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Company Flips, Then Operates Struggling, Rural Hospitals in Southeast

Thu September 08, 2022 - Southeast Edition
Scripps Media & NPR

Kyle Kopec gets a kick out of leading tours through the run-down hospitals his company is buying, pointing out what he calls relics of poor management left by a revolving door of operators.

For instance, at the Houston County Community Hospital in Erin, Tenn., a town of 1,700 about 90 minutes northwest of Nashville, the x-ray machine is beyond repair.

"This system is so old, it's been using a floppy disk," said Kopec, the chief compliance officer and vice president of government affairs of Braden Health, a company based in southwest Florida.

Much of the equipment found at the hospital in Erin is older than Kopec, he told National Public Radio recently, and the facility's use of outdated technology even caused Medicare to penalize the medical facility with reduced payments.

About 123 mi. to the southwest of Erin, in the community of Brownsville, Tenn., Braden Health recently breathed new life into another rural hospital.

With fresh paint on the walls, new equipment and wiring, the once-abandoned Haywood County Community Hospital is ready to provide patients with care once again.

Over the past couple of years, Kopec and the rest of the team at Braden Health have worked to reopen the old Brownsville facility, located northeast of Memphis.

Among the tasks carried out by Braden's crews at that facility were removing mold, bringing the hospital up to code and completing several other renovations, Scripps Media reported.

"The roof was damaged and there were roof leaks everywhere throughout the building," explained Terry Stewart, the facilities manager and project construction coordinator at Braden Health for Tennessee Projects.

"We have spent about $10 million or so to rebuild it," Kopec said. "In our first phase, what we're doing is opening the emergency department, the first nine medical surgical beds, and then pharmacy and imaging."

Despite all the construction and work, there is still much more to do, he added, as he led a tour of the old medical facility.

"This used to be the surgical wing," Kopec pointed out. "It was last used in the '70s with the exception, I think, of when a few horror movies were filmed here. It really looks a lot like most rural hospitals we find that are closed and abandoned."

The Brownsville building sat empty for nearly eight years before Braden bought it in October 2020 and, later, began to rebuild and renovate it.

Michael Banks, who currently serves as the CEO of the Haywood County Community Hospital, watched as the old facility shut down in 2014.

"Financially, it hit us," he explained. "We also saw a decline in the overall health of the community as well."

Banks added that the lack of certain health services locally impacted taxpayers too.

"Our ambulance service is county-owned," he explained. "We ended up having to put two new crews and a new ambulance on because they couldn't bring patients here. [Instead], they had to take them to Jackson, which is a 30-mile drive. That ended up costing the taxpayers about $800,000 a year."

William Rawls, the mayor of Brownsville, and a man who has lived in the small town all his life, said, "We just thought: ‘This is done. We won't have rural, acute health care in our community ever again.' So, having this hospital back is life changing."

At the end of August, the Haywood County Community Hospital passed its state inspection, making the facility a fully licensed hospital once more.

Hundreds of Rural Hospitals in U.S. Need Upgrades

The medical centers in both Houston and Haywood counties make up a narrative seen all too often in rural American communities that lose access to nearby healthcare.

"Your lower economic rural areas have really been affected disproportionately," Banks said.

The two facilities are among a handful of hospitals Braden Health has bought and renovated. Company officials started the practice in 2020 by taking profits from their other hospitals to buy and rehabilitate more healthcare facilities.

"Right now, you see a little bit of a trend and it's sort of a mixed bag," explained Kopec while addressing a question about whether he is seeing other companies also buy closed shuttered hospitals. "As we reopen [our hospitals], we're hopeful to win back community support — but it will take time."

He explained to Scripps Media that there are "hundreds of hospitals and thousands of communities that are in need. We're going to look at the hospitals that are closing and see where we can help."

A recent NPR report noted that there is a point to exposing the state of disrepair in these and other rural hospitals. In the case of Braden Health, it is buying buildings worth millions of dollars for next to nothing with a promise to keep running them as health centers that serve their communities.

For its part, Braden thinks it also can run them more effectively than the earlier owners and turn a profit.

The hospitals being taken over by Braden sit in bad locations in one of the worst states for rural hospital closures, NPR noted. Since 2010, 16 facilities have been shuttered in Tennessee — second only to the far more populous state of Texas, which has had at least 21 closures.

The local governments that own these facilities are finding that remarkably few companies — with any level of experience — are interested in buying them. And those that are willing do not want to pay much if anything for them.

By that point, large healthcare systems have already bought or affiliated with the hospitals that have the fewest problems, Michael Topchik, director of the Chartis Center for Rural Health, told NPR.

The hospitals that are left are those that other potential buyers passed on, he explained. Turning a profit on a small rural hospital with mostly older or low-income patients can be challenging. Some operators who take over rural hospitals have gotten in trouble with insurers and even law enforcement for shady billing practices.

"You can make it profitable," Topchik said, "but it takes an awful lot to get there."

Chartis, a national healthcare consultant, analyzed 1,844 rural hospitals and found that 453, or about 1 in 4, are vulnerable to closure based on performance levels.

Small, But Well-Run Hospitals Are Needed

Beau Braden, who runs Braden Health, used his savings and some inherited wealth to get into the hospital-buying business in 2010. An ER doctor and addiction specialist, he previously tried to build a hospital in Florida, but after running into regulatory roadblocks, he saw more opportunity in reopening hospitals — which brought him to Tennessee.

Since buying a hospital in Lexington, Tenn. in 2020, Braden Health has signed deals for three other declining or failed medical facilities, and has looked at buying at least 10 others, mostly in Tennessee and North Carolina.

Besides upgrading each facility, the company's strategy is to build mini networks to share staff and supplies, according to NPR.

Renovations Fully Under Way at Erin Facility

Back in Erin, Tenn., Kopec noted that the giant HVAC system on the dilapidated Houston County hospital's roof can only be controlled from a rusty side panel accessible by a ladder. Down below, an emergency room has never been used, most likely because a recent renovation, predating Braden Health's ownership, inexplicably built the ER's doors too narrow for a gurney to pass through — one of several design flaws at the facility.

In the meantime, an old operating room is temporarily housing the ER while Braden's crews start work on new renovations.

To prevent this hospital's closure in 2013, Houston County bought it for $2.4 million and raised taxes locally to subsidize operations.

"We had no business being in the hospital business," Erin Mayor James Bridges acknowledged. "The majority of county governments do not have the expertise and the education and knowledge that it takes to run health care facilities in 2022."

Those with the most experience, like big corporate hospital chains based in Nashville, have been getting out of the small hospital business, too.

Residents in Houston County may have trouble accepting the fact that their hospital is valued at $4.1 million by the local tax assessor, but the final sale price was just $20,000 — and that was not for the land or the building. Kopec said the amount was for a 2016 ambulance with 180,000 mi. on the odometer but considered to be the only equipment with any remaining value.

Still, as Kopec bounced through the Erin hospital's halls, he greeted nurses and clerical staff by name with a confidence that belies his age and experience. He tells anyone who will listen that rural hospitals require specialized knowledge.

"They're not the most complicated things in the world," he explained. "But if you don't know exactly how to run them, you're just going to run them straight into the ground."

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