Rural hospitals fight to stay alive

Rural hospitals fight to stay alive as cost pressures mount

What you probably already know: More than 700 mostly rural hospitals are at risk of closing, according to the latest analysis by the Center for Healthcare Quality and Payment Reform. The report is based on the Centers for Medicaid and Medicare Services July 2024 hospital financial data, and shows that, in more than half of U.S. states, 25% or more of rural hospitals are at risk of closing and nine states have a majority of these hospitals at risk.

Why? The report notes that the primary reason so many hospitals are at risk is because private insurers are paying less than what it costs to deliver care to patients. About half of the services at average rural hospitals are delivered to patients with private insurance, according to the report, and those payments generally exceed what the facilities receive from Medicare or Medicaid payments.

What it means: For many who reside in these rural areas, closure of these hospitals would result in lengthy travel times for care and, in general, negative health outcomes for residents. The report suggests these facilities receive special “standby capacity payments” from both private payers as well as the Medicare/Medicaid system to cover the hospitals’ fixed costs and prevent these closures. Areas in the South and Midwest are most impacted by these potential closures. Texas has 80 hospitals at risk — 50% of the state’s rural hospitals — followed by Kansas with 62, Oklahoma with 39, Mississippi with 35, and New York and Illinois with 29.

What happens now? The federal government will need to step in to ensure these hospitals get the financing they need to continue to operate. The Health Resources and Services Administration provides grants, technical assistance and funding to rural hospitals, though these programs also struggle with funding. Between 2010 and 2021, 138 rural hospitals closed, and some reports suggest another 50 have closed in the last three years.