About 768 of rural hospitals in the US are at risk of closing, with 315 of which at “immediate risk” of closing within three years.
That’s according to a new report by healthcare finance policy organization the Center for Healthcare Quality and Payment Reform (CHQPR), which cited ongoing financial challenges like reimbursement rates for services as the problem. Texas, Oklahoma, Kansas, and Mississippi were identified as the states with the most (more than 20) at-risk hospitals.
In other words, the math just isn’t mathing to pay hospitals what they say they need.
The problem? It’s more expensive to provide acute care for patients in rural communities.
For example, there may be fewer emergency department (ED) visits due to there being fewer patients living in the area, but the cost to staff the ED remains the same as operational costs increase. And, according to trade group the American Medical Association, 65% of rural areas lack primary care access.
CHQPR said private health plans also don’t pay enough to keep the hospitals financially stable so they can deliver care.
“Although the at-risk hospitals are losing money on uninsured patients and Medicaid patients, losses on private insurance patients are the biggest cause of overall losses,” the CHQPR report read.
Rural hospitals reportedly have less than half the median profit margin of urban hospitals, according to a 2017 study from Johns Hopkins Bloomberg School of Public Health.
Continuing care. Last month, Jackson Hospital in Montgomery, Alabama, filed for Chapter 11 bankruptcy, citing low reimbursement rates as one of its challenges.
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Grants from the government and local tax revenues have helped these hospitals stay afloat, according to CHQPR, but these funds aren’t guaranteed. As a result of that financial uncertainty, since 2005, 195 rural hospitals have closed and more than 1,000 have cut inpatient services.
Hospital closures can create access problems for patients, especially if there are no other providers nearby. It can also have an economic impact, Sarah Hohman, director of government affairs for the National Association of Rural Health Clinics, told Healthcare Brew, as people are “not interested” in living in areas without access to healthcare. For example, per capita income may decrease between 2.7% and 4% after a rural hospital closure, according to a 2023 study.
“Unfortunately, the [insurance] plans have a lot more leverage at the negotiating table than our small clinics do, and so what that results in is lower and lower [Medicare Advantage] reimbursement,” Hohman said.
CHQPR called on Congress in the report to require Medicare Advantage plans to pay rural hospitals the same as Medicare plans do.
“Private insurance companies and public insurance programs need to make significant changes in both the amounts and methods they use to pay for rural hospital services in order to prevent more rural hospitals from closing in the future,” the report read.