At a time when many rural hospitals are either closing or merging with larger, urban health systems, a group of Oregon hospitals wants to try something different.
Eleven hospitals and health systems are asking for state approval to form a clinically integrated network. They say the partnership will allow them to share resources while maintaining their independence.
Landon Dybdal is the CEO of Lake Health District and the chair of the proposed Cascade High Value Network. Nate White is the CEO and president of Cibolo Health, which has helped establish these networks in other states. They both join us to talk about the new partnership.
Note: The following transcript was transcribed digitally and validated for accuracy, readability and formatting by an OPB volunteer.
Dave Miller: This is Think Out Loud on OPB. I’m Dave Miller. A report from the Oregon Hospital Association this summer found that the state has lost three community hospitals in recent years. That’s in addition to the loss of specific services like labor and delivery or urgent care at hospitals that remain open. Now, 11 rural hospitals clustered in Eastern and Southwestern Oregon want to band together in a way that they hope will let them stay afloat without jeopardizing their independence. They’re asking the state to let them form a nonprofit partnership with the help of a for-profit company called Cibolo Health. Nate White is a CEO and president of Cibolo. Landon Dybdal is a CEO of Lake Health District in Lakeview. It’s one of the hospitals in this planned partnership. It’s great to have both of you on Think Out Loud.
Landon Dybdal: Yeah, thanks for having us.
Nate White: Yeah, thank you very much.
Miller: Landon Dybdal, first, what was the financial situation of your hospital when you started there as CEO about two years ago?
Dybdal: Yeah, so I started at Lake Health District in April of 2024. When I walked in here, we had about four days cash on hand, and we were probably a few weeks from shutting the doors. So it’s a pretty dire situation. I can say without going into a ton of detail on it, to save time, we posted a profit in this last fiscal year, and by profit, I mean, we had a 0% operating margin, we broke even. So we have improved our financial situation over the past couple of years compared to when I first started the year prior, in fiscal year 23, we had an $8 million loss. So we’ve come a long ways, and we want to make sure that going into the future, we can keep that sustainability going.
Miller: We could spend hours talking about this next question, but since you seem good at giving succinct answers when necessary, what are the reasons for the financial challenges, what are hospitals like yours facing right now, broadly?
Dybdal: Yeah, I mean there’s a lot of growing costs out there in the industry, supply costs have drastically risen in recent years, labor costs have risen in recent years. There are challenges with insurance companies, battling them on a day-to-day basis to make sure we get paid for the services that we provide. There’s just a lot of different challenges out there. Looking into the future, the Big Beautiful Bill, H.R. 1, and the impacts to Medicaid, that will be a challenge that we’re looking to try to find solutions for, lots of different things out there right now.
Miller: Nate, I want to turn to you and your company. When did you first start thinking about this specific way to help rural hospitals band together?
White: Yeah, I’ve been in healthcare my entire career. I actually started with a large healthcare system in the upper Midwest where we owned a number of critical access hospitals and rural hospitals, and we were acquiring them and sort of thinking through how do we operationalize rural hospitals in a manner that can preserve their independence?
And it was probably about five years ago when I started thinking through this more seriously and having conversations with rural CEOs. And our first network that we helped manage and run in North Dakota, that started getting off the ground in about 2022. But yeah, it’s been a good journey, but sort of this notion of rural healthcare I’ve been doing for 20 plus years.
Miller: How is your model, they’re known as clinically integrated networks, different from a merger in which a larger hospital takes over a smaller one? How’s it different it seems than what you started your career by doing?
White: Yeah. I’ve come to the other side, if that makes sense. I grew up in a town of 300 people in South Dakota. And as a result, this notion of rural is just a part of me, and I’m passionate about it. And I think the historical model has been largely predicated on what’s called the hub and spoke, right? So you have the hub, the major anchor facility, tertiary hospital, and you have spokes, could be physician clinics, nursing homes, could be rural hospitals.
And the challenge with rural hospitals is there’s always a financial stress where they’re gonna make more money if they close the service in rural and move it to the urban, right? And sometimes it’s appropriate, right? Sometimes volumes don’t lead to quality of care. Sometimes it’s just a financial motive and sort of the thought behind this is, OK, are there different ways we can get paid from rural? Are there different ways we can band together to generate some scale, or volume, to solve some of these challenges? So that’s largely what it’s predicated on.
Clinically integrated networks are not new. They have been around for 30, 40 years. What is new is the notion that these could be owned and managed by rural hospitals. And when we started the first network in North Dakota, there was no thought of Cibolo Health. This was just us trying to put a network together. When I got into it, I went, oh man, there’s a lot of work in running a clinically integrated network. You need significant technology, you need doctors and nurses and IT people, so on, contracting and lawyers.
