intensive, with high fixed costs regardless of the number of patients occupying beds. And the Affordable Care Act and other market forces are pushing more providers to accept capitated payments in an attempt to keep costs in line.

However, Melnick noted that a larger, consolidated hospital does not always decrease costs or increase quality.

"There is a lot of evidence that, as they get bigger and take on more and more, their costs don't necessarily go down," Melnick said. "From the quality side, even that is not well supported by research."

To learn more:
- read the San Diego Union-Tribune article

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