CRAIG — Stacy Hendrickson planned to have her baby at the hospital in town, just a few minutes from her home and a couple of turns down some quiet, snow-covered streets.

But in January, when she was not quite seven months pregnant, Memorial Regional Health shut down its labor and delivery department. Pregnant women can no longer have babies in Craig, unless an urgent situation lands them in the emergency department and an emergency physician — not an obstetrician or midwife — delivers the baby.

The next closest hospital is in Steamboat Springs, 45 miles down a winding, two-lane highway that hugs the mountains and where hazards include blizzards as well as crossing elk and mule deer.

Memorial’s decision, which executives at the county-owned hospital said was the result of a budget crisis, highlights a worrisome issue in rural health care. Craig isn’t the only place in trouble — 18 rural hospitals in Colorado are operating in the red, according to the Colorado Rural Health Center. Besides obstetrics, Memorial has laid off its emergency department doctors and its hospitalists — who care for admitted patients — and instead is contracting with companies that bring in rotating doctors to cover those shifts.

For Hendrickson and other pregnant women in the far northwest Colorado town, the closure of the labor and delivery unit was frightening. Hendrickson and her husband, Joseph, worried that she would go into labor all of sudden, or in a snowstorm, or the middle of the night, or all of those at once.

Instead, Hendrickson began cramping and bleeding a month before her due date, and when she called the UCHealth Yampa Valley Medical Center in Steamboat for advice, a midwife told her to “come straight down here,” Hendrickson said. Joseph had just come home for lunch from his job as maintenance manager at an apartment complex, and the couple hopped in their vehicle without even packing a bag or a baby car seat.

Everhett James Hendrickson was born the next day by Cesarean section, one month ahead of schedule, at 6 pounds, 1 ounce.

“I wasn’t in excruciating pain. I was just nervous,” Stacy said, describing the 45-minute drive to Steamboat as she recuperated last week. “We were just very worried and wanted to get here safely.”

About two weeks before the Hendricksons had their son, another Craig woman went into premature labor and delivered in an ambulance that was on its way to meet her from Steamboat. The preemie was so small that doctors later sent the family to a Denver neonatal intensive care unit.

First-time parents Stacy and Joseph Hendrickson, of Craig, visit their newborn son, Everhett, on Feb. 28, 2020, at UCHealth Yampa Valley Medical Center in Steamboat Springs. The parents changed their plans and had Everhett in Steamboat after Memorial Regional Health in Craig stopped offering obstetrics services in January. (Matt Stensland, Special to The Colorado Sun)

Dr. J. Scott Ellis, the obstetrician who was laid off when Craig shut down its labor and delivery department, fears that what happened that snowy day on the side of the road will happen again now that Moffat County no longer has labor and delivery services.

Of Colorado’s 32 critical-access hospitals — a federal designation that means they have no more than 25 beds and there is no other hospital within 35 miles — just 18 now have obstetrics departments. Labor and delivery closures are a nationwide trend; one study found that from 2010 to 2014, 7.2% of rural hospitals closed their obstetric units.

“That sad thing about this is that it really does place moms and babies at risk,” said Ellis, who delivered babies in Craig for 12 years and is now looking for a new job. “Critical access hospitals have a mission to serve the critical needs of the community, and obstetrics is one of those critical needs. When that safety net isn’t there, things are going to fall through, and unfortunately, people are going to get hurt, I’m afraid.”

The hospital in Craig delivered 116 babies last year — about one baby every three days, and not even close to the 300 hospital officials said it would take for that department to break even. The obstetrics department brought in about $915,500, while expenses totaled more than $1.5 million, according to financial documents provided to The Colorado Sun.

But many residents, and Dr. Ellis, wonder why the ob-gyn department was targeted when it isn’t the only department that isn’t profitable. The hospital has operated in the red most of the last several years — it was short $3.4 million last year, when expenses totaled $66.7 million and net revenues were $63.3 million.

It’s common, in rural hospitals as well as big-city ones, that labor and delivery units operate at a financial loss. But hospitals keep them open in part because moms are more likely to seek health care for their families in the hospital system where they delivered, and because obstetrical care is the “hallmark of First-World medicine as opposed to Third-World medicine,” said Dr. Diane Petersen, an obstetrician with UCHealth Women’s Care Clinic in Steamboat Springs.

