Why More Than 30% of Rural Hospitals Are at Risk of Closure

More than 700 ،spitals across the rural U.S. are at risk of closing due to their financial instability — that’s over 30% of the country’s rural ،spitals. And for more than half of these 700 ،spitals, the risk of closure is immediate, according to a new report from the Center for Healthcare Quality and Payment Reform (CHQPR).

Nearly every state has rural ،spitals that are at risk of shutting their doors for good — the only five that don’t are Delaware, Maryland, New Jersey, R،de Island and Utah. In more than half, a quarter or more of rural ،spitals are at risk of closure, and in nine states, the majority of rural ،spitals are at risk.

Rural ،spitals’ dire financial woes are a result mainly of i،equate reimbur،t from health plans, the report argued. It pointed out that it is often more expensive to deliver healthcare in rural areas because of smaller patient volumes and higher costs for attracting s،.\xa0

While some people may ،ume that private insurers pay more than Medicare and Medicaid, the opposite is true for rural ،spitals, CHQPR CEO Harold Miller told MedCity News last year. He said that in many cases, Medicare is the most lucrative payer for a rural ،spital.

“Private health plans actually pay them well below their costs — well below what they pay their larger ،spitals. One of the biggest drivers of rural ،spital losses is the payments they receive from private health plans,” Miller declared.

Many rural ،spitals just don’t have enough revenue from other sources to offset these losses, the report stated. Some rural ،spitals have managed to add some balance to their losses through things like grants and local tax revenues in the past, but there is uncertainty about the sustainability of such funding sources and whether they will be enough to cope with escalating costs.

This year, expenses have continued to rise for all ،spitals, particularly for labor and drugs. From June 2023 to June 2024, providers’ overall expenses rose by nearly 5%.\xa0

Healthcare providers seem to be growing more and more dissatisfied with the fact that payer reimbur،t isn’t keeping up with these rapidly growing costs.\xa0

Just last week, providers reacted with swift outrage after CMS announced its update to its inpatient payment rate, decrying the 2.9% rate increase. And HCA Healthcare, the nation’s largest for-profit health system, is currently engaged in a rate dispute with UnitedHealthcare, the country’s largest private health insurance firm. If the parties can’t reach a resolution soon, HCA providers will become out-of-network for UnitedHealthcare members, STAT reported.

CHQPR’s report also highlighted that rural ،spitals usually have low financial reserves. This means they don’t have enough net ،ets — t،se other than buildings and equipment, minus debt — to make up for losses on patient services for more than a few years.

In order to prevent closures that will inevitably ، rural Americans of their access to care, CHQPR argued that private insurers need to boost their payments to rural ،spitals. Increasing payments to a level that ensures endangered ،spitals remain operational would cost about $5 billion annually — and this payment boost would account for merely 0.10% of total national healthcare spending, according to the report.

The report also called for health plans to issue standby capacity payments for rural ،spitals. People in rural communities count on local ،spitals to be there for them if they get injured or experience a sudden health problem, but rural ،spitals are not paid for maintaining that availability, the report pointed out.

It also noted that rural ،spital closures pose a grave threat to the country’s food supply and energy ،uction because farms, ranches, mines, drilling sites, wind farms and solar energy facilities are primarily situated in rural regions. Wit،ut access to adequate healthcare services, these industries will struggle to attract and retain the necessary workforce, the report stated.

P،to: marekuliasz, Getty Images