Rising Patient Cost Sharing Is Creating Financial Risk for Rural Hospitals

Growing patient responsibility is forcing rural providers to confront a new source of strain, and rethink collections and service strategy.

Shifts in patient cost sharing pose a financial threat to hospitals, and the implications are especially meaningful for rural providers.

A new Health Affairs study revealed that patients are responsible for a growing share of hospital revenue, with the gap between rural and metropolitan hospitals’ share of allowed amounts per encounter widening over time.

The University of Southern California researchers observed a four-percentage-point difference in 2012 swell to a seven-percentage-point discrepancy in 2022. In 2019, at the peak of cost sharing in the study period and before the COVID-19 pandemic, cost sharing accounted for 34% of rural facility allowed amounts, compared to 25% at metropolitan facilities.

“As a result, rural, commercially insured residents are paying a higher share of total health care costs than metropolitan residents, and rural hospitals are burdened by having to collect a higher share of revenue from patients,” the authors wrote. “The collection of patient obligations may deepen financial strain for hospitals and consumers in these rural settings.”

Hospital utilization and spending diverged over the study period. Inpatient admissions declined from 3.2 to 2.6 per 100 enrollees, while outpatient use remained largely stable, aside from a temporary increase in 2021 during the pandemic. Even with that trend, spending rose significantly. Mean annual allowed amounts per enrollee for combined inpatient and outpatient services increased 54%, from $1,048 in 2012 to $1,616 in 2022. Patient cost sharing followed a similar trajectory, jumping 42% from $105 to $149 per enrollee.

The share of those costs paid by patients varied by setting. Outpatient care carried a higher cost-sharing burden, with patients responsible for 13% to 15% of allowed amounts on average. Inpatient services remained lower, with cost sharing accounting for 4% to 6% of allowed amounts.

At the same time, payment patterns have become less consistent. Encounters with no cost sharing increased from 45% in 2012 to 50% in 2022, while episodes with more than $1,000 in cost sharing ticked up by one percentage point and incidents of cost-sharing amounts between $0 and $1,000 decreased by seven percentage points.

That difference is tied in part to pricing. Urban systems tend to negotiate higher commercial rates, which shifts a larger portion of total payments toward insurers. Rural hospitals lack that leverage, so a greater share of each bill falls to patients.

The financial consequences show up in collections, which is why rural hospital leaders must prioritize revenue cycle performance. Capturing revenue earlier in the patient journey is critical. Front-end processes such as eligibility checks and point-of-service collections take on greater importance, particularly in markets where patients face higher cost burdens.

Rural providers may also want to rethink service lies, with high-cost, elective services potentially carrying increasing collection risk. Leaders should reassess which services are financially sustainable under rising cost sharing.

As rural hospitals contend with thinning margins, a larger dependence on patient collections introduces more uncertainty into revenue streams.