“It’s the basis of all hospitals in the developing world,” said Petersen, who is now caring for dozens more patients from Craig because of the closure. “We prioritize mother-and-baby care because that’s how you build out of poverty. It is considered a staple of health care.”

Budget crisis was a “perfect storm”

Memorial Regional in Craig notified patients in December that the obstetrics clinic would close its doors mid-January, stirring up anxiety and anger among townspeople — many of whom packed an into-the-night hospital board meeting and accused hospital executives of mismanaging the budget.

Top of mind were questions about why the board was cutting services after building a new hospital building in 2010, opening two urgent-care centers in the last few years, and moving its clinics into a new medical office building last October.

“I love Craig. I love rural life. It’s a shame to see rural communities suffering and to lose our OB department and have to travel to have babies,” said Megan Dowling, who owns a cattle ranch north of town. Her second child is due in July. “It’s a bummer.”

The closure will affect not just Craig women, but pregnant women 37 miles up the road in Baggs, Wyoming, and in the Moffat County communities of Dinosaur and Maybell who used to have babies in Craig.

“This is kind of the center of the middle of nowhere,” Dowling said, “and there are lots of people out there.”

Megan Dowling holds her 14-month-old son Dutch on Feb. 27, 2020, at their family ranch just north of Craig. Dowling was one of the numerous Craig residents who were outraged when Memorial Regional Health officials announced the northwest Colorado hospital would no longer offer obstetrics services. She is due with her second child in July. (Matt Stensland, Special to The Colorado Sun)

Memorial, which opened in 1950 and was deeded to the county several years later, operates on a budget funded 96% by patient care and 3% through a mill levy from taxpayers. The remaining 1% comes from cafeteria and other sales.

After running a deficit most of the last decade, the hospital hired a new chief financial officer and reached a painful conclusion: it needed to cut costs by $850,000 per month.

Besides Dr. Ellis, and another obstetrician who was let go several weeks earlier, Memorial is losing five emergency department doctors. Two of them quit after hospital leaders notified them they were closing obstetrics and that they might have to deliver babies in the emergency room.

“That made some of them a little bit nervous and they didn’t want to practice at the hospital if we didn’t have OB coverage,” said Jennifer Riley, the hospital’s chief operations officer. “They didn’t want the potential to deliver a baby.”

Instead, the emergency department is contracting with CarePoint Health, which sends physicians to Craig on a rotating basis to make sure the department is staffed 24/7. The hospital is using a similar model for its hospitalists, meaning physicians who work along the Front Range rotate through Craig to take care of admitted patients.

Memorial Regional Health administrators from right, CEO Andrew Daniels, Vice President of Operations Jennifer Riley and CFO Sam Radke are pictured Feb. 27, 2020, in front of the hospital. (Matt Stensland, Special to The Colorado Sun)

The financial crisis was the result of a “perfect storm,” Memorial CEO Andy Daniels said. Besides the new construction, the hospital took a massive hit after discovering in 2018 that Medicare had overpaid the hospital and would require a $2.2 million “takeback.” The accounting error, a calculation of what Medicare would owe the hospital for taking care of patients who did not pay their debt, was found by an internal audit in 2018, and a second look by an outside accounting firm found the mistake dated back to 2016.

Daniels said he and other executives were “making decisions to do things based upon bad information,” including building new medical office space at the hospital and moving medical clinics from the dilapidated 1950-era hospital building downtown. “There is a cascading effect of lots of decisions, my own included. By the time that picture starts to come into focus, you’ve already got a building half built.”

Voters approved a mill levy in 2007 that generates about $900,0000 annually for hospital operating costs. The amount isn’t even enough to cover the hospital’s payroll for one two-week period, executives said.

Funding for the new hospital, though, came from a $40 million loan backed by the U.S. Housing and Urban Development and later refinanced through a U.S. Department of Agriculture program for rural hospitals. A second USDA loan for $28.9 million funded the new medical office space at the hospital.

Memorial Regional is now operating with just two or three days of cash on hand. To get by, hospital officials have asked the state Medicaid department to pay for care the hospital provided to needy patients in prior years. Medicaid typically takes years to reimburse hospitals and Memorial is hoping for a rush on $1.4 million, a portion of what it’s owed, Riley said.

