More than 700 hospitals across rural America face closure due to financial instability, representing over 30% of the nation’s rural hospitals. Over half of these hospitals face an immediate risk of closure, as indicated in a new report from the Center for Healthcare Quality and Payment Reform (CHQPR).
Rural hospitals in almost every state are vulnerable, with only Delaware, Maryland, New Jersey, Rhode Island, and Utah being exceptions. In many states, more than a quarter of rural hospitals are at risk, and in nine states, the majority are threatened with closure.
The key factors leading to this crisis include inadequate reimbursement from health plans and the higher costs associated with delivering healthcare in rural areas, which often have smaller patient volumes and increased costs for attracting staff. According to CHQPR CEO Harold Miller, contrary to popular belief, private health plans pay rural hospitals significantly less than Medicare does. Miller stated to MedCity News last year that Medicare is frequently the most lucrative payer for rural hospitals.
Compounding the issue, some rural hospitals have historically covered their financial shortfalls through grants and local tax revenues. However, there is growing uncertainty regarding the sustainability of these funding sources amidst rising costs. This year, healthcare providers have witnessed a near 5% increase in overall expenses from June 2023 to June 2024, particularly affecting labor and drug costs. Providers have expressed frustration over the insufficient updates to reimbursement rates, such as the recent 2.9% rate increase from CMS, as reported by MedCity News.
HCA Healthcare, the largest for-profit health system in the U.S., is currently engaged in a highly publicized rate dispute with UnitedHealthcare, which could result in HCA hospitals going out-of-network for UnitedHealthcare members if not resolved soon (STAT).
CHQPR’s report emphasizes that rural hospitals often possess low financial reserves, leaving them unable to sustain operations for an extended period without adequate compensatory payments. To avert closures and assure access to healthcare for rural Americans, the report recommends that private insurers significantly increase their payments to rural hospitals. It estimates that maintaining operational rural hospitals would require an additional $5 billion annually—merely 0.10% of the total national healthcare spending. It also suggests health plans should issue standby capacity payments for rural hospitals, enabling them to maintain the availability required by rural communities.
Furthermore, the potential closure of rural hospitals poses a broader risk to the nation’s food supply and energy production, given the concentration of farms, mines, drilling sites, and renewable energy facilities in rural areas. The absence of adequate healthcare services in these regions could hinder the ability to attract and retain the workforce necessary for these critical industries.
This vulnerability in the healthcare infrastructure of rural America underscores an urgent need for policy action to ensure these facilities remain operational, thereby safeguarding the health and economic stability of rural communities.