Some rural hospitals are in such bad shape, local governments are de facto

ERIN, Tenn. — Kyle Kopec gets a kick out of leading tours through run-down hospitals when his boss is snapping, pointing out what he calls the ruins of poor management left by a revolving door of operators. But they have one thing to show for their plight — the company he works for, Braden Health, is buying a million-dollar building in exchange for the next one.

At a hospital in this rural community about 90 minutes northwest of Nashville, the X-ray machine is beyond repair.

“This system is so old, it’s using a floppy disk,” said Kopec, 23, marveling at the bendy black square that doesn’t have enough memory to hold a single digital photo. “I’ve never actually seen a floppy disk used. I saw them at the Smithsonian.”

Not only is Kopec young, but he had limited work experience in hospitals before helping to get bought by Braden Health. Her previous work experience includes a three-month stint as an intern at the Trump White House, assignments through her volunteer position with the US Coast Guard Auxiliary. He worked through college at Braden Health’s clinic in Ave Maria, Florida, and became a commitment to the company’s founder, Dr. Beau Braden. Now Kopec’s official title is chief compliance officer, Braden’s second in command.

Braden Health is occupying hospitals in one of the worst places in one of the worst states for rural hospital closings. Tennessee has experienced 16 closures since 2010 — second only to the more populous state of Texas, which has had at least 21 closures.

Local governments that own these facilities are finding that remarkably few companies – with any level of experience – are interested in purchasing them And those who are willing don’t want to pay much, if anything.

“When you’re on the ropes or even with your head under water, it’s really hard to negotiate any terms of power,” said Michael Topchick, director of the Chartis Center for Rural Health, which closely tracks distressed rural hospitals. “And so you are, often, choosing someone who is willing to choose you.”

Right now, large health systems have acquired or affiliated with hospitals that have the fewest problems, Topchick said. And what’s left is picked up by operators, some of whom have run into trouble with insurers and even law enforcement for shady billing practices.

“You can make it profitable,” Topchick said. “But it’s awful to go there.”

Braden, an emergency room doctor and addiction specialist, joined the hospital buying business in 2020 using his savings and inherited assets. Previously, he tried to build a hospital in Southwest Florida, where he owned the large rural clinic in Ave Maria. After running into regulatory roadblocks, he saw more opportunities to reopen hospitals — which brought him to Tennessee.

Braden Health has 40 employees at its corporate headquarters, according to Kopec. It’s a limited liability company and privately held, so it doesn’t have to share much about its financials publicly. But in a certificate of need filing that outlines why it should be allowed to operate a health care facility, Braden disclosed a hospital operating in Lexington, Tennessee, has $2 million in monthly revenue and more than $7.5 million in cash on its balance sheet. hands.

Since buying that Lexington hospital in 2020, Braden Health has signed deals for three more failed or failing hospitals and has looked at acquiring at least 10 others, mostly in Tennessee and North Carolina. Braden Health’s strategy is to create mini-networks to share staff and supplies.

At Erin’s hospital, much of the facility’s equipment is older than Kopec. And he said Medicare penalized hospitals with lower payments for using outdated technology.

Heading up to the roof, Kopec said, there was a ham radio system in the attic that apparently didn’t get much use. He wanted to show how the massive HVAC system could be controlled from a rusty side panel accessible only with a wrench. Downstairs, an emergency room was never used. During a recent renovation prior to Braden Health’s ownership, its doors were made too narrow for a gurney, among other design flaws.

One photo shows Kyle Kopec using his phone as a flashlight to look through an old supply cabinet.
Braden Health’s Kyle Kopec searches through an old medical supply cabinet in an abandoned hospital.(Blake Farmer for KHN)

An old operating room is temporarily living in the ER while Braden Health begins new renovations. The Tennessee attorney general, who must approve the sale of a public hospital to private investors, signed off in July.

To prevent the hospital from closing in 2013, Houston County purchased it for $2.4 million and raised local taxes to subsidize operations. “We had no business being in the hospital business,” said Mayor James Bridges. “Most county governments don’t have the skills and education and knowledge needed to run health care facilities in 2022.”

