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Dangling over the pit: Nevada County Hospital makes a comeback, only to slide back to the brink of failure.

IN 1990, NEVADA COUNTY Hospital was clinging by its nails from the cliff of financial despair, but it was clawing its way over the precipice.

It was a great story. A tiny rural hospital in Prescott with one doctor and 24 nurses, on a hopeless quest to serve 15,000 people, went from losing $130,000 in 1989 to posting a profit of $52,135 in 1992.

But, as the latest chapter of the story unfolds, the hospital again dangles from the brink.

A panel of four physicians has been reduced to two and the intensive care unit, opened in October, was shut down in February because of insufficient funding. Nurses who joined the hospital to work in ICU have since departed.

Fourteen Arkansas hospitals have closed since 1985, and the county is desperate to avoid the same fate for its only medical center, which has the lowest occupancy rate among the state's hospitals.

"I think they are making every effort they can to keep it open," Prescott Mayor James Johnson says. "We just don't have enough doctors here in town for the hospital to make money."

Bob Edwards, a former respiratory therapist, came to the hospital in late 1990 to take his first post as an administrator. He inherited a mess.

What had been a small but stable medical presence covering portions of Nevada, Pike, Hempstead and Clark counties had badly degenerated.

"In 1984, our physicians started retiring or dying," Edwards says.

In a town where the doctors can be counted on one hand, the loss of one can be devastating to the hospital, costing scores of patient referrals and as much as $1 million a year in revenues.

Medicare Reform

More importantly, it was also in 1984 that Medicare was reformed. Payments to hospitals no longer were based on the actual cost of the services but on the federal government's concept of what medical services should cost in a particular region.

As a result, Edwards says, the Medicare payments made to Nevada County Hospital average 29 percent lower than payments to Little Rock hospitals.

The 39-year-old Edwards describes his facility as a "chest-pain" hospital, where most of the patients either have suffered heart attacks or are well on their way to one. Even more so than most hospitals, the patients there are predominantly elderly and covered by Medicare.

For this reason, he says, the Medicare changes have been particularly painful.

Competition from nearby larger hospitals quashes any hopes of major growth at Nevada County Hospital. Less than 20 miles away is Medical Park Hospital in Hope, a money-loser but a much larger presence with a 50 percent occupancy rate and the equivalent of 223 full-time employees.

The same can be said of Baptist Medical Center in Arkadelphia, with 38 percent occupancy and 179 employees, 30 miles from Prescott.

Nevada County Hospital's primary obstacle always has been physician recruitment, but it's not a question of money.

Edwards says general practitioners easily can make $250,000-$400,000 in annual income at Prescott, with several thousand patients to themselves. In large cities, that level of income normally is reserved for medical specialists. Family doctors average a relatively small $111,500 in annual income across the country.

With outstanding earnings potential, why isn't the town crawling with young doctors?

"They just wear out," Edwards says.

The hospital has hired a Dallas recruitment firm to search for doctors to affiliate with the hospital. Three candidates have been interviewed, some with extensive experience.

It seems ironic the hospital has returned to this desperate state of affairs after the significant progress of the past few years.

When Edwards came on board he soon began speaking to many community groups, drumming up hope that the hospital could survive and grow.

A support group, the Nevada County Hospital Charitable Organization, was formed. It has contributed about $169,000 a year to the hospital since 1990.

Brighter Days

The hospital's losses diminished steadily. By fiscal 1991, it was only $8,300 in the hole.

The next year, Edwards and the hospital posted a profit of more than $52,000 -- the first time the hospital had been in the black for eight years. Of course, that accomplishment is tempered by the fact the city of Prescott has been giving the hospital $250,000 annually for the past five years to keep it afloat.

"The biggest difference was having another doctor come in," Edwards says. The new physician's referrals to the hospital averaged $80,000-$100,000 per month in revenues.

On the strength of higher revenues Edwards decided to shoot the works last year, creating an intensive care unit for the hospital.

"That was an expensive proposition," he says. "But we decided that in order for the hospital to grow, we had to do it."

A fund-raising goal of $155,000 was created, consisting largely of labor costs. Only $55,000 was raised from the community, so the hospital leadership decided to forge ahead and hope that hospital revenues would be able to pay for labor as it occurred.

The trouble was, the hospital didn't anticipate losing another of its physicians.

Two of the hospital's doctors had been partners in a pair of rural health clinics, one in south Nevada County and the other in Gurdon, 15 miles east of Prescott.
A Glance at Nevada County Hospital
Fiscal Year Net Income Occup. Rate
1992 $52,135 16.87%
1991 -8,343 16.87%
1990 -276,515(*) 15.30%
1989 -129,800 20.00%
Source: Annual hospital cost reports
* non-adjusted figure

A tremendous percentage of the hospital's referrals were coming from the two clinics, often in the form of laboratory tests. But the two doctors had a falling-out; one then sued the other.

One of the doctors is still admitting patients to the hospital, but the other is not.

In a town the size of Jacksonville, Conway or Benton, it would not make a difference. In Prescott, however, it can be the writing on the wall. Edwards says it is crucial to bring the doctor back into the fold.

"This town is going to keep this hospital going," Edwards says. "We do not want to turn into a town like Gurdon," which lost its municipal hospital in 1987.

Recently there was good news: The city agreed to continue to extend its $250,000 support of the hospital for one more year.

"I think that it's very important that we keep the hospital," Mayor Johnson says.

"We've got two major industries here that need the hospital -- Potlach Corp. and Firestone -- and closing it would discourage industry from coming in."
Arkansas Hospital Closings Since 1984
1984 Calhoun County Hospital, Hampton
1986 England Hospital and Clinic, England
1987 Delta Medical Center, Brinkley
 Gurdon Municipal Hospital, Gurdon
 Lafayette County Memorial Hospital, Lewisville
1988 Lee County Memorial Hospital, Marianna
 Woodruff County Hospital, McCrory
1989 Central Ozarks Medical Center, Yellville
 Dr. Gray's Hospital, Batesville
1990 Buffalo Island Community Hospital, Manila
 Dermott-Chicot County Hospital, Dermott
1991 Corning Community Hospital, Corning
1992 Bull Shoals Community Hospital, Bull Shoals
 Huntsville Memorial Hospital, Huntsville
Source: Arkansas Hospital Association
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Author:Haman, John
Publication:Arkansas Business
Date:May 10, 1993
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