The hospital has been under local control for more than a century, but has had informal talks about partnering with larger health systems. The hospital lost $1.7 million in 2017 followed by a $4.5 million loss in 2018, while showing a modest profit of $150,000 the first few months of 2019, said CEO David Jahn.

The hospital twice has imposed 10 percent employee pay cuts and eliminated about 80 jobs from its payroll a year ago, as hospital use fell by 20 percent, from 12,402 in-patient days in 2012 to just under 10,000 in 2018.

Jahn said the hospital – like many in rural areas – struggles to attract and retain staff. That can hurt its bottom line. Officials spent months trying to replace one of two staff orthopedic surgeons, positions that collectively represent 10 percent to 15 percent of hospital revenue. The hospital still is seeking to replace its sole staff urologist, who departed late last year.

“If you’re an orthopedic surgeon, who wants to be on call every other day? But generally, you’re going to need to find a doc willing to be on call every other day or every third day,” Jahn said.

Jahn said there are a few points that the hospital will not concede if it merges.

“Services such as OB and dialysis have to continue,” Jahn said, noting the nearest hospitals for delivery are at least 90 miles away. In winter, that could mean a drive of two hours or more.

If its dialysis unit closed, he said, some 50 patients would be forced to make a trip to Petoskey in the Lower Peninsula – more than 90 away – three times a week.

“We might want an affiliation, but how much are we willing to give up with an affiliation? How long we will be able to survive as an independent hospital, time will tell.”

Big state, handful of health care groups

Nationwide, 380 rural hospitals have merged or been acquired by larger systems from 2005 to 2016, according to the North Carolina Rural Health Research Program. The program found mergers can mean better physician recruitment, joined purchasing power and shared services – even survival.

But mergers can also mean loss of local control, outsourcing of support services, loss of local employment and increased travel time for medical treatment.

“Mergers may provide an opportunity for rural hospitals to access much-needed capital and continue providing some level of care in the community. However, changes in services provided at those hospitals could hinder access to care and further widen the gap between rural and urban health disparities,” the report stated.

In Michigan, a handful of health care groups dominate the rural hospital landscape as smaller community hospitals merged or formed partnership agreements over the past two decades.

Grand Rapids-based Spectrum Health, which in addition to two large metropolitan hospitals, manages 10 community hospitals in rural areas that stretch from north of Grand Rapids down to the southwest corner of the state.

MidMichigan Health - a non-profit health system affiliated with the University of Michigan Health System – has hospitals in Midland and Mt. Pleasant and four smaller rural hospitals that extend north to Alpena on the shores of Lake Huron.

Munson Healthcare has seven hospitals in the northern Lower Peninsula and one in the U.P’s St. Ignace in addition to its hospital in Manistee.

And in the U.P., Wisconsin-based Aspirus Health Care has acquired four small rural community hospitals over the past dozen years, in Ironwood, Keweenaw, Ontonagon and Iron River, adding the latter in 2014.

In 2010, Aspirus acquired Grand View Hospital in Ironwood, a 25-bed hospital that serves a former iron ore mining region in the western fringe of the U.P. and northern Wisconsin. Now called Aspirus Ironwood Hospital, it’s one of 35 critical access hospitals in Michigan, a federal designation that gives added money to rural hospitals more than 35 miles from the nearest emergency room. The hospital was named a top 20 U.S. critical access hospital each year from 2015 through 2018. Local officials say merger might have saved the hospital.

‘Radical changes’

In the rural southwest corner of Michigan, Sturgis Hospital – among the 18 hospitals deemed at risk of closing - has been something of a poster child for the woes of rural health care.

Facing rising costs and dwindling numbers of patients, the hospital in late 2018 announced it would slash 60 jobs, cut inpatient beds to just four and shutter money-losing departments such as its wound clinic and pain clinic, hospice, cancer treatment center and obstetrics ward.

CEO Robert LaBarge said the hospital at the time was racking up $275,000 in uncompensated patient care a month, while its baby deliveries fell from 450 a year to 300.

“Sometimes, you have to make radical changes like this to ensure the future,” LaBarge said.

The hospital board fired him a few weeks later, as one board member said in February the hospital might have to close if it could not complete a merger deal with another hospital or hospital group.

As of late September, there was still no such deal.

‘We do need to be sustainable’

Back in Manistee, at least one union leader claims Munson Medical is putting dollars ahead of patient care since the merger.