Understanding the Financial Strain on Rural Hospitals

About 600 rural hospitals in America are at risk of closing.

As part of this ongoing series of “What’s Happening to Rural Hospitals?” today’s topic will deal with the financial crisis these hospitals are facing today.

According to the American Hospital Association (AHA), approximately 29 percent of hospitals in the United States, 1,796 in number, can be considered rural hospitals. According to the Center for Healthcare Quality and Payment Reform (CHQPR), more than 600 of them, about 30 percent, are at risk of closing in the near future. To break this down even further, this represents about 25 percent of rural hospitals in half of the states, and 40 percent in 10 states.

Simply said, these closures are happening because these hospitals have insufficient reserves and are not paid sufficiently to cover the delivery of services they provide in their areas. This was a challenge even before the pandemic but has been exacerbated. Private health insurers typically pay poorly to begin with and are vultures in the denial arena, with a small overturn upon appeal. There is a plethora of reasons this happens. It really becomes a numbers game since the population numbers are lower in rural areas, leading to fewer emergency room visits, and in-house care. A common myth for rural hospitals is that most of their patients are Medicare or Medicaid beneficiaries but the truth is more than half of the patients have private insurance or no insurance at all.

In the past, these hospitals had access to grants, local tax revenues for the hospitals that are community hospitals, and the ability to capitalize on other community activities to offset expenses, but these resources have dwindled significantly. With the economy having declined recently, and the cost of supplying the care has changed at a higher rate than in the past. Federal aid has played a positive role, but this may not continue at the same pace. The Medicare waivers also did help with some of the restrictions, but this may be ending in the very near future.

Another factor is that, even though census numbers may be low, the cost of staffing doesn’t change, and in order to get good quality nurses, physical therapy, and others, pay must be appropriate for today’s market and the ability to attract this quality. Non-routine services to be provided such as specialties may not be available on a daily basis.

This financial burden is just one of the multitude of factors affecting rural hospitals, yet these facilites are so important to a large population in this country. More challenges will be presented in subsequent parts of this series.

Too many Americans that represent the backbone of industries so important to our economy such as farming and small business need access to immediate good quality healthcare and we have an obligation to insure its survival.