South Carolina hospitals on the brink of bankruptcy or closing their doors completely now have some seed money to find different ways of doing business.

The Legislature recently passed a proviso called the "Hospital Transformation Plans" that directs $15 million in state money - and maybe millions more in federal funds - to hospitals so that they can transition from business models based on filling beds to other models less reliant on inpatient services.

While the proviso doesn't exclusively target South Carolina's 19 rural hospitals, these facilities need the most help. They treat some of the sickest residents in the state's so-called "hot spots of poor health" and most of them lost millions of dollars in recent years. The legislation is particularly timely considering one rural hospital declared bankruptcy last week.

The Union Hospital District, which operates Wallace Thomson Hospital in Union County, filed a Chapter 9 petition to readjust its debts on Friday.

Union Hospital District CEO Paul Newhouse told the Union Daily Times that the system accumulated approximately $20 million in debt over the past four to five years. Less than a quarter of the hospital's 59 beds were occupied between 2009 and 2011, according to the South Carolina Medicaid agency, which tracks this data online.

"One of the biggest problems that hospitals have is that . the average occupancy is 60 percent," Medicaid Director Tony Keck said. "And so hospitals have a lot of excess capacity in a time when admissions are going down even further."

The new proviso offers one-time funds to support a shift away from a laser focus on inpatient admissions.

"I don't envision that this money would completely cover the cost of transition," Keck said. "Sometimes that extra little bit is enough to move the market."

It's also less expensive than tying the state to the expansion of an open-ended entitlement program, he said.

"Hospitals support Medicaid expansion because they want a new revenue stream to help bridge the gap between old business model to new business model," he said. The proviso is intended to accomplish the same goal for a much lower price, he said.

South Carolina is one of about half of all states that will not expand its low-income health insurance program under the federal Affordable Care Act.

The language in the proviso, supported by the South Carolina Hospital Association, was left purposefully vague. It is not clear if every hospital in the state needs to develop its own transformation plan or how Keck's department will distribute the money.

"I'm assuming there will be some guidelines coming out," said Ken Hiatt, administrator of Allendale County Hospital. "Certainly it could have an impact on us."

Allendale County Hospital was only seven percent occupied in 2012 - the lowest rate among all hospitals in the state.

Each transformation plan may look different. One possibility may reduce the number of hospital beds in a given facility. Others could forge partnerships between small hospitals and academic medical centers or convert some rural hospitals into freestanding emergency departments.

"The reason why we weren't specific in the bill is because we think there are lots of different models that hospitals will come up with and we'll have to evaluate each one of them," Keck said.

While the individual plans may differ, their end goal is the same - to keep the hospitals open, at least in some capacity.

"When you lose a hospital in a county, you lose part of your soul of that county, too," said Rep. Murrell Smith, R-Sumter, who helped develop the proviso.

More of the proviso's details, including the level of matching federal funds that South Carolina may tap into for the project, are still under discussion.

"There's a lot of unknowns," said Mark Sweatman, a lobbyist for the Medical University of South Carolina. "That's why it's a proviso. It's not permanent law. You can easily change it next year."

Reach Lauren Sausser at 937-5598.