DOVER-FOXCROFT — The rehabilitation wing of Mayo Regional Hospital in Dover-Foxcroft bustled on a fall afternoon, as therapists worked with elderly patients to restore range of motion, balance and other physical abilities.

The room was packed with beds, medicine balls, steps with a railing to simulate a staircase, weights, stretching bands and other tools to help patients recover from injuries. Employee work stations were crammed together to keep as much space open for the patients as possible.

Occupational therapist Erica Lyford encouraged an elderly woman to move plastic pipes over her head to improve her strength while recovering from an illness.

“We are busy a lot,” said Christine Perkins, an occupational therapist who works with patients on a number of tasks, including reaching and moving items in a mock kitchen.

One floor up, the inpatient center was quiet, with not much activity. Empty rooms were abundant at the 25-bed hospital, and only 10 patients were staying on this day. Twenty years ago, the hospital routinely had about 30 to 35 inpatients per day, hospital officials say. Ten years ago it was 20. Now it averages 12 inpatients per day.

The contrasting scenes at Mayo reflect long-term trends in the health care industry that are causing seismic changes in how health care is delivered in rural Maine and across the country.

Rural hospitals like Mayo are increasingly relying on rehabilitation and other outpatient services – such as physical and occupational therapy and primary care. At the same time their inpatient count – and the revenue that goes with it – has dwindled.

“It’s a very tough time for rural hospitals. It’s going to be harder for them to make ends meet,” said Andrew Coburn, a professor of public health at the University of Southern Maine who has studied rural health care.

Rural hospitals are caught in a financial squeeze even as larger hospitals are investing in massive expansions. Mayo has a $50 million budget and is coping with an expected $1.2 million deficit for the 2015-16 fiscal year.

“We are actually one of the more financially healthy rural hospitals, and we have a $1 million hole in our budget,” said Marie Vienneau, Mayo’s CEO.

IN SEARCH OF SPECIALIZED SURGERY

Meanwhile, Maine Medical Center in Portland last month announced a $512 million expansion, with most of the money to be invested in increasing the square footage at its West End main campus, which follows major expansions within the past few years at MaineGeneral Medical Center in Augusta and Eastern Maine Medical Center in Bangor.

Maine Med executives pointed to changes in the health care system, and how inpatients are traveling from all over the state to Portland for specialized surgery, as reasons for the expansion. Part of the Maine Med expansion will include 20 new state-of-the-art operating rooms.

Since surgeries are becoming more specialized as technology has improved, patients who need the surgeries are increasingly being funneled from outlying areas to bigger hospitals, health industry officials say. More surgeries that used to be inpatient are now outpatient procedures.

But what happens to the hospitals that used to conduct surgeries but no longer do so?

The answer is beginning to play out, as about 70 rural hospitals, including St. Andrews Hospital in Boothbay Harbor in 2013, have closed across the United States since 2010.

Maine’s hospitals

“Every year there are more closures than the year before,” said Mark Holmes, an associate professor of health policy at the University of North Carolina.

Coburn said there’s an emotional attachment to rural hospitals, often the largest employer in small towns, providing valuable good jobs. In all but two of Maine’s 16 counties, the local hospital is among the top six employers, and is the biggest employer in rural counties like Aroostook, Lincoln and Knox.

Vienneau described Mayo as the “hub of the region.”

Closing a rural hospital is perceived as a threat to the community it serves, Coburn said.

“If you close a hospital, it’s like closing a high school,” Coburn said. “These are big, important institutions in a community.”

Laurie Smith, 51, of Dover-Foxcroft said if Mayo were ever to close, it would be devastating to lose an “indispensable asset” to the town.

“There is no replacement for a local hospital that you can get to quickly,” Smith said.

She said this summer, her elderly father had to quickly be admitted to the intensive care unit at Mayo when he contracted an infection in his knee. If a hospital hadn’t been a mile down the road, she says, it would have been difficult to persuade him to make the one-hour trip to Bangor. Long car trips are difficult because of chronic conditions in his knee. Smith said her dad has been in and out of Mayo for various ailments over the past few years as he’s aged.

But many of the trends may offer some advantages to patients who are being funneled to larger hospitals. When patients do need surgery or other complicated care, specialist physicians who work at the larger hospitals can perform advanced surgeries that rural hospitals cannot and were never able to provide.

PAYMENT SYSTEM FOCUSES ON VOLUME

Many trends cut against rural hospitals.

In 2006, the average daily census at a rural hospital in the United States was nearly 20 inpatients. By 2015, the average daily census had declined to 15.4, a nearly 25 percent decrease, according to the North Carolina Rural Health Research Center at the University of North Carolina.

Mayo Regional Hospital has experienced a similar decline, and its daily census of 12 is expected to decrease further in the next few years, Vienneau said.

Vienneau ticked off the surgeries that are no longer performed or rarely done at the Dover-Foxcroft hospital that used to be routine surgeries done in-house: vascular, thoracic, major abdominal surgeries, general surgery.

The emergency room performs fewer operations; instead, more of its role is to stabilize patients before sending them to hospitals in Bangor or Portland.

Mayo Regional Hospital serves an average of 12 inpatients daily, down from 30 to 35 about 20 years ago. While the hospital has expanded its primary care services, “We don’t yet get paid for keeping people healthy,” said CEO Marie Vienneau. “We still get paid primarily on volume.” Shawn Patrick Ouellette/Staff Photographer

That represents lost revenue for rural hospitals as the surgeries are being done elsewhere and the hospital also loses revenue when the patients don’t stay overnight as inpatients.

Vienneau said she understands that there are good reasons why surgeries are being centralized – with specialization, the doctors need to be in larger hospitals to get the necessary volume of surgeries.

Vienneau said despite all of the national discussions about payment reform – paying hospitals for helping patients to better manage chronic diseases and live a healthy lifestyle, and for offering preventive care – the bulk of the payments to Mayo is still based on patient volume.

The payment reforms that occurred are changes around the edges and are not yet driving factors in how health services are paid for in the U.S.

“We don’t yet get paid for keeping people healthy. We still get paid primarily on volume,” Vienneau said. “We don’t get paid for it, but we still do it because we know it’s the right thing to do.” She said to that end, Mayo has expanded its primary care services to help keep patients healthy, by providing more preventive care services.

Mayo Regional Hospital is a federally designated Critical Access Hospital, which helps keep rural hospitals viable with more favorable reimbursement rates. But losing volume still hurts financially, and it has been forced to cut staff through early retirement and attrition over the past few years.

“It’s all well and good to tout population health, but nobody’s paying for population health,” Coburn said. “What pays is a patient spending a night in a hospital for pneumonia. Our financing system is still really broken.”

Mayo’s service area of about 12,000 includes rolling hills, farmlands, scattered homes and the town of Dover-Foxcroft – population 4,500 – with its turn-of-the-century homes featuring wraparound porches. Dover-Foxcroft is the home of the annual Whoopie Pie Festival.

The population is trending older and poorer – more so than urban and suburban regions – which means people need more health care, but the payments to the hospitals are lower. That’s because government reimbursements like Medicare and Medicaid pay hospitals less than what private insurers pay.

That’s typical of a rural hospital, said Holmes, the UNC researcher.

“It’s a very challenging mix,” Holmes said.

And if people come in without insurance, hospitals are required to care for them, but the “free care” has to be absorbed by the hospital. Maine has decided not to expand Medicaid, which further pressures rural hospitals because some of the “free care” patients would instead be Medicaid patients if Maine had expanded Medicaid.

“We live off of government payors,” Vienneau said.

Also, as an independent hospital with about 400 employees, Mayo doesn’t have leverage when negotiating rates with insurance companies.

For those reasons and others, Vienneau said, Mayo is currently discussing becoming part of Eastern Maine Healthcare Systems in Bangor. The two sides signed a letter of intent this summer to launch initial discussions about the idea.

Briana Martell, R.N., right, and Jessica Chekovsky, R.N., center, check patient charts in day surgery at Mayo Regional Hospital. The types of surgery performed at rural hospitals have dwindled as patients are funneled to city hospitals for specialized care. Shawn Patrick Ouellette/Staff Photographer

TWO SIDES TO CONSOLIDATION

The centralization of health services may not be an overall negative trend, experts say, as there are pros and cons.

On the con side, Holmes said, there are concerns that in small states like Maine, health networks gobbling up independent hospitals could result in monopolization of some health care services, driving prices up.

But consolidation could also make health care more efficient, driving prices down.

One of the long-standing criticisms of the U.S. health care industry is needless duplication of services.

As hospitals competed for patients, expensive medical equipment could be found at each hospital, sometimes within a few minutes or a 30-minute drive.

The consolidations have cut down on some of the unnecessary expenses, Holmes said. For instance, instead of each hospital having its own IT and human resources departments, those services are now often shared among hospitals in networks.

Another example is consolidating major surgeries into a few locations. The networks look to build efficiencies by funneling certain services to one or a few locations, Holmes said.

For instance, Pen Bay Medical Center and Waldo County General Hospital in the midcoast share a number of functions, including physicians, speech therapy and dental, human resources and administration. The two hospitals are part of the MaineHealth network.

And at St. Andrews, the emergency room had an average of 0.8 patients per day and the inpatient center 1.6 patients per day when it closed, said William Caron, CEO of MaineHealth, the parent company of Maine Med.

The ER was extremely inefficient and expensive, he said.

MaineHealth closed the ER and inpatient center after it acquired St. Andrews in 2012, and it has since been renamed LincolnHealth St. Andrews Campus.

Caron said most of the procedures that were being done at the ER could have been handled by an urgent care center. The ER was replaced with urgent care in 2013.

“To maintain an emergency department is four to five times more expensive than an urgent care,” Caron said.

Patricia Seybold, a Boothbay resident who protested the changes, said MaineHealth’s solution was a Band-Aid on health care in the region.

“A lot of people feel less safe and less comfortable here. We don’t have the comfort of having some place you can go to in the middle of the night if you need to,” Seybold said, pointing out that the nearest emergency room, at Mid Coast Hospital in Brunswick, is a 40-minute drive that could be treacherous or impossible in the winter.

While the ER is closed, St. Andrews has greatly expanded services in outpatient, wound care, skilled care and wellness programs since MaineHealth took over, MaineHealth officials said. So LincolnHealth, a health network in Lincoln County that includes St. Andrews, is still the largest employer in the county, according to the Maine Department of Labor.

In the past 15 years, MaineHealth has swallowed up a number of rural hospitals that used to be independent, although Caron said he doesn’t envision MaineHealth acquiring more hospitals.

Caron said many of the acquisitions were struggling hospitals that were experiencing financial difficulties.

“We view it as an obligation,” Caron said. “If not us, who? We are helping to preserve health care in these communities.”

LOSING DOCTORS – AND PATIENTS

The financial incentives in the current health care system are also causing problems at rural hospitals, which maintain largely empty inpatient centers at great cost in order to maintain their status as a hospital and the favorable reimbursement rates that go with being a hospital, Holmes said.

“Once they’re no longer a hospital, they’re no longer getting the funding for a hospital,” Holmes said.

A bill is pending in Congress that would maintain favorable reimbursement rates and hospital status for rural hospitals that maintain an emergency room and outpatient services, but no longer have an inpatient center.

Whether hospital consolidation is helpful or harmful to overall health care costs is a complex question and still being studied. A 2013 study by Harvard University delved into the proliferation of hospital networks and consolidations but did not make any definitive conclusions about what it might mean for health care costs to patients.

Another problem for rural hospitals is recruiting physicians, who often would prefer to work in more urban areas, Vienneau said. When a doctor leaves, it can take rural hospitals years to find a replacement.

“We had to go out of the country to find someone. I had to go to London to find a doctor because there wasn’t anyone in the United States willing to come to Dover-Foxcroft, Maine,” Vienneau said.

Caron said that’s where a network of hospitals can be an advantage – today’s young doctors just out of medical school generally do not want to move to a rural area, especially when they are always on call. With a network, the hospitals can share doctors so they don’t have to be on call as often.

Vienneau came to Mayo three years ago from Millinocket Regional Hospital, and was able to turn around the financial fortunes of Mayo. But because it lost physicians and couldn’t replace them, the money problems have returned, she said. Now Mayo has to pay traveling doctors, called locums, to retain services such as orthopedics.

Vienneau said locums cost three times as much as having a physician on staff. But she said Mayo can’t afford to lose orthopedics, because once word gets out in a small town that they’re no longer fixing broken bones, people will stop coming.

“Once you lose a service, it’s very difficult to get it back,” Vienneau said. “People become used to you not having the service, and they will go elsewhere and not come back.”

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