Alliance Healthcare System in Holly Springs is Mississippi’s first rural emergency hospital – the first in a trend some say indicates the further decline of health care access in the one of the country’s poorest and sickest states. 

Hospitals were able to apply for the new federal designation mere weeks ago, when the Mississippi Department of Health rolled out its rules for “rural emergency hospitals.” The federal government finalized the program in November. 

Rural emergency hospitals are a step below critical access hospitals, which must have 25 or fewer inpatient beds, provide emergency services, keep its patients for less than 96 hours and be located at least 35 miles from another hospital. 

The resources at rural emergency hospitals are even fewer — they must end all inpatient care and transfer patients to larger hospitals within 24 hours of the patient coming to the emergency room. 

The hospital has already begun getting rid of all its inpatient beds and discharging current patients, as reported by the South Reporter, Marshall County’s community newspaper, on Wednesday. The acute care center is currently licensed for 40 beds, though its daily census doesn’t go much higher than four or five patients a day, according to hospital CEO Dr. Kenneth Williams. 

The hospital has partnered with North Mississippi Medical Center and will transfer its patients there if necessary, he said. 

He also said Alliance is one of just a handful of hospitals across the country approved for the designation so far.

As of Thursday, spokespeople from the state Department of Health said Alliance’s new hospital designation hadn’t been approved by the Centers for Medicare and Medicaid Services. But according to Williams, it had been approved by both required parties, CMS and the state Health Department, on Wednesday. 

“I haven’t even had a chance to share this with my staff,” he said Thursday. “Yesterday was an exciting day for me to have that designation. I’m looking forward to the future to see how it works out.”

Rural emergency hospitals also can’t provide swing bed services, which means if a hospital operates a nursing home, that has to close. Alliance does not operate a nursing home. 

Both rural emergency and critical access hospital designations are meant to ease financial stress — if a hospital qualifies as either, in exchange, they get paid more for their services. Rural emergency hospitals also get monthly payments from the federal government. 

The program is aimed at preventing the closure of rural hospitals and creating a way they can increase financial viability and maintain operations. The idea is that rural hospitals at risk of closure already struggle with low patient counts and low payments for inpatient care.

But it’s meant as a last resort for hospitals that are barely surviving because of the limited amount of services a rural emergency hospital can offer. 

State Health Officer Dr. Dan Edney considers it a closure when a hospital converts to an REH because of the loss of services. He tweeted in early February about the state’s first “loss” of a hospital, which is around the time Alliance applied for the designation with the Centers for Medicare and Medicaid Services and the Mississippi Department of Health. He compared rural emergency hospitals to triage units.

Williams, on the other hand, sees them as “expanded outpatient hospital systems.”

Rep. John Faulkner, a Democrat who represents Holly Springs, was not immediately available for comment Friday morning.

Williams bought the hospital two decades ago when he heard it was struggling. During its first years under Williams, he said the hospital was making money. Then in 2006, it lost almost $2 million with the arrival of Medicare Advantage plans, which are privatized versions of Medicare that often deny needed care and underpay hospitals. 

Holly Springs is a certified retirement community, which means most of the hospital’s patients are on Medicare. 

They’ve had good years and bad years since, but it’s been mostly downhill, especially since the pandemic began.

“I knew that our hospital couldn’t exist under the payment system it is under right now,” Williams said. 

A little more than a decade ago, Alliance tried applying to become a critical access hospital. They were rejected because of the hospital’s proximity to Memphis. 

Now, Williams says the federal rules are a little more relaxed, and he decided to apply at the recommendation of his partner, Quentin Whitwell, who operates hospitals in north Mississippi and serves as legal counsel for Alliance Healthcare, and the hospital’s financial team.

“With REH, the robust outpatient services the clinic brings to the community will be enhanced, along with continued 24/7 coverage, and the costly services will be reduced while receiving an annual subsidy,” Whitwell said when reached by text Thursday. “We are glad it worked out.”

Few Mississippi hospitals are making money, especially in the state’s more rural regions. The problem is multifaceted, but experts say the crisis has resulted from a combination of state leaders’ refusal to expand Medicaid, insurance companies’ low reimbursement rates and the pandemic forcing costs up in all areas, including staffing.

“The funding of health care in rural America is going down,” Edney previously told Mississippi Today in an interview. “There is no one coming to the rescue.”

Williams said many of the challenges hospitals are facing lead back to insurance payments and managed care plans, like Medicare Advantage. 

He could’ve closed the hospital back in 2012, Williams said, when it first applied for critical access status, but he’s done everything he can to keep it open, including some layoffs and reorganizing their staff. 

But at some point, “you cut muscle instead of fat,” Williams said.

One report from the Center for Healthcare Quality and Payment Reform puts a third of rural Mississippi hospitals at risk of closure, and half of those within a few years. 

“Too many small rural hospitals are closing,” Williams said. “Big hospitals are struggling, whether or not they admit it, but you can get by if you’re doing high-end procedures. 

“But just to take care of a regular patient who has congestive heart failure, with diabetic ketoacidosis, who is sick, they (insurance companies) don’t want to pay you for it.”

According to data from the CHQPR, Alliance Health has been losing money for the past few years, both overall and specifically taking care of patients.

And just in case the rural emergency hospital structure doesn’t work, Alliance is still applying for the critical access designation, too. If the new designation doesn’t stabilize the hospital, it can revert to its original status as an acute care facility or, if it is approved for the critical access hospital designation, it can convert to that, instead.

“Would I prefer to have us continue to operate the way that we were, having patients be admitted? Absolutely,” Williams said. “It is unfortunate that we had to make this move, but it is the right move based on the reality of health care and this payment system.”

According to Edney, Mississippi can likely expect more conversions to rural emergency hospitals – or, as he refers to them, “closures” – in the coming months.

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