Rural hospitals in the red: Half are losing money, many are cutting services

Rural hospitals have struggled for years, but the situation is getting worse in many communities.

Many rural hospitals are losing money, and some are cutting services, such as obstetrics and chemotherapy. (Image credit: ©Robert Peak - stock.adobe.com)

Half of the nation’s rural hospitals are losing money, according to a new analysis released this week by the Chartis Center for Rural Health.

Hundreds of rural hospitals are at risk of shutting down, and many rural hospitals are also seeing less money in reimbursements as Medicare Advantage plans grow more popular, the report states. And more rural hospitals are reducing services.

Rural hospitals have faced difficulties long before the COVID-19 pandemic, but the road is getting harder for many to stay afloat.

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.

Big losses

Those rural hospitals without an affiliation are finding it more difficult, as 55% of independent rural hospitals are losing money.

Plenty of rural hospitals affiliated with a health system are having problems, as 42% of those facilities are in the red. Nationwide, more than half of all rural hospitals (58%) are affiliated with a health system.

In some states, the vast majority of rural hospitals are losing money, the report states.

Kansas has the highest percentage of rural hospitals operating in the red (89%), but New York and Wyoming aren’t far behind (83% in each state). Other states with about three-quarters of rural hospitals in the red are Vermont (75%) and Alabama (74%).

Rural healthcare leaders say they are struggling financially, and with filling positions at all levels. In a roundtable on rural health last May, Dartmouth Health CEO Joanne Conroy says rural hospitals continue to grapple with higher costs, which they can’t pass onto consumers or insurers.

“All of those pressures are kind of coming to roost at once,” Conroy said last May. “So I like to say healthcare is kind of a rough business right now.”

While many hospitals and health systems are struggling to fill vacancies, rural hospitals are having an especially difficult time, says Nicole Stallings, president and CEO of the Hospital and Healthsystem Association of Pennsylvania.

“The workforce challenges in rural communities are particularly acute,” Stallings told Chief Healthcare Executive® in a recent interview. “It's very difficult to recruit into those areas, which tend to be the communities that are aging the most and therefore need the most care.”

Medicare Advantage impact

Many hospitals are saying they’ve seen more denials from Medicare Advantage plans, and rural hospitals say they are feeling the pain.

Rural hospitals see lower reimbursement than traditional Medicare for some services. And Medicare Advantage plans don’t cover services that are covered by traditional Medicare, such as swing beds, that provide skilled nursing care for patients and bring in revenue for rural hospitals, the report states.

Medicare Advantage plans are finding more consumers in rural communities, as enrollment in rural areas rose 48% between 2019 and 2023, according to the Chartis report.

Some rural hospitals may be encountering difficulties in dealing with prior authorization requirements of Medicare Advantage plans for services, hurting their ability to get paid.

Reduced services

Americans in rural communities are facing longer trips to get the care that they need.

Since 2011, 267 rural hospitals have stopped providing obstetric services. A significant number dropped OB services in the peak years of the pandemic (63 hospitals in 2020 and 2021).

Nearly half (46%) of West Virginia’s rural hospitals that had provided obstetric services dropped those services between 2011 to 2021, the highest percentage of any state. However, Florida (43%), Pennsylvania (41%) and New Hampshire (40%), all saw similarly high percentages of rural hospitals dropping OB services in that span.

Many rural hospitals are also dropping chemotherapy services. Between 2014 and 2022, 382 rural hospitals stopped providing chemotherapy, according to the Chartis analysis.

Greater risks

The Chartis report estimates that 418 rural hospitals are facing such financial peril that they could shut down. Put another way, roughly one in five (20%) of America’s rural hospitals are facing risk of closure.

Last month, the Hospital Sisters Health System announced plans to close two rural hospitals in Wisconsin, to the dismay of state and local officials.

The federal government developed another model for rural hospitals: the Rural Emergency Hospital designation. The government offered the new model beginning in January 2023, designed as a way to keep some rural hospitals afloat. Those hospitals choosing to have that designation are essentially providing emergency care, and aren’t permitted to offer inpatient beds.

The Chartis report suggests the program could help sustain some rural hospitals, and estimates that 400 hospitals are likely to consider moving to that model.

However, the report also suggests that the government modify the regulations to allow those hospitals to participate in the 340B program, which allows hospitals serving vulnerable populations to get some outpatient drugs at lower prices.

Some rural hospitals would consider pursuing the Rural Emergency Hospital model if they could have “swing beds” to provide skilled nursing, giving some more reliable revenue.

When rural hospitals close, other hospitals in the region are affected. They see an uptick in emergency department visits and admissions, a Penn State College of Medicine study found.