More than 700 hospitals across the rural U.S. are at risk of closing due to their financial instability — that’s over 30% of the country’s rural hospitals. And for more than half of these 700 hospitals, 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 hospitals that are at risk of shutting their doors for good — the only five that don’t are Delaware, Maryland, New Jersey, Rhode Island and Utah. In more than half, a quarter or more of rural hospitals are at risk of closure, and in nine states, the majority of rural hospitals are at risk.
Rural hospitals’ dire financial woes are a result mainly of inadequate reimbursement 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 staff.
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While some people may assume that private insurers pay more than Medicare and Medicaid, the opposite is true for rural hospitals, CHQPR CEO Harold Miller told MedCity News last year. He said that in many cases, Medicare is the most lucrative payer for a rural hospital.
“Private health plans actually pay them well below their costs — well below what they pay their larger hospitals. One of the biggest drivers of rural hospital losses is the payments they receive from private health plans,” Miller declared.
Many rural hospitals just don’t have enough revenue from other sources to offset these losses, the report stated. Some rural hospitals 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 hospitals, particularly for labor and drugs. From June 2023 to June 2024, providers’ overall expenses rose by nearly 5%.
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Healthcare providers seem to be growing more and more dissatisfied with the fact that payer reimbursement isn’t keeping up with these rapidly growing costs.
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 hospitals usually have low financial reserves. This means they don’t have enough net assets — those 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 strip rural Americans of their access to care, CHQPR argued that private insurers need to boost their payments to rural hospitals. Increasing payments to a level that ensures endangered hospitals 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 hospitals. People in rural communities count on local hospitals to be there for them if they get injured or experience a sudden health problem, but rural hospitals are not paid for maintaining that availability, the report pointed out.
It also noted that rural hospital closures pose a grave threat to the country’s food supply and energy production because farms, ranches, mines, drilling sites, wind farms and solar energy facilities are primarily situated in rural regions. Without access to adequate healthcare services, these industries will struggle to attract and retain the necessary workforce, the report stated.
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