And so that’s kind of the gap that we fill at Cibolo is that, hey, and at that time, another state, Minnesota, became interested. And so our sort of goal in all of this is now it’s not just these 11 hospitals in Oregon who are investing in tools and technology, it’s 11 networks in 11 states and 200 hospitals. All these hospitals share, for example, technology, and it’s allowed them to run a CIN, which typically costs millions of dollars a year to a fraction of that, right? So that’s first and foremost.
The other is, how do we get rural hospitals to get paid for quality instead of just volume, and how do we get them incentivized to reduce the overall total cost of care? So there’s two things fundamental about any legal CIN, is you have to be financially incentivized to improve quality and reduce the overall total cost of care. If you can do that, you get paid as a result, right? There’s an ROI, so that’s our operating philosophy.
Miller: All right, there’s a lot to dig into here. Landon, I wanna go back to you. What were the big questions you had for Cibolo when you started considering this?
Dybdal: That’s a great, great question. I think how does it operate was the first question. I’ve worked with networks in the past, but not necessarily this type of network, clinically integrated networks. It was a different model, so I needed to understand how they truly worked and how they operated. And then, one question that I remember asking Nate was, do we have enough members that we could actually join a clinically integrated network because I know some other states have 20-plus 40-plus hospitals within their networks and we’re a smaller one with 11 facilities.
But those were the questions that I initially had, and then we talked with Nate off and on in Cibolo Health with the other hospitals involved. We talked back and forth for probably a little over a year, Nate, I think is what it was.
White: Yeah.
Dybdal: It was a long time. So we really hashed it out for a long period of time before we decided that this is truly something we wanted to move forward with.
Miller: Were the other hospitals, 10 others, as I mentioned, largely in either Eastern Oregon and then skipping through Central Oregon down into Southwestern Oregon, were the 10 others reluctant to sign on or were they relatively eager?
Dybdal: Most of them were not reluctant. Eager, I’m not sure is necessarily the right word. Like I said, we talked with Nate for a year plus, so we all had lots of questions. We really fleshed this out to make sure it was the right choice for our facilities to move forward with this. But our facilities, all the facilities that are a part of this are independent facilities. Most of them are critical access hospitals. Only one is not.
Miller: And just to stop you there, that’s a federal designation which opens up… What does it actually mean to be a critical access hospital?
Dybdal: It would take a really long time to fully explain that, so I’ll do it as succinctly as I possibly can. It’s a slightly different funding mechanism that we get paid differently from the federal government for Medicare services. And it’s based on cost-based reimbursement is what it’s called, and that is very confusing and would take a long time to explain, to be totally honest.
White: It’s a federal designation that came in about 30 years ago that treats rural hospitals, you have to be under 25 beds, and you have to be further than like 25 miles away from the next facility. There’s sort of requirements, right? You have to be so small and so isolated to qualify for it. And if you do, the federal government treats you differently on Medicare reimbursement.
Miller: OK.
Dybdal: Yes, yeah, 35 miles is the designation, so you have to be...
Miller: So Landon, let me zero in on what you see as the benefits of this potential partnership. What do you think you’re going to be able to do as a result of this that you couldn’t do otherwise?
Dybdal: Sure, there’s a couple aspects. I think first and foremost, it allows us to take advantage of cost sharing and different purchasing agreements and things like that with shared services. It helps us act like we could be in a system, but we get to remain independent, and that is extremely important to all 11 hospitals that are within this network is that we keep our independence. That’s why we’re doing this, but it allows us to take advantage of how systems can sometimes operate. So that is extremely helpful to us.
And then the other really big thing is it allows us to get into value-based care. Nate can kind of talk about this more, but there’s scale that comes into play when you’re trying to get into value-based care arrangements, and with most of our facilities, we’re too small to get into that playing field. This gives us scale so that we can get into those markets a little bit more.
Miller: Nate, as I understand it, just simplifying this idea of value-based care a little bit – and you talked about it briefly before, we didn’t really dig into it yet – I think about it as changing the incentive structure so that overall patient health and the quality of care that patients are getting is incentivized as opposed to the hospital gets more money when it provides more services, when it does more tests, when it does more procedures, and there the incentive is not, it’s not really explicitly about outcomes or overall population health. It’s about how many services are you providing. This sounds great to me, I have to say, as a patient, I like the idea of this different incentive structure. Does it actually pencil out for a hospital system?
White: Yeah, I think you hit it exactly on the head. Fee for service or fee for sick care is our model today, right? There’s no overarching incentives for quality and controlling costs. So as you think about value-based care, and I’ll kind of piggyback off a couple of things Landon said, one, it does require you to hit certain quality metrics. Those are typically different for each payer, obviously. And you wanna have more lives in these programs, not less, because if you’re a small rural hospital with 100 patients with a particular payer, those programs just are not actuarially sound, if that makes sense.
Miller: Because the risk overall is not spread out enough?
