Many Small Health Systems Have Been Hoovered Up. Rejecting This Fate, Rural Oregon Hospitals Are Uniting.

A few years ago, Landon Dybdal, who runs Lake District Hospital in Lake County, Ore—pop. 8,187—says he found himself sketching up a plan on some loose paper at a restaurant around San Antonio.

At the rural hospital leadership conference he was attending, he recalls, a man named Nathan White had just given a talk that made an impression. It was about how rural hospitals could team up to amass negotiating power, administrative expertise and other assets they lack on their own. After the talk, Dydbal and other small Oregon hospital CEOs in attendance chatted favorably about the idea, and he says when he encountered White later in the restaurant, the two men started talking turkey.

That idea is now a reality—at least provisionally. It was christened several months ago in a conference room in Bend: Leaders of 11 independent Oregon rural hospitals have signed on to create a new nonprofit, the Cascades Rural High Value Network.

Last week, they submitted the plan to state regulators for approval.

The vision would be shepherded by Cibolo Health, a South Dakota-based company which in recent years has implemented similar systems in other rural states to promising effect, says Dydbal, the chair of the new nonprofit network board who says he heard good reviews from health leaders in Montana and beyond who’d already contracted with Cibolo.

Though rural hospitals, often aided by enhanced pay rates, have in some cases lately posted better financial margins than their urban counterparts, the move reflects the sense of precarity many feel as the population ages, massive insurers put on the squeeze, workers dwindle, and costs to provide care skyrocket.

Some have responded to these pressures by folding into bigger mothership health systems. But Dybdal and others describe the rural network model as an alternative path—a way for local communities to keep their control, and avoid the pitfalls that can come with ceding your independence.

“When you join a hub-and-spoke model and you join these large systems, services will always get stripped away from these smaller facilities,” Dydball tells WW. “And in a place like Lakeview where I live, that means you’re driving 100 miles to the next organization that might offer those services—at the closest. Bend is 175 miles from here. So it’s important for us to stay independent.”

When, say, closing a labor and delivery unit or a geriatric psychiatry unit, health systems often cite low patient volumes and challenges recruiting doctors. These hurdles are real, but financial incentives play their part too.

“In almost all instances you’re going to make more money by just having less locations and higher volumes to the locations that you do have,” White, the Cibolo Health CEO, says in an interview.

Founded in 2022, Cibolo Health—tagline: ”Be the Buffalo”—organizes bands of small rural hospitals to develop networks of scale on their own. For this work it receives a management fee. (White says the financial specifics with the Cascade Network are confidential, and as-of-yet pending, given that the group awaits Oregon Health Authority approval.)

Wallowa Memorial Hospital CEO Daniel Grigg foresees in the network numerous benefits. For example, he imagines it recruiting specialists—who would not have enough work within a given area—to split time between different hospitals. Or buying equipment at the lower rates bigger systems can negotiate.

“When you have a population of 7,500, that’s nothing to these companies,” he says of the vendors with whom he often must do business.

CEOs tout another big perk too: They say the network will enable them to build out payment models incentivizing them to work efficiently keep patients healthier, rather than the standard one incentivizing the provision of more and more services.

The concept known as “value-based care” sounds straightforward: Get patients to smoke less, say, or keep hospital readmissions down, or keep patients coming in for their checkups, and get rewarded financially. But rural hospital leaders say it’s hard, at their solitary sizes, to get payers like Medicare or commercial insurance companies to use the more complex payment model—and to administer the systems themselves.

“We don’t do a lot of it, and we don’t do a great job at it,” Dybdal says of his hospital. Its tried to build out more value-based care approaches lately, but has “long way to go to be efficient.”

None of these ideas are totally new. The Oregon Medicaid system is—at least in theory—organized around a model premised on the “value-based care” approach, yet costs continue to skyrocket in that space.

And not all independent Oregon hospitals signed on. Sky Lakes Medical Center in Klamath Falls didn’t. Dybdal says Columbia Memorial Hospital in Astoria didn’t either, concerned it might undercut its close relationship with Oregon Health & Science University. Nor did Santiam Hospital & Clinics; it was in the process of getting absorbed by Salem Health, a bigger system in the area.

The hospitals that did join are concentrated in two areas, Eastern and Southwest Oregon. For Southern Coos Hospital and Health Center CEO Raymond Hino, one appeal of the Cascades Network is the prospect of leaning on corporate-type resources unavailable to him as an independent operator—for example an expert in clinical equipment acquisition, or risk management.

Hino’s worked at small district hospitals for years. They are unique operations, he says. They are controlled by community boards, often the largest local employer and a true “focal point”—home to birth, death, family care, emergencies. And for a long time, part of their identity has been centered on a central challenge: “We’re on our own.”