Rural Hospitals Facing Multiple Rising Financial Pressures

AHA examines the causes behind 136 small hospital closures since 2010.

Low reimbursement, staffing shortages, low patient volumes, regulatory barriers, and COVID-19 disruptions all played a role in the shuttering of 136 rural hospitals between 2010 and 2021, including a record 19 closures in 2020, the American Hospital Association reports.

Those problems appear to be worsening as rural hospitals contend with rising costs for labor, drugs, supplies and equipment, threatening care access for rural Americans, AHA says.

"While many hospitals and health systems are facing unprecedented challenges, those faced in rural America are unique," AHA President and CEO Rick Pollack says. "We must ensure that hospitals have the support and flexibility they need to continue to be providers of critical services and access points for patients and communities."

Sean Fadale, president and CEO of the 84-bed, for-profit Nathan Littauer Hospital and Nursing Home in Gloversville, NY, says rural hospitals proved their worth at the height of the COVID-19 pandemic.

"One of the things that COVID-19 did for us, as devastating as it was, it shone a light on the importance of local healthcare, especially hospitals," Fadale says.  "The organizations that stepped up and filled the gap were hospitals, and especially rural hospitals."

"If we weren't there, the likelihood of those patients getting the life-saving care they needed at the time they needed it would have been very slim," he says. "Every one of those hospitals that closed was providing for a community that has needs. When that hospital closes, all the support around them, primary care, diagnostics, imaging, all that go away." 

Julie Yaroch, DO, president of ProMedica Charles and Virginia Hickman Hospital in Adrian, MI, says reimbursement are not keeping pace with rising care costs.

"We have not seen an adjustment of payment from state and private payers to reflect the added financial burden to care for the patients we are serving," Yaroch says. "We also are seeing a higher level of care required by our aging population that often have multiple comorbid conditions."

Rural hospitals comprise 35% of all hospitals in the U.S. and include Medicare-designated critical access hospitals, frontier hospitals, and sole community hospitals.

In addition, rural hospitals are often the biggest employers and economic drivers in their service areas, supporting one-in-12 rural jobs across the nation, and contributing $220 billion in economic activity in their communities in 2020, AHA says.

Yaroch says that, because of the increased care costs and slimmer operating margins, "we are not able to invest in the infrastructure, capital needs, or innovative technology," Yaroch says.

"It also impacts the dollars we can put back into the community. It has a global impact that goes beyond our four walls and into our communities," she says.

The AHA report recommended "a number of pathways" to stabilize rural hospital finances, including flexible care models, lowered regulatory hurdles, partnerships, and state Medicaid expansion.

The AHA is also calling on Congress to extend the financial support provided under the Medicare-dependent Hospital and enhanced Low-volume Adjustment programs. Both programs expire on Sept. 30, 2022 unless Congress acts.