White: Exactly, exactly. So if you take the most common value-based care program in the country, it’s called Medicare Shared Savings through Medicare, and all commercial payers have some version of this too. They actually require you to have 5,000 patients in the program or you can’t qualify. And some of that has to do within that program, they tell you each Medicare patient that you’re attributed to, that lives in your community, it should cost you $13,000 a year, right? And if it costs you $12,000, we’ll share in those savings, and if it costs you $14,000 you have to pay in. Now, actuarially, you need 5,000 lives for that to not be a risky program, if that makes sense. So what Landon talks about when working together, these programs were simply not available to them.
Miller: With the 11 hospitals that we’re talking about now in Oregon, do you have at least 5,000 patients for this particular program?
White: Yeah, so we will be participating in MSSP. Commercials don’t have the rigid requirements, right? And there’s things you can do, let’s say you only have 1,500, right? We might do a more narrowly tailored program, but we can still do a program, if that makes sense.
Miller: Let me zoom out a little bit further. Nate, six years ago, the RAND Corporation put out a report about these kinds of networks, clinically integrated networks. They said they couldn’t find any academic studies at the time that looked into whether or not they actually save money or improve patient care. They wrote, “In theory, quality should improve with the alignment of healthcare organizations, but there’s no evidence.” That was six years ago. Do you have evidence now?
White: Well, I think just look at the studies associated with that Medicare program I referenced to you. It has clearly saved Medicare millions. It’s the only program out there that is proven to save money, right? So we’re not saving through our participation in that program. If we’re successful, we will save Medicare money.
Miller: What about patient outcomes, which is the other important piece of this?
White: Yeah, no, we have tons of evidence. Actually, the Commonwealth Fund did an article on one of our networks in a pilot we did, and I’m happy – we don’t have time to talk about that today – but we’ve seen great improvement simply because in the rural setting, it just hasn’t traditionally been a focus to think about how we engage patients that aren’t coming in. So if you think of the quality standards, it’s closing gaps in care, getting in for your annual wellness visits, getting in for your preventative cancer screenings, controlling your A1C, right?
And we have functions that extend from these clinics that the hospitals own, and we’re helping them do that to improve their quality scores. The other thing is really, really important to note about our strategy and really critical when you ask about this value-based care work, in a large system when you are doing complex care and high-end procedures, the math suggests they typically don’t work, right? Because you’re ramping down your volume on these high profitable procedures and you’re getting paid half of that in the value-based care program.
Well, if you think about rural, and this is true of rural hospitals. So for critical access, over half of your revenue, some studies suggest 65%, over half of your attributed spend on your total cost of care as you care for the patients in your community, happens outside your walls, right? So in Oregon, it could be going to Seattle, it could be going to Portland for high-end expensive care.
Well, one of the things we really, really focus on in our total cost of care models is if we’re going to send a patient out for a complex procedure or for care that can’t happen locally, like I said, more than half of our spend, we want to send them to places that get better outcomes at a lower cost. Which by its nature will drive, hopefully, some competition amongst the larger systems to compete based on cost and quality, not just trying to grow their volume, grow their volume, grow their volume, buy the next hospital, buy the next hospital. So it’s trying to change that trajectory. I mean, that’s our big bet here is that we can influence total cost of care by simply making people compete on cost and quality.
Miller: Landon, just briefly, why do you need Cibolo? I mean, could you take all these good ideas, have these meetings with this company and say, great, you know what, this got us thinking, and now the 11 of us will band together and we’ll make this partnership, this new nonprofit partnership, and we actually we don’t even need the middle maker anymore, we’ll just do this ourselves.
Dybdal: We’ve actually talked about that. CEOs are the ones that sit on the board for the CIN. We do not have the bandwidth to manage everything that goes into managing a CIN. That’s why you need someone else to do it for you if you wanna be successful. And there have been CINs that have tried to do that on their own, and they usually fail. So we don’t want this endeavor to fail, we want to make sure it succeeds, so that’s why we have Cibola helping us with this project.
Miller: And just briefly, what’s the timeline now for state level approval?
White: Are you talking about HCMO approval?
Miller: Yes.
White: Yeah, I gotta look at that. So the initial response obviously is due within that 30 days, and we’re, I think, within a couple of weeks of that…
Dybdal: Yep.
White: …which may or may not resolve. We’re in good conversations with the state. They’ve asked a lot of good questions, I think obviously they’re very supportive of rural health care. They just want to make sure they’re digging into everything. And the other important thing I should say about Cibolo is we do not own the Cascades Network in Oregon, we have zero ownership in their network. We have zero ownership in their hospitals.
Miller: Right, you’re a service provider.
White: We’re a management company and if we can do it cheaper and better, they’re gonna keep us. And like you said, if they can do it on their own cheaper and better, they’re not gonna use us.
Miller: Landon Dybdal and Nate White, thanks very much.
White: Thank you.
Dybdal: Thank you.
Miller: Landon Dybdal is the CEO of Lake Health District. Nate White, CEO and president of Cibolo Health.
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