Mark Sanchez: We all love going to the cider mills in the fall, but we have to remember there's a whole agricultural operation. Somebody's got to grow those apples and maintain those orchards and run the business and run the agricultural operation on the farm. And then each of us, we get to enjoy going there for our cider and our donuts. And that's part of agritourism. Agritourism, it's also the blueberry farms over here in Ottawa County that people love, especially the out of towners go and pick your blueberries. Go to the apple orchards in the West Michigan fruit belt to the Southwest Michigan fruit belt. Go pick your apples. Your wineries. You know, there's an agricultural operation behind those growing those grapes and a lot of them have their tasting rooms and then host events, weddings, birthdays, events like that.
So, it's a big business and we've seen this pick up for many years of these farms and these agricultural operations wanting to do more and everybody wants to preserve farmland. And I always say, what's the best way to preserve farmland? Well, you have to preserve farming, and the farmer needs a return on their investment for their business.
And you've seen a lot of operators over the years, for many years, create these side businesses, these attractions, again, come in and enjoy your cider and donuts or go pick apples or peaches or some other type of operation with it.
And this is a story this week, my coworker here at Crain’s Grand Rapids Business, Abby Poirier, did take a look at this issue.And she used kind of the Robinette’s example here in Grand Rapids that back in the 1970s, they built a cider mill on the farm and then it become something much more and it's a place to go. And you have your farm markets as well. But the problem is you have your townships with their zoning regulations, and has the regulation quite kept up with the market demand and what's going on in the marketplace?
And I think this is a classic example where perhaps it hasn't. You've seen townships try to control these operations and, in some cases, maybe go too far. You had the case up in the Old Mission Peninsula here in the last couple of years where the wineries were doing things with their tasting rooms, their event centers, and the township enacted an ordinance that was quite restrictive and was restricting those operations. It went to litigation and the township got hit with the $50 million judgment.
So, here's an example, again, the marketplace is doing something. The farmers are adding to their operations and it's kind of butting heads with some of those zoning ordinance out there in these rural townships and where does it go from here?
Patrick Center: Let's stick with rural Michigan.We're beginning to see these smaller rural hospitals close, and you focus on Sturgis Hospital.
Mark Sanchez: Yeah, this was kind of a sad event. Last Friday, Sturgis Hospital down there near Kalamazoo closed for good.And Sturgis Hospital has really had a lot of difficulty for a number of years financially and struggle along, had kind of a re-classification a couple of years ago where it closed its inpatient beds and just operated the ER and all those outpatient services and it qualified for some additional funding from Medicare, that didn't work either.
So finally, the decision was made by the directors there at Sturges Hospital to close the operation.And in doing the story last week, I talked to somebody at the Michigan Health and Hospital Association because we've been hearing this for years that these rural hospitals are really struggling. They have trouble getting capital. They have trouble, just like everybody, with rising costs, rising labor costs, retaining and recruiting doctors, especially specialists such as OBGYNs, because they don't have high volumes. So, it's tough to attract somebody to get somebody to come practice there.
So, there's a whole number of issues that have been ganging up on hospitals, especially your rural hospitals, not just in Michigan, but around the country. And finally, we saw one of them come down, Sturgis Hospital closed. And then talking to somebody at Michigan Health and Hospital Association last week, her words, “this is the canary in the coal mine moment for rural hospitals.” That they've been talking about this for years and warning about it and it's coming to roost. And they believe that we could see more of this in the years ahead.
There's research at the University of North Carolina Chapel Hill that does kind of an annual report of looking at hospitals and especially rural hospitals and right now they put out an annual list and right now they have three hospitals, no names, that they consider at immediate risk of closing, plus another five or six that are at risk of closing sometime in the future.
So, this is a growing issue and it's something that needs to be confronted because everybody deserves access to quality healthcare. It's getting a much, much tougher sled to offer these services and run these hospitals in rural markets.
Patrick Center: It was my understanding that the federal government had budgeted more money for rural hospitals. Is it making an impact?
Mark Sanchez: Well, not yet. You're talking about the One Big, Beautiful Bill also known as H.R. 1. And this is going to take up to about a trillion dollars out of Medicaid over the next decade, $900 billion to one trillion dollars in cuts to Medicaid funding here in the next 10 years. I know, lot of your rural hospitals have high Medicaid populations. So, it's going to hit those hospitals even harder than some of your other urban hospitals and urban facilities. Not to say anybody's going to come out of this in good shape because that's a chunk of money. And your Medicaid populations and some of these rural markets are high.
And I believe Michigan, there was about $50 billion in there allocated for rural hospitals. I believe Michigan's allocation was about $173 million. Boy, you spread that out over a number of facilities over a decade, it's not that much money. So, it could, it could have an effect. It could help. But the bigger things that folks are worried about is what's going to happen here post-election come next year when HR one's funding in Medicaid really kicks in.What's the implication?
We're already seeing this happen. Rural hospitals under threat. What are the implications now, going forward, once this funding cut kicks in?
Patrick Center: We're talking with Crain's Grand Rapids Business staff writer, Mark Sanchez. The House Speaker is introducing legislation that would mandate hospitals cut prices or lose their nonprofit status.
Mark Sanchez: Yeah, this is some interesting legislation that we've been hearing about for a few months from various parties. And there is a big growing belief that a lot of what's going on and nobody seems to like the status quo of healthcare in America.It's too costly, bottom line. A lot of finger pointing goes on and a lot of fingers are getting pointed at your big health systems.
We've had a lot of consolidation over the last decade in Michigan that gives these big health systems more purchasing power in negotiating their contracts with the health insurers. And over the last year and a half, we've seen Blue Cross Blue Shield of Michigan offering a lot of comment about consolidation and the pricing power and rising prices. So that's just one issue. There are whole myriad of issues on why health insurance keeps going up and up and is so expensive.
So last week, Matt Hall, state representative, Speaker of the House and the Michigan House of Representatives, he introduced a package of bills. Number one, cut prices by 10% and cap the hospital's ability to raise prices above the rate of inflation.
It also restricts accumulating late payment fees and prohibits hospitals from reporting medical debt to consumer credit agencies and have some transparency on hospital pricing.
So, these are just some of the things and he's got this introduced. Obviously, as Speaker, he has the ability to move these bills and get them to a committee and get them to a committee hearing. To say the least, the health systems, hospitals out there, are not fans of this legislation and it's really setting up a coming debate in Lansing further argument, debate, conversation in Lansing over what's going on with these costs and what keeps driving these costs up and up and up.
We've seen, you know, the Small Business Association of Michigan data a month or so ago where it said one out of four small businesses is now talking about dropping health benefits within the next year to three years. So, the cost and the pricing at hospitals is part of this equation. Speaker Hall has the legislation out there.And my guess is he intends to have a pretty healthy debate about this over the coming months.
Patrick Center: Crain's Grand Rapids Business staff writer Mark Sanchez, thank you so much.
Mark Sanchez: Thank you, Patrick.