KHI News Service

Hamilton County Hospital faces possible closure without $3 million boost

Petition seeks countywide vote on the question

By Phil Cauthon | May 15, 2013

Two years ago, voters here approved tax increases to keep the 25-bed Hamilton County Hospital open. The county sales tax went up by a half-cent and property taxes went up 20 percent, both permanent increases.

Now hospital officials are asking the county for another $3 million in "no-fund warrants" to support the operations of the facility, which employs 108 people. Otherwise, the hospital faces the prospect of closing, said Phyllis Horning, the interim chief executive.

“We can probably go another month without doing something,” Horning said. Closing “is a possibility, but it's sure not where I want to be. I do believe the no-fund warrants issue will pass. I don't really have any doubt that it will."

In March, commissioners unanimously approved the request for $3 million to be repaid over four years by county taxpayers.

However, a petition is circulating to put the measure to a countywide vote. If 63 signatures are collected by June 3, the vote will be held sometime in July — pushing back to August the earliest the funds could be available.

Syracuse Mayor Joe Stephens, owner of the town's bowling alley and gun shop, is among the 55 or so people who so far have signed the petition.

Photo by Marcus Ashlock, Syracuse Journal.

Joe Stephens, mayor of Syracuse.

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“I signed the petition not as mayor but as a citizen,” Stephens said. "We're trying to find out why they need $3 million to operate all of a sudden. We didn't arrive at this point overnight. It seems to be a pattern that about every two or three years they're coming and asking for more money.

"Nobody in their right mind wants to lose the hospital. But we can't just be taxed to death. They say they've lost revenue because they don't have doctors. Well, if my business falls off, we make whatever adjustments we have to make — if it's laying people off, cutting services, not supplying something. But we haven't seen any of that up there.”

Hospital officials are scheduled to make the case for the $3 million in bonds to the community 7 p.m. Friday at the Syracuse High School gymnasium.

“The meeting Friday is to explain to everybody how we got where we are and where we’re trying to get to,” Horning said.

Budget woes

Among the factors threatening to put the hospital’s $5 million annual budget in the red is declining oil and gas tax revenue — the main variable behind the county’s quarterly allotment to the hospital, said County Clerk Angie Moser.

In 2007, the hospital received $1.1 million from the county property tax when it was 15 mills, plus another $12,000 to $18,000 per month from the sales tax. In 2011, the hospital received only about $690,000 even after the property tax was raised to 18 mills. The sales tax revenue remained stable.

“Oil and gas production around here has really dropped. And the state assesses the valuation on public utilities and that really dropped. And that’s affected the hospital,” Moser said.

Another hit on the hospital budget was the installation of a new $800,000 electronic health records system. Hospitals that don't have a digital records system by 2015 will receive reduced Medicare reimbursements from the federal government.

But by far the biggest factor behind the hospital's financial problems has been the lack of its own doctor, Horning said.

A nurse station inside the nursing home wing of the Hamilton County Hospital. The hospital owns the nursing home, which is licensed for 44 beds.

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“Once we can get one hired, it should all turn around,” she said.

In January, the hospital lost its doctor when it could not afford to renew its contract with Greeley County Health Services, which for five years had supplied Syracuse one to three part-time doctors.

Hospital officials were able to recruit a semi-retired physician from Atwood, Dr. Charles Zerr, to fill the void. But he only started last week.

Hospital board member Shannon Wharton said the board reached a "handshake agreement" with Zerr to work with the hospital while the hospital continues the search for a permanent doctor.

"He's willing to work with us. He's been wonderful as far as doing as much or as little as we need," Wharton said.

Recruiting doctors to rural communities

Wharton said a central element of the long-term strategic plan to be presented at Friday’s meeting is changing how the hospital recruits doctors.

Rural hospital network pioneers new approach to common challenge in rural health care: recruiting doctors

"We can't just rely on outside companies to do all of our recruiting for us. Now, it's going to be an ongoing process that never stops,” Wharton said.

"We're not just going to recruit one doctor and sit back and say 'We've got our doctor, we're in good shape.' We're looking at starting earlier with doctors in residency programs," she said, citing the University of Kansas residency programs in Salina and Wichita, which face possible elimination or reductions if some budget cuts proposed by the Legislature are enacted.

It's more challenging than ever to recruit doctors, Wharton said.

"There's not as many graduates going into family medicine like we need. A lot of them are going into specialties," she said. "Rural doctors need to have more of a servant-oriented attitude. It has to be a passion for them. They have to be drawn more toward wanting to help the rural community — the people — versus becoming a rich doctor. It's a different mindset."

Hamilton County Drug Store owner and pharmacist, Todd Traylor.

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A rural hospital's impact on the community

Pharmacist Todd Traylor said he thought supporting the hospital's $3 million request was "pretty easy to justify."

He said if approved, he expected his property taxes would go up $300 a year on his house and up to $600 a year on his business, the Hamilton County Drug Store.

"It's more than just the obvious benefit of having a hospital in town," he said. "They are the largest employer in the county. If the hospital closes, it would take those families and children out of the school system, which would take a huge chunk out of the local economy. That in turn would destabilize the customer base for local businesses," including his own.

Traylor said if the hospital were to close, he would try to keep his drugstore open.

"But that hasn't worked in other communities," he said. "In Walsh, Colo., the hospital closed and then the pharmacy and now you could drive right through that town and miss it.

"Ultimately, closing the hospital would lead to fewer citizens to take care of whatever tax burden is left. In essence, your taxes would go up anyway just for basic county services ... like having a sheriff or fire department."

The rippling economic impact Traylor described is sometimes called the "multiplier effect."


The Importance of the Health Care Sector to the Economy of Hamilton County

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According to a 2012 Kansas Hospital Association study, the average statewide multiplier effect for communities with a hospital was $1.48, which means that every $1 of income generated by hospitals results in another 48 cents generated for other sectors of the economy.

But many rural hospitals cannot sustain themselves the same way as urban hospitals because they have the expenses of around-the-clock operations but a smaller population base from which to defray the costs, said Cindy Samuelson, a spokesperson for the hospital association.

"That presents a very difficult environment,” she said, “to be able to provide (around the clock, year round) services ... but you don't have a lot of people coming in to utilize the services."

Most communities seem prepared to support a county hospital with occasional bond issues, Samuelson said. Only one frontier hospital comparable to Syracuse has closed in the last decade: Cedar Vale Hospital — a privately owned facility employing about 30 people — closed in 2006.

In that southeast Kansas community, there was talk of issuing a bond or increasing taxes to save the hospital but nothing more than talk, said Beverly Tolle, who works at the town’s remaining rural health clinic.

She said most of the hospital employees left town, though some now commute 30 minutes west to work in Arkansas City.

“We lost our grocery store after the hospital closed. I think that directly was a result of the population loss. We didn’t have jobs, so people left town,” Tolle said.

As of the 2000 census, there were 723 people in Cedar Vale. By 2010, there were 569.

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