In the Red: Pandemic preps devastating rural Minnesota hospitals

In April, life in Cook, Minnesota, had come to a standstill.

The corner hair salon and gift shop in the Boundary Waters border town, with a population of nearly 600 people, had been forced to close due to the spread of COVID-19.

Just a few miles away, the doors to Cook Hospital were locked. Routine procedures had been canceled. Five full-time staff had been laid off.

The health care facility rushed to retrofit its outpatient area into a COVID-19 response ward. CEO Teresa Debevec pointed out the special air filtration system that was installed in five patient rooms.

"Had to take out the windows so that would work," Debevec said, pointing to the metal piping sticking out of a piece of plywood where glass had once been.

The hospital administrator estimates she spent nearly $320,000 on COVID-19 preparations to make sure the rooms are ready for patients who may never end up in her emergency room.

"Without (the virus) ever coming in the door or touching the community, it’s still devastating and has hit us hard," Debevec said.

The coronavirus outbreak has exposed the financial vulnerability facing small, rural healthcare facilities, many of which were already struggling to stay financially viable, according to a review of health care financial records and interviews with hospital administrators.

The pandemic cost hospitals cash they did not have, while at the same time eliminated revenue those facilities desperately needed.

Those hospitals are in a unique situation. They are publicly owned "district" hospitals that serve dozens of communities scattered over large geographic areas in rural Minnesota. Without those facilities, access to healthcare would be severely limited in the far reaches of the state.

But even with taxpayer funding, they regularly operate in the red.

5 INVESTIGATES obtained financial statements from seven district hospitals in greater Minnesota and found that in 2018, five of those facilities lost money.

Historically, smaller, rural facilities have run on tighter margins than their urban counterparts, according to a study published in April from the North Carolina Rural Health Research Program.

Researchers found from 2016 to 2018, the average profitability of rural hospitals decreased, while the profitability of urban hospitals increased. The study concluded that rural hospitals with long-term unprofitability "are particularly vulnerable to shifts in the economy" and are at a higher risk of consolidation or closure.

"Those losses and those real expenses are adding up," said Dr. Rahul Koranne, president of the Minnesota Hospital Association.

Koranne said the association lobbied the state and federal government for assistance for hospitals across the state. In March, the Minnesota legislature approved and distributed $50 million in emergency funding to health care facilities.

But a review of grant applications from district hospitals reveal those rural facilities got a fraction of what they said they needed to weather the pandemic, 5 INVESTIGATES found.

For example, Cook Hospital requested more than $300,000 to address its highest priority: cash flow to support additional staffing for COVID response. The hospital was awarded $75,000.

Swift County-Benson Health Services asked for only $89,000 for testing and screening supplies and a renovation that was done to prepare for COVID-19. That hospital got nothing.

Access vs. Affordability

In one of the state’s farthest corners, North Shore Health CEO Kimber Wraalstad tackled a common problem facing many health care facilities: buying and stocking enough personal protective equipment for hospital staff in case of a surge.

"When you see things that are costing you quadruple and more, that’s the piece that’s stressing," Wraalstad said in an interview with 5 INVESTIGATES. "I’ve never purchased things before that I hope I never use."

North Shore Health in Grand Marais serves thousands of people who live across Cook County. It is one of only two counties in Minnesota that, to date, have not seen a positive COVID-19 case.

Wraalstad worries that, given the current economic climate, the continued financial stress will trickle down onto the residents in one of the state’s most popular tourist towns.

"How’s it going to impact those individuals and businesses that are paying property taxes?" she said. "We are dependent on our tax levy and we can’t just say, ‘OK, we’re going to tax more.’"

Both Wraalstad and Debevec describe it as a "Catch-22," worrying that their communities will have to make a choice between access and affordability.

"We’ve had patients where it was a good thing we were here for their heart attack or their stroke," Debevec said. "They would not have survived another half-hour ride."

As the CEO described the need the health care facility fills in a remote, rural area, an incoming trauma patient arrived outside of the doors.

Debevec, who is in her 28th year at Cook hospital, wants only one thing post-COVID: to make sure those doors are still open this time next year.