There are 703 rural hospitals, representing 30% of the total — that are at risk of closing because of financial problems, according to the Center for Healthcare Quality and Payment Reform (CHQPR). And 360 of them are at risk of immediate shutters.
According to CHQPR, