Shaky rural hospitals are often sold on the cheap, often to startups that can innovate -- or adopt shady practices

Kyle Kupec of Braden Health with the outdated CT scanner
at the hospital in Erin, Tenn. (Photo by Jordan Howell, WTVF)

Some rural hospitals are in such dire financial straits that the local governments that own them are selling them for rock-bottom prices to private companies who promise to keep the hospitals open and serving their communities. Buyers who make an honest effort to turn the hospitals around can benefit themselves and the community,  but the challenges sometimes leads to shady business practices.

Many of the question are often badly run-down, with outdated equipment and major structural issues, so governments often sell them for very little. "Remarkably few companies with any level of experience are interested in buying them. And those that are willing don't want to pay much, if anything," Blake Farmer reports for Nashville Public Radio. "At this point, large health systems have already acquired or affiliated with the hospitals that have the fewest problems. . . . The hospitals that are left are those that other potential buyers passed on. Turning a profit on a small rural hospital with mostly older or low-income patients can be challenging."

Startup Braden Health has snapped up over a dozen rural hospitals, mostly in Tennessee and North Carolina. "The hospitals Braden Health is taking over sit in one of the worst spots in one of the worst states for rural hospital closures," Farmer reports. "Tennessee has experienced 16 closures since 2010 — second only to the far more populous state of Texas, which has had at least 21 closures." None of those states have expanded Medicaid under the Patient Protection and Affordable Care Act.

Braden bought Houston County Community Hospital in Erin, Tennessee, a community of about 1,700 some 90 minutes northwest of Nashville, for $20,000, and only paid that much because the hospital came with an ambulance considered to have some value, Farmer reports. Otherwise, the equipment is broken or decrepit, and it will take considerable investment from Braden to get the hospital up to speed.

"A lot of people aren't willing to put in the time, effort, energy, and work for a small hospital with less than 25 beds. But it needs just as much time, energy, and effort as a hospital with 300 beds," company founder Beau Braden told Farmer. "I just see there's a huge need in rural hospitals and not a lot of people who can focus their time doing it." Braden, an emergency room doctor, owns a clinic in rural Florida, but was prevented from building a new rural hospital nearby in 2020 after a larger hospital system complained that the proposed 25-bed hospital would take too many of its patients. He turned his attention to reopening hospitals, and says he can make them profitable by cutting waste, improving tech in ways that insurers reward, and limiting nursing staff when business is slow.

But some companies that take over ailing hospitals have turned to shady practices that have gotten them in trouble with insurers and even law enforcement, Farmer notes.

At Audrain Community Hospital in Mexico, Missouri, unscrupulous new owners destroyed the finances of some of its employees, too. Private-equity startup Noble Health, whose managers had never run a hospital, bought it in March 2021, Sarah Jane Tribble reports for Kaiser Health News. The Centers for Medicare & Medicaid Services vets such hospital purchases, but it's unclear why the sale was allowed to proceed when one of its owners had settled a Medicare fraud case.

It soon became clear "that the new owners were skimping on services — failing to pay for and stock surgical supplies and drugs, Tribble reports. "What was less apparent, former workers said, was that Noble had also stopped paying for employee health, dental, vision, and life insurance benefits. They were unknowingly uninsured." One ultrasound tech relied on insurance to cover cancer treatments during the last months of her late husband's life, but because she wasn't actually insured, she now owes her insurance company at least $250,000.

Noble, which accepted nearly $20 million in pandemic relief funds, is now under federal investigation. On April 20, Noble sold Audrain and another nearby hospital to Texas-based Platinum Neighbors. The new owners paid $2 total.