The cash flow problem is in big part a numbers game — there just aren’t that many patients in a small town. When The Colorado Sun visited Memorial in late February, the 25-bed hospital had admitted only nine patients. The hallways and patient rooms were mostly empty, and the emergency department, which sees an average of 20 patients in 24 hours, had only one, and staff were chatting at the check-in desk.

The former nursery, where a handful of infant cribs were pushed to one side and the other side was used for storage, sat dark.

Items are stored in Memorial Regional Health’s former nursery Feb. 27, 2020, in Craig. To help address a financial crisis, the hospital stopped offering labor and delivery services in January. (Matt Stensland, Special to The Colorado Sun)

Ellis, the hospital’s former obstetrician, does not dispute that Memorial is in financial straits, but he questioned the choice to close obstetrics while other, less-critical departments — including orthopedics and spine, which are profitable — remain open. He also is concerned that administrators “are making clinical decisions about obstetrical care without any input from the obstetrical department or ignoring it altogether.”

Obstetrics serves to “decrease morbidity and mortality for moms and babies,” he said, noting that patients often become high-risk during labor “when minutes count.” The consequences are sometimes irreversible when there are problems with hypertension, placental abruptions, preeclampsia and umbilical cord entanglement.

“Those are lifelong, devastating injuries that can happen to moms and babies and they live with that forever,” he said. “Everybody needs as good a start as we can give them, and prevention here is the key.”

18 rural hospitals running in the red

Rural hospitals are struggling across Colorado, said Michelle Mills, CEO of the nonprofit Colorado Rural Health Center. “We have 18 rural hospitals that are operating in the red right now,” she said. “It’s huge.”

Mills said she could not break confidentiality and would not name those hospitals, but said that many are county-owned. They’ve suffered because of costly requirements that came with the Affordable Care Act and because of federal spending reductions stemming from the budget sequestration of 2013.

Medicare once funded critical-access hospitals at 101% of cost but that was reduced to 98% after sequestration.

“We just don’t have the volume of patients in rural hospitals to make up the difference,” Mills said. “There are one to three patients a day in a lot of our rural hospitals, but you still have to maintain everything for rules and regulations.”



Nursing student Nathan Allred, right, works Feb. 27, 2020, in the Memorial Regional Health Emergency Department with nurses Jacie Jourgensen and Dave Higgins. The hospital has been trying to cut $850,000 in monthly expenses. (Matt Stensland, Special to The Colorado Sun)

UCHealth Yampa Valley Medical Center in Steamboat, which has delivered about 280 babies each of the last few years, is making plans to handle about 100 additional births for Moffat County women. The hospital hired Memorial’s former midwife, creating a smooth transition for her Craig patients.

Doctors at the Steamboat hospital’s Women’s Care Clinics, which have always held office hours in Craig, have increased the number of days per month they work in the Moffat County town.

MORE: Colorado’s public health insurance option puts a bull’s-eye on hospital profits. But some rural facilities could make more.

“As soon as we heard the news, the night before it hit the paper, we were texting each other, ‘Oh my gosh, this is big, what should we do?’” said Soniya Fidler, president of Yampa Valley Medical Center. “We quickly created a plan on how we can move forward.”

In February, the hospital delivered 28 babies, including 11 from Craig. It’s unknown, though, how many of those mothers had planned to deliver in Steamboat and how many did so because Craig closed its obstetrics unit.

Steamboat Springs resident Zoey Patterson holds her daughter Malibu on Feb. 28, 2020, at UCHealth Yampa Valley Medical Center in Steamboat Springs. The hospital has been preparing for an increase in the number of births since Memorial Regional Health in Craig stopped offering ob/gyn services in January. (Matt Stensland, Special to The Colorado Sun)

It’s not unheard of for women in labor to travel an hour to get to their hospital, whether in big cities or rural areas, said Dr. Petersen, the obstetrician at Yampa Valley. The Steamboat hospital will focus on managing deliveries safely, including scheduling labor inductions for some women, she said.

“I think it’s very concerning to those patients because they were used to having their hospital much closer,” Petersen said. “There are many people who live on farms and ranches and are remote from any hospital.”

Our articles are free to read, but not free to report Support local journalism around the state.

Become a member of The Colorado Sun today! $5/month $20/month $100/month One-time Contribution

The latest from The Sun