Like the big corporate hospital chains based in Nashville with the most experience, they are also getting out of the small hospital business.

Communities have seen incompetent managers come and go. In Decatur County, where Braden Health is also taking over the local hospital, the previous CEO was charged with theft that is pending. And the Tennessee comptroller determined that the hospital helped jeopardize the county’s finances.

“You’re looking for somebody who supposedly knows what to do, who supposedly can solve problems. And you believe them, then you’re going to be disappointed,” said Decatur County Economic Development Board Member Laurie Brasher. “And not once disappointed, but more than once.”

Brasher expressed high confidence in Braden Health, which he said has firm plans to reopen, although the timing has been delayed by an unresolved insurance claim from a burst water line that flooded a wing of the hospital.

One photo shows Laurie Brasher talking to someone out of frame at a table
Laurie Brasher, a member of the Decatur County Economic Development Board in Tennessee, said her community has been “frustrated” more than once by companies that claim they can turn over local hospitals. The last CEO was charged with theft which is pending.(Blake Farmer for KHN)

Local residents still have trouble figuring out the sticker price: $100 for a property valued at $1.4 million by the local tax assessor. Along with those lower prices, Braden Health won a tax break to invest $2 million in the building.

Houston County Hospital is valued at $4.1 million by the property appraiser. But the final sale price was only $20,000 — and that wasn’t for the land or the building. Kopec said the amount was for a 2016 ambulance with 180,000 miles — considered the only piece of equipment with any residual value.

A deal with Braden Health to acquire Shutter Hospital in Haywood County, Tennessee, valued at $4.6 million, was a similarly symbolic payment. All told, Braden Health is getting more than $10 million worth of real estate for less than the price of an appendectomy.

Kopec contends that the value of each property is essentially negative because the hospitals require so much investment to comply with healthcare standards and – according to the company’s purchase agreement – must be run as hospitals. If not, the hospitals revert to the county.

Much of the funding to restore those facilities comes directly from Braden, who thinks people overestimate the value of his company’s hospitals taking over.

“If you look honestly at a lot of transactions that take place with rural hospitals and how much liability is tied to them, there really isn’t a lot of value,” he said. Braden recently settled a $2.3 million debt with Medicare for Houston County Hospital.

He said he has no secret sauce in mind, saying small hospitals need just as much persistence as large medical centers — especially since their profit margins are so slim and patient volumes so low. He wants to improve technology in ways that reward hospitals by health plans, limit nurse staffing to slow business, and see medical supply inventories to reduce waste.

“Many people are not willing to put in the time, effort, energy and work for a small hospital with less than 25 beds. But it requires the same time, energy and effort as a 300-bed hospital,” Braden said. “I just see that there’s a huge need in rural hospitals and not a lot of people who can focus their time.”

It’s a tall order. Braden said he understands any skepticism, even from hospital employees. They’ve heard promises of change before and may even be wary of the care they’ll receive at such run-down facilities.

One photo shows staff gathered around the front desk in a hospital waiting room.
Dr. Beau Braden (left) and Kyle Kopec speak to staff gathered at the nurses’ station at Houston County Community Hospital in Irene, Tennessee. Braden Health bought the facility for $20,000 — a price that most pay for a piece of medical equipment that’s considered to have any value, a 2016 ambulance with 180,000 miles.(Blake Farmer for KHN)

Still, as Kopec bounced through the halls of Erin Hospital, she greeted nurses and clerical staff by name with a confidence that belied her age and experience. Rural hospitals require specialized knowledge, he tells anyone who will listen.

“These are not the most complicated things in the world,” Kopec said. “But if you don’t know how to drive them properly, you’re going to drive them straight into the ground.”

This story is part of a partnership that includes Nashville Public RadioNPR, and KHN.

Related topics

Contact us Submit a story tip

Leave a Reply

Your email address will not be published.