Nearly half are operating with negative margins, according to new research, which says a high rate of uninsured patients is among the reasons.
With healthcare services being concentrated more and more among major health systems and larger providers, rural hospitals are struggling.
A new study from Chartis Group and iVantage Health Analytics sheds light on the scope of the problem. About 41 percent of rural hospitals faced negative operating margins in 2016, the report found.
If those hospitals were located in a state that elected not to expand Medicaid under the Affordable Care Act, those margins were generally worse than those of their peers, suggesting that such expansion had a mitigating effect on financial pressures.
Due to those financial pressures, 80 rural hospitals closed from 2010 to 2016, indicating that the rural health safety net has seen better days.
One of the key factors behind this was a high rate of uninsured patients, and a payer mix heavy on public insurers with lower claims reimbursement rates. More patients are seeking care outside rural areas, which isn’t helping, and many areas see a dearth of employer-sponsored health coverage due to lower employment rates. Many markets are also besieged by a shortage of primary care providers, and tighter payer-negotiated reimbursement rates.
Demographics aren’t helping rural hospitals, either. Patients in rural markets are generally more socioeconomically disadvantaged, with many patients over 65 years old and suffering from multiple health disparities, which lead to higher general healthcare costs.
To make matters worse, there’s a shortage of physicians in rural communities as well, with only about 39.8 physicians per 100,000 people. By contrast, the ratio in non-rural areas is 53.3 physicians per 100,000 people.
All this comes at a time when the shift from fee-for-service payment models to value-based reimbursement is in full swing, putting pressure on all hospitals to reduce costs — which is especially problematic for rural hospitals given that their demographic and staffing challenges have a tendency to drive costs up, not down.
The researchers pointed to the Graves-Loebsack Save Rural Hospital Act as a possible means of mitigating the problem. The bill, introduced by the House in 2015, would create a payment structure whereby 105 percent of “reasonable” costs would be reimbursed; 100 percent of bad debt would be reimbursed; and rural hospitals would be exempt from 2 percent of sequestration of payments.
The authors suggested revisiting the bill, which would also establish the Community Outpatient Hospital Program, a measure aimed at preserving emergency and outpatient care for rural markets. It would also recoup $5.4 billion in lost Medicare reimbursement among rural hospitals over 10 years.