This is why Nanticoke is affiliating with a Salisbury health system

Nanticoke Health Services announced this week that it will affiliate with a Salisbury, Maryland, hospital system, likely providing the small Seaford hospital more financial security at a time when rural hospitals are struggling. 

For the past 18 months, Nanticoke has looked at the possibility of affiliating with several organizations, including health systems in Delaware. It chose Peninsula Regional Health System, which has a 288-bed hospital in Salisbury as well as practices in Millsboro and Laurel. 

"There are hospitals closing, and we wanted to make sure that we kept our place here in western Sussex," said Steven Rose, president and CEO of Nanticoke Health Services.

"And it's not just about meeting missions. We’re a part of economic engine, and to be a part of that is to be here and help the economy grow."   

More than 200 rural hospitals have closed between 2005 and 2018, according to a November report by the Rural Health Research and Policy Centers. As of 2016, 175 rural hospitals were identified to be "at risk of financial distress."

Many rural hospitals are tasked with the challenge of taking care of a declining population that tends to be older, sicker and poorer than patients in urban areas, the report said. 

This is why more and more rural hospitals have chosen to affiliate with larger organization in the past decade, the report said. 

Rose said Nanticoke was placed in a "vulnerable" position about when the Centers for Medicare and Medicaid pulled its Medicare-dependent hospital status in 2017.

Before the feds did that, the hospital was reimbursed at a special higher rate than urban hospitals because about 65 percent of Nanticoke's patients depend on Medicare, it's in a rural area and it has less than 100 beds, he said. 

But then, CMS decided that all counties in Delaware, New Jersey and Rhode Island are considered to be urban, Rose said.

Although Nanticoke was able to get its Medicare-dependent status back this October, the situation made the board proactively look at sustainability options and "not wait to a point where we had to make a decision," Rose said. 

Nanticoke ultimately chose to affiliate with Peninsula Regional Health System because of its proximity, Rose said. The two organizations have been "good neighbors" in the past, in which they have borrowed equipment, supplies and pharmaceuticals from one another.

"It's like your neighbor next door: 'Can I borrow a cup of sugar,'" he said. 

When rural hospitals affiliate with larger health systems, the benefits tend to include better access to technology, staff recruitment and retention and more services, the Rural Health Research and Policy Centers found.

Rose believes the affiliation will help Nanticoke access better equipment and invest money into certain areas in the hospital. It will also allow Nanticoke to get better prices from suppliers. 

"Every hospital’s margins are getting smaller," he said. "What you need to do is reduce expenses by reducing drug costs and supply costs. ... You're able to do that by purchasing in bulk."

Rose said "no money exchanged hands" between the two health systems because they are both nonprofit organizations.

The biggest changes will come with governance, Rose said. Nanticoke will continue to have its own board and will have representatives on Peninsula's board of directors.

The two organizations have signed a letter of intent and will need to go through Delaware's Certificate of Public Review process, which analyzes health care business developments and how it could affect the public. 

Ultimately, the Delaware attorney general needs to sign off on it.

"Nothing's official until she signs it," Rose said. 

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Contact Meredith Newman at (302) 324-2386 or mnewman@delawareonline.com and on Twitter @MereNewman.