About half of rural hospitals had negative margins in COVID-19 pandemic

Even larger hospitals struggled financially during the COVID-19 pandemic, so it’s logical that rural hospitals would have faced steep challenges.

About half of America's rural hospitals operated in the red during the COVID-19 pandemic, even with additional federal aid, a new study finds.

When the COVID-19 pandemic hit, the federal government offered billions of dollars to hospitals to stay afloat, and those funds were especially critical to rural hospitals.

About half of the nation’s rural hospitals had negative margins during the COVID-19 pandemic, even with the infusion of federal aid, according to a new analysis released by the American Hospital Association. The Virginia Commonwealth University College of Health Professions produced the study.

With the additional federal assistance, some rural hospitals were able to see positive operating margins in 2021, but their financial position worsened as the federal COVID assistance expired.

“Provider relief funds were successful in preventing financial losses for many hospitals during the pandemic and, in some cases, contributed to positive hospital margins in 2021,” the study found. “However, as this funding declined in 2022, and hospitals faced persistent, and in some cases worsening, financial challenges, margins dropped.”

• Read more: Rural hospitals struggle with staffing, and not just doctors

While the pandemic aid provided a lifeline to some rural hospitals during the pandemic, the report suggests many rural hospitals face an uncertain future without the additional boost of the federal aid.

“Overall, our results suggest that relief funds provided much needed support to rural hospitals, and in addition to addressing the financial needs stemming from the COVID-19 pandemic, these funds were able to provide a measure of relief to many rural hospitals from long-standing financial pressures,” the report stated. “However, these observations raise questions about how rural hospitals will cope financially as COVID-19 funding has ended but persistent financial challenges remain.”

Prior to and during the pandemic, 48% of rural hospitals were operating in the red. About 1 in 9 rural hospitals (12%) had positive operating margins before and during the pandemic, the report states.

Most of the rural hospitals (82.8%) that had positive margins before and during the COVID-19 pandemic were affiliated with a health system, according to the report.

Rural hospitals with a greater percentage of patients utilizing Medicare and Medicaid were more likely to have financial struggles, according to the report. And rural hospitals that weren’t affiliated with a larger health system were more likely to have negative margins, according to the report.

“The fact that the most financially vulnerable rural hospitals share similar characteristics suggests that these providers may require unique strategies or policy interventions to remain financially viable,” the report stated.

With the assistance from the government, the percentage of rural hospitals operating in the red “was between 11 and 15 percentage points lower than it would have been between 2020 and 2022,” according to the report. The government provided more than $80 billion to hospitals and hospital-affiliated organizations through the Provider Relief Fund.

To be sure, rural hospitals continue to face a perilous road.

Half of the nation’s rural hospitals are losing money, according to an analysis released in February by the Chartis Center for Rural Health.

Over the past 12 months, the percentage of rural hospitals operating in the red has risen from 43% to 50%, according to the Chartis report. It’s the highest percentage of rural hospitals losing money in the past decade, the report states.

Many rural hospitals have also cut back on the services they provide. Since 2011, 267 rural hospitals have stopped providing obstetric services, the Chartis report found. A significant number dropped OB services in the peak years of the pandemic (63 hospitals in 2020 and 2021).

Two Wisconsin hospitals that served their communities since the late 1800s closed their doors last month. Sacred Heart Hospital in Eau Claire and St. Joseph’s Hospital in Chippewa Falls both shut down March 22. The Hospital Sisters Health System, which had operated the two hospitals, announced plans to close the facilities in January, citing the financial challenges for rural hospitals.

Since 2010, more than 130 rural hospitals have closed, according to a report by the American Hospital Association.