A Rural Kansas Hospital Owned By A Kansas City-Based Company Closes Abruptly

This story was updated to add the comments of Kansas Gov. Laura Kelly.

Oswego Community Hospital, a 12-bed critical access hospital in southeast Kansas, abruptly closed down on Thursday, citing insufficient revenue to cover its operating expenses.

The hospital’s board released a statement saying the hospital had “weathered low patient volumes; high number of uninsured patients; low reimbursement rates; difficulty in getting payment from private insurance providers; low Medicaid and Medicare rates; and the state’s refusal to expand Medicaid.”

“The trickle of low revenue stream we have generated has not been enough to cover payroll, let alone to meet all of the other costly expenses needed to operate and maintain a hospital,” the statement said. “As such, the hospital’s budget has had to be supplemented on a daily basis in order to stay open. The monies invested in the facility have unfortunately not been enough to make it financially viable for the long term.”

Hospital officials could not be reached for comment, but the statement concluded by saying, “It has been an honor and privilege to have served the Oswego Community and its citizens.”

Oswego Community Hospital was among more than a dozen rural hospitals in Kansas, Missouri and other states operated by EmpowerHMS, which is based in North Kansas City.

The hospital and its three affiliated clinics employed 65 people, according to the hospital’s website. Oswego, in Labette County, has a population of about 1,700.

EmpowerHMS has been struggling to pay its hospitals’ creditors and employees since late last year, and at least two of its hospitals – Hillsboro Community Hospital in Hillsboro, Kansas, and Fulton Medical Center in Fulton, Missouri – have been placed under new management recently.

George Ross, Empower’s senior marketing director, said Oswego Community Hospital’s nursing staff did not report to work Wednesday night even as state inspectors showed up to conduct an inspection.

“I guess the board met and decided they’d close down the hospital because they didn’t have the staff to operate it,” he said.

Ross, who works out of central Indiana, did not have any further information.

Mike Murtha, who heads a group affiliated with EmpowerHMS called the National Alliance of Rural Hospitals, did not return a phone call.

Although Kansas’ failure to expand Medicaid was just one of many problems besetting Oswego Community Hospital, it likely was a contributing factor in the hospital’s demise.

In a statement, April Holman, executive director of the Alliance for a Healthy Kansas, which advocates for Medicaid expansion in Kansas, pointed to research showing that rural hospitals in states that have not expanded Medicaid are far more likely to close than those in states that have.

“Until the Legislature acts to expand KanCare, we will very likely see more hospital closures like the one announced today in Oswego,” Holman said.

Newly elected Kansas Gov. Laura Kelly, a Democrat, has released an expansion proposal that she says would provide health coverage to an additional 150,000 Kansans, help save rural hospitals and reclaim billions in federal tax dollars.

In a statement Thursday afternoon, Kelly pointed to Oswego Community Hospital’s closure as a consequence of the state’s failure to expand Medicaid.

“Just by expanding KanCare — the state’s Medicaid program — we can help keep these important facilities open and provide affordable health care to 150,000 more Kansans — no matter where they live. It is time to put politics aside and do what is best for the families and communities of Kansas,” Kelly said.

“I look forward to legislators following through on their pledge to move our agenda through the committee process and allow for a full floor debate on our Medicaid expansion proposal.”

Kansas and Missouri are among just 14 states that haven’t expanded Medicaid to include people who make under 138 percent of the federal poverty level — or about $17,000 for a single person and $35,000 for a family of four.

With Oswego Community Hospital’s closure, Kansas has seen four rural hospitals close in the last eight years. The other two were Central Kansas Medical Center in Great Bend, which closed in 2011; Mercy Hospital in Independence, which closed in 2015; and Mercy Hospital in Fort Scott, which closed at the end of 2018.

A 2016 study by iVantage Analytics found that a third of rural Kansas hospitals were at risk of closing. And a study of rural hospital closures last year by the U.S. Government Accountability Office found that rural hospitals faced challenges stemming from the convergence of both demographic and rural trends, including the higher percentage of elderly residents in rural areas, the higher percentage of residents with chronic conditions, lower median household incomes, diminishing populations and slow employment growth.

Brock Slabach, senior vice president at the National Rural Health Association based in Leawood, Kansas, said that while Medicaid expansion was not a silver bullet for rural hospitals, “it’s definitely one of the most important tools in the toolbox that would be useful to correct some of the long-term problems that some of these hospitals in Kansas are facing.”

Slabach said that 86 percent of rural hospitals in Kansas are operating at a negative margin, compared with 46 percent nationwide. Average operating losses in non-expansion states, he noted, are a negative 0.2 percent, compared with a positive 1.5 percent for rural hospitals in expansion states.

“These Medicaid dollars are paid to providers, not recipients,” Slabach said. “They go directly to the hands of hospitals and physicians in rural communities to help them care for patients that would otherwise not have any coverage.

“We look at this as access to care, which is obviously extremely important, but it’s also an economic development tool. These are dollars that are going into communities that  are in turn used to bolster the rest of the economy of that local rural area,” Slabach said.

Dan Margolies is a senior reporter and editor at KCUR. You can reach him on Twitter @DanMargolies.

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