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Case Study: Finding Community Partners to Modernize a Rural Healthcare Facility



Doctors and nurses who practice in rural communities are often driven by an extraordinary sense of mission and connection. But even the most devoted providers have to make a living, and the economics of healthcare are especially tenuous in sparsely populated areas.


Real estate costs can be the biggest financial burden for a struggling primary care practice, and it’s hard for the numbers to make sense using traditional development models – but creative partnerships and outside-the-box thinking can allow rural providers to beat the odds.


Here’s a case in point: Several years ago, Criterion Healthcare was enlisted to help save a struggling practice in rural North Carolina. The existing, 30-year-old building was cramped and outdated, with no space for diagnostic imaging, rotating specialists, or other services needed to meet the needs of the community.


That created a vicious cycle. Local residents were forced to drive to neighboring markets for about 75% of their primary care visits, taking away revenues that could have helped to modernize their hometown facilities.


The county identified a vacant commercial building that was nearly three times larger than the current office, but total project costs were pegged at $1.3 million – far more than any traditional lender would approve, even accounting for projected growth.


Criterion looked beyond the usual bank-borrower model to identify eight different partners with a stake in better primary care for the community:


  • The county hospital, which operated the local medical practice

  • The county’s economic development agency

  • A local bank

  • A design and construction firm

  • Two statewide foundations focused on rural issues

  • The local electric co-op

  • USDA’s Rural Development Office


Here’s how it all came together: The county applied for a $600,000 mortgage to buy the vacant, distressed property. With loan guarantees from the USDA, the local bank was able to approve the loan. The county hospital and its physician group signed a 10-year lease on the new building and assumed responsibility for all maintenance and operating costs.


The two statewide foundations provided grants that covered $320,000 in renovation costs, and the electric co-op provided a zero-interest loan to purchase $360,000 in imaging equipment. That left just $100,000 in equity needed to close, which was split 30/70 between the hospital and the county.


When the new facility opened, patient visits immediately jumped by 30%, a new physician joined the practice, and the new imaging services were utilized more than twice a day, on average, justifying the investment to save local residents a 30-minute drive for their X-rays.


If you're a rural healthcare provider with aging, outdated facilities, we'd love to help. Contact RHI today for a no-obligation consultation.

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