By Chris LaPage

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.

The Pros

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.

The Cons
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.

Grant Funding Considerations

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. In fact, HRSA even makes money available on an annual basis for rural health care providers to develop a formal network.  The Rural Health Network Development Planning Grant Program is currently open and applications are due October 15, 2012.  The program offers applicants $85,000 to undertaking planning activities to formalize a network.  Grant funding can be used for a variety of planning functions, such as a community needs assessment, establishing a network board and bylaws, drafting memorandums of agreement, and conducting a health information technology readiness assessment. 

The good news is that you do not have to take advantage of the planning grant in order to qualify for subsequent opportunities that are geared towards rural health networks.  The major point of emphasis is to have the rural network formalized ahead of the application process for a particular grant program. Later this year we are likely to see the return of the Rural Health Workforce Development Program.  It is anticipated that rural health networks will be eligible for up to $600,000 over a three year project period to develop innovative community-based education and clinical health training programs that encourage the recruitment and retention of health professionals in rural communities.  HRSA is planning on releasing the program in December with an anticipated deadline in March 2013.  Over the long-term, HRSA will likely bring back the Rural Health Network Development Program in the Fall of 2013 (FY 2014), which puts $450,000 over three years on the table to carry out network activities. 

In Conclusion...

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.  It is only logical that the federal government would favor such arrangements considering all the benefits and efficiencies that result from the creation of rural health networks.  There may even come a day when government payers (Medicaid, Medicare, CHIP) follow suit and begin offering enhanced reimbursement for members of rural health networks.  For rural entities that typically operate on the thinnest of margins, or at a loss, the idea of avoiding formal health networks may no longer be an option.