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Study Gauges Risk of Closure for Independent and Affiliated Rural Hospitals

Analysis  |  By Christopher Cheney  
   July 05, 2022

For financially distressed rural hospitals, affiliation with other hospitals was linked to a lower risk of closure compared to being independent, researchers found.

For financially distressed rural hospitals, affiliations with other hospitals lower the risk of closure; but for financially stable rural hospitals, affiliations with other hospitals increase the risk of closure, a new research article found.

Several factors have made rural hospitals more exposed to financial distress than urban hospitals, the new research article says. Compared to urban hospitals, rural hospitals struggle to attract and retain clinicians. Rural hospitals face higher fixed costs than urban hospitals because of lower patient volumes. Compared to patients at urban hospitals, patients at rural hospitals are more likely to be uninsured or covered by public insurance.

The new research article, which was published by JAMA Health Forum, examines data collected from 2,237 rural hospitals from 2007 to 2019. The study compared closure risk for independent hospitals, hospitals that were already affiliated with other hospitals in 2007, and hospitals that became affiliated after 2007.

The study has several key data points.

  • 140 (6.3%) of the rural hospitals closed by 2019
     
  • The number of rural hospitals that were independent decreased dramatically over the study period, falling from 68.9% in 2007 to 47.0% in 2019
     
  • For financially distressed rural hospitals in 2007, affiliation was linked to a lower risk of closure compared to being independent (adjusted hazard ratio 0.49)
     
  • For financially stable rural hospitals in 2007, affiliation was linked to a higher risk of closure compared to being independent (adjusted hazard ratio 2.36)
     
  • For financially stable rural hospitals in 2007, for-profit ownership was linked to a high risk of closure (adjusted hazard ratio 4.08)
     
  • On average, affiliated hospitals had more beds than independent hospitals
     
  • Hospitals that were already affiliated in 2007 were more likely than independent hospitals to have maternal and neonatal care (71.7% versus 61.1%)
     
  • Hospitals that were already affiliated in 2007 or became affiliated after 2007 were more likely than independent hospitals to have mental and/or substance use disorder (MSUD) treatment and surgical care (80% versus 74%)
     
  • Overall, the percentage of rural hospitals in financial distress increased from 25.0% in 2007 to 30.2% in 2019

"The results of this cohort study suggest that affiliations may be associated with lower risk of closure for some rural hospitals in financial distress. However, among initially financially stable hospitals, an increased risk of closure for hospitals associated with affiliation and proprietary ownership raises concerns about the association of affiliation with closures in some circumstances," the study's co-authors wrote.

Interpreting the data

Rural hospitals experienced significant changes from 2007 to 2019, the study's co-authors wrote. "Approximately 6% of rural hospitals that were open in 2007 have now closed. Affiliations and financial distress have increased substantially, whereas market shares have declined. Downsizing was observed across the board in terms of decreases in number of beds and total volume of inpatient stays. During the study period, rural hospitals decreased maternal and neonatal, MSUD, and surgical inpatient services."

Some rural hospital closures may have been business decisions that were not aligned with community needs, the study's co-authors wrote. "Notably, hospitals that became affiliated during the study period had a higher rate of financial distress at the end of the study period, as well as a greater reduction in total inpatient volume and market share than independent hospitals, suggesting that these hospitals may have not performed well even after joining a system or merging with another hospital. Additionally, private for-profit ownership was associated with closure among financially stable hospitals."

Some financially distressed affiliated rural hospitals may have reduced risk of closure because affiliation provides access to more resources, the study's co-authors wrote. "Among financially distressed hospitals, affiliations were associated with a lower risk of closure compared with being independent. This finding did not hold in the subanalysis of hospitals that were independent in 2007, suggesting the protective association may have been associated with mature affiliations (i.e., hospitals already affiliated in 2007)."

Photo by Antonina Heeres

Related: Can the Hospital at Home Model Help Rural Hospitals Thrive?

Christopher Cheney is the senior clinical care​ editor at HealthLeaders.


KEY TAKEAWAYS

Among 2,237 rural hospitals, 140 (6.3%) closed from 2007 to 2019.

Overall, the percentage of rural hospitals in financial distress increased from 25.0% in 2007 to 30.2% in 2019.

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