Why are 600+ rural hospitals at risk of closing?


A report from the Center for Healthcare Quality and Payment Reform (CHQPR) found that over 600 rural hospitals are at risk of closing in 2023, citing persistent financial challenges related to patient services or depleted financial resources.

More than 600 rural hospitals are at risk of closing in 2023

In the report, which was released in January, CHQPR identified 631 rural hospitals — over 29% nationwide — at risk of closing in 2023. However, compared to pre-pandemic levels, fewer rural hospitals are at immediate risk of closing because of the federal relief they received during the pandemic.

Among rural hospitals at risk of closing, CHQPR found two common contributing factors. First, these hospitals reported persistent financial losses of patient services over a multi-year period, excluding the first year of the COVID-19 pandemic. Second, these hospitals reported low financial reserves, with insufficient net assets to counter losses on patient services over a period of more than six years. 

In most states, at least 25% of the rural hospitals are at risk of closing, and in 12 states, 40% or more are at risk.

Meanwhile, more than 200 of these rural hospitals are facing an immediate risk of closing. According to CHQPR, these hospitals have inadequate revenues to cover expenses and very low financial reserves.

“Costs have been increasing significantly and payments, particularly from commercial insurance plans, have not increased correspondingly with that,” said Harold Miller, president and CEO of CHQPR. “And the small hospitals don’t have the kinds of financial reserves to be able to cover the losses.”

How rural hospital closures impact communities

In many cases, the closure of a rural hospital leads to a loss of access to comprehensive medical care in a community. Most of the at-risk hospitals are in areas where closure would result in community residents being forced to travel a long distance for emergency or inpatient care.

“In many of the smallest rural communities, the only thing there is the hospital,” Miller said. “The hospital is the only source. Not only is it the only emergency department and the only source of inpatient care, it’s the only source of laboratory services, the only place to get an X-ray or radiology. It may even be the only place where there is primary care.”

Many small hospitals also run health clinics. “There literally wouldn’t be any physicians in the community at all if it wasn’t for the rural hospital running that rural health clinic,” Miller said. “So if the hospital closes, you’re literally eliminating all health care services in the community.”

According to Miller, there has to be a fundamental change in the way hospitals are paid. “The problem that hospitals have faced though, is that they do two fundamentally different things — but they are only paid for one of them,” Miller said.

“Hospitals deliver services to patients when they are sick, and they are paid for that. But the other thing that hospitals do, which is essential for a community, is that they are available when somebody needs them — that standby capacity is critical for a community. But hospitals aren’t paid for that,” he added. (Higgs, Cleveland.com, 3/16; CHQPR report, accessed 3/20)

Advisory Board’s take

Why it is ‘not enough’ to simply stave off hospital closures

Hospital closures are a big deal — for all the reasons outlined above (and more) — but we cannot understate the importance of monitoring hospitals that are in or moving into the “at risk” category.

When hospitals fall into the “at risk” category, they are more likely to cut services to reduce costs. While this may help preserve hospital survival, it can have a devastating effect on patient access. For instance, a 2019 Health Affairs study found that rural hospital closures are associated with an 8% annual decrease in the supply of general surgeons in the years preceding closure.

While dangerous trends persist in maternal mortality, especially among Black women, obstetrics (OB) care is often placed on the chopping block for hospitals looking to rationalize services and stave off closure. According to the American Hospital Association (AHA), nearly 90 rural community hospitals closed OB units between 2015-2019. As of 2020, only 53% of rural community hospitals offered OB services, AHA reports.

Ultimately, these service closures carry massive implications for patient access and outcomes. As care delays result in higher-acuity downstream presentation, they can also increase the strain on the rest of the healthcare system.

So, yes, we need to stave off hospital closures. But to say “that’s not enough” is a massive understatement. In fact, many of the strategies hospitals deploy to stave off closure can create gaps that stakeholders must work together to fill.

This is especially true as we near the end of the COVID-19 public health emergency. As Medicaid redeterminations start ramping up, rural hospitals may see an increase in bad debt, especially among states that have not expanded Medicaid.

For example, the Alabama Rural Health Association reported that 55 of 67 counties in Alabama are considered rural, and CHQPR reported that 48% of rural hospitals in the state are at risk of closing. Meanwhile, the Wyoming Department of Health reported that 17 of 23 counties in the state are considered “Frontier,” which means there are fewer than six residents per square mile, and CHQPR reported that 29% of the state’s rural hospitals are at risk of closure.

When rural hospitals close their doors, the surrounding communities are left without access to timely, quality health care.

There is no silver bullet here — but Advisory Board researchers have created several resources to help stakeholders understand how to support rural hospitals:

Rural providers aren’t providing “rural healthcare” — they’re providing healthcare in a rural setting. While niche policies can help in pockets, rural providers need federal policymakers to consider rural needs in overall health policy to meet the magnitude of the crisis.

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