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One of the biggest challenges in American hospitals right now is the change from paper files to electronic medical records. The switch is especially tough for the country's 2,000 rural and small-town hospitals. They're typically short on cash and short on people with information technology skills. So a lot of small hospitals are turning to bigger hospitals for help, giving up some independence in exchange.

From Montana, Eric Whitney reports that not all hospitals want to do that.

ERIC WHITNEY, BYLINE: They don't get a lot of traffic jams in Red Lodge, Montana. It's a historic mining town just outside Yellowstone National Park, about 60 miles from Billings. On a recent spring day, the only thing slowing cars on Main Street is a flock of wild turkeys strutting across the pavement. Just days before, though, this road got two feet of snow. It can be a major travel issue in Red Lodge, as Dr. Billy Oley knows. He lives just a few miles from where he works, at the 10-bed hospital here.

DR. BILLY OLEY: There was a time that the nurses won't let me forget when I drove my tractor to work one day because I couldn't get my truck here. I had to plow with the tractor all the way to the hospital and I just kept it here.

WHITNEY: On days like that, Dr. Oley and his patients are particularly grateful for his hospital's electronic medical records. He can share patient records instantly and securely with the big hospital in Billings and get expert advice.

OLEY: Daily basis, couple times a week, we see a lot of patients who are able to not have to travel or see specialists or do different things because we can just take care of it here.

WHITNEY: Sharing electronic records sounds simple but for a lot of little hospitals, meeting new federal digital standards means coming up with a million dollars or more up front. That's tough when the average rural hospital runs a financial loss of 8 percent a year.

Brock Slabach with the National Rural Health Association says that has lots of small hospitals asking for help.

BROCK SLABACH: They have said that absolutely, we cannot do this on our own. We need the support of a third party partner.

WHITNEY: Red Lodge became part of the bigger Billings Clinic system, in part, to get help with IT. When hospitals align or merge, they give up some or maybe all control of their operations - everything from which records system they'll use to which doctors and services are available where. But affiliating with a big network can be a good trade-off and improve the care available in small towns. Scott Duke with the Billings Clinic system says a lot of small hospitals are weighing trade-offs like Red Lodge's in return for help with electronic medical records or EMRs.

SCOTT DUKE: I think it actually falls into the one or two category to almost everyone we talked to, I'd say that the EMR is right there.

WHITNEY: But for many rural hospitals, it's a point of pride and a matter of survival to stay independent and make their own decisions about the future.

UNIDENTIFIED WOMAN: Hello, Dorothy. How are you?

WHITNEY: Four hours drive west from Red Lodge, the little town of Anaconda, Montana, sits in a fold of steep mountains. The hospital there is a scrappy independent and a proven survivor. Executive Meg Boynton shows me around.

MEG BOYNTON: So this is all the in-patient area, so 25 rooms, different wings. And we have labor and deliver. Nobody babies today, but we average about 36 to 50 births a year.

WHITNEY: This building opened in 1981. The industry that founded Anaconda, a giant copper smelter, shut down, leaving a lot of empty buildings in town. The economy remains marginal. Steve McNeece, the hospital's CEO, says it survives because they never got too comfortable.

STEVE MCNEECE: Part of our goal and mission is to have a culture that embraces change and challenge.

WHITNEY: McNeece's hospital can find the million and a half dollars it needs to finance the digital upgrade. He says it's an obvious improvement over the old way they used to transfer patient information.

MCNEECE: Put in an old, you know, in a manila folder, put on the patient's abdomen when they're in the ambulance going to St. Pat's.

WHITNEY: Anaconda's hospital looks like it's going to be able to adopt the latest information technology and stay independent. But their fate is still tied to bigger hospitals in the area. It only makes sense for Anaconda to use the same records system as the places they send most of their referrals.

MCNEECE: So that was really the main driver in our decision-making. From a patient care perspective, this seemed like a safe and wise decision.

WHITNEY: Whether rural hospitals choose to do their digital upgrade independently or partner with a bigger system, it's important they have a conscious digital strategy, says Brock Slabach with the National Rural Health Association.

SLABACH: We're very concerned about a growing digital divide that might be created going forward between the urban haves, if you will, and the rural have-nots.

WHITNEY: Slabach worries hundreds of hospitals aren't meeting new digital benchmarks as time to take advantage of federal help is running out. Starting this October, hospitals that don't meet digital records standards will start seeing financial penalties, which will make the digital leap even harder going forward. For NPR News, I'm Eric Whitney.

BLOCK: This story is part of a reporting partnership between NPR and Kaiser Health News.

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