An Open Letter To Every Rural Hospital Board In America: You Are The Villain
Sixty years. Thirty-one million dollars per hospital. Walked out your door. And every adult in your boardroom had a financial interest in not telling you about the door.
David Walz said it out loud this week.
“The day we can’t make payroll, it’s over.”
Madelia Health is 107 years old.
Older than insulin therapy.
Older than antibiotics.
Older than Medicare itself.And it is thirty-one million dollars behind on its own balance sheet.
The money walked out the door.
Every year. For sixty years.Nobody on the board ever asked where it went.
IN TODAY’S ARTICLE:
Why the CEO of a 107-year-old hospital is begging the state legislature for cash that belongs on his balance sheet
The $31 million per hospital that walked out the door over the last sixty years, and the federal cost-report mechanism that subsidized the walk.
The six categories of advisors whose business model requires your hospital to stay fragile
The legal structure that has existed since the 1950s, why no one has shown it to you, and what unfailing looks like for you.
Glossary at the bottom of today’s article.
THE QUOTE
David Walz is the CEO of Madelia Health, a 25-bed critical access hospital in southern Minnesota. This week, he gave Becker’s Hospital Review a quote that explains everything wrong with the rural hospital sector in one sentence.
“The day we can’t make payroll, it’s over.”
Walz inherited a hospital with negative days cash on hand. He has run it on a line of credit throughout his three-year tenure. The hospital has closed home care. It has closed its retail pharmacy. It is closing an underperforming clinic on August 1. UCare collapsed in Minnesota, leaving Madelia with stranded receivables. Walz is exploring a city bond. He has applied for a federal rural health stabilization program. He is hoping a Minnesota state allocation of $115 million for rural healthcare reaches him.
Two hundred employees. Mortgages. Families. One CEO managing a line of credit, waiting for a politician to wire money to a hospital that has existed since 1918.
Madelia is 107 years old. It is older than insulin therapy, older than antibiotics, older than Medicare itself, the federal program that now sustains it. It survived the 1918 flu. It survived the Great Depression. It survived two world wars. It survived the BBA of 1997. It survived COVID.
And David Walz is telling Becker’s that he is one bad month from “over.”
He is not lying or exaggerating.
The math, line of credit, and negative cash are all real.
But the math didn’t have to look like this either.
THE MATH
Madelia Health, in the modern commercial insurance era, pays roughly $5.3 million per year in total premium across four lines.
Medical malpractice for the enterprise plus the independent physicians practicing inside the facility: $1.2 million. Property on a 25-50 bed plant plus medical equipment: $250,000. Casualty stack including workers comp, general liability, auto, umbrella, cyber, D&O, and EPLI: $450,000. Group employee benefits for 200 employees including medical, dental, vision, life, and disability: $3.4 million.
Total annual premium leaving Madelia Health, flowing to Travelers and Liberty Mutual and MedPro and Tokio Marine and Anthem and BUPA and the rest: $5.3 million per year.
Back-cast that premium pool at 6% inflation over the last sixty years, the modern commercial insurance era. The 1965 starting premium pool was approximately $161,000. The cumulative premium paid out of Madelia’s checking account from 1965 to 2025 is approximately $86 million.
Eighty-six million dollars.
From one 25-bed hospital.
To commercial insurance carriers.
Over sixty years.Subscribe for the playbook.
