By Chris LaPage
May 2011

Anyone paying attention to the health sector grant funding landscape is certain to see several opportunities each year specifically designed for rural health networks. Under these programs, the Health Resources and Services Administration (HRSA) distributes the majority of federal dollars available to formally organized rural health networks, which usually requires a pre-existing relationship (prior to grant announcement), while some is reserved for entities in the planning stages of network development. In Fiscal Year 2012 alone, HRSA has committed $17.2 million in funding for rural health networks. Since most of the commitments are for multi-year projects, the real funding total over the next three years will exceed $50 million.

For rural health care entities that have resisted entering into such formal network arrangements in the past, the major financial investment by the federal government should put such conversations back on the table. Beyond the implications of meeting eligibility requirements for much needed grant funding, rural health networks have a slew of other potential benefits. For example, a formal rural health network might consist of a critical access hospital, a rural health clinic, a federally qualified health center and a mental health agency. Evidence suggests that formal health networks are in a better position to care for patients across the continuum, leading to better health outcomes. In addition, a formal health network is likely to achieve economies of scale when it comes to purchasing power as well as other potential efficiencies. For instance, individual member institutions of the formal rural network are more likely to share resources and avoid unnecessary duplication of services, which results in savings to the overall health care system.

Considering all the potential benefits, one might ask why any rural health care institution would avoid pursuing a formal health network. The major obstacle is that in order for a rural network to be recognized as a formal, each individual member institution must give up some autonomy. A formal network is a legal arrangement (between at least 3 separately owned organizations),
requiring a memorandum of understanding (or agreement), establishment of a governing board, and the creation of bylaws. Several forces prevent rural entities from exploring health care networks, including apprehension on the behalf of executive officers to relinquish autonomy, community ownership of a rural facility, historical significance of the health care entity and disagreement amongst potential participants as to the details of the arrangement.

Considering the level of investment in these entities by HRSA, chief executives at rural health care institutions across United States will need to take a second look to determine if the pros now outweigh the potential cons. Once a formal relationship is established, HRSA makes additional money available to these networks to carry out various activities. The Rural Health Network Development Program (http://upstream.grantsoffice.com/GrantDetails.aspx?grant_id=19549) provides networks with up to $540,000 over three years to achieve economies of scale, consolidate administrative functions, enhance workforce recruitment and retention, share staff and expertise across the network, improve quality of care across the continuum, perform continuous quality improvement activities and gain access to capital and new technologies. This particular program usually is announced in late summer with a due date in November.

While it may not be feasible and necessary for all rural health care entities to eventually find partners and create formal networks, the future of the funding streams supporting rural health care is targeted in that direction. In fact, HRSA just recently announced $12 million in FY 2012 funding to assist rural health care entities that are part of formal networks with adopting EHR, achieving meaningful use and realizing the Medicare/Medicaid Incentives (see box below). For rural entities that typically operate on the thinnest of margins, or at a loss, the idea of creating or joining a formal health network may no longer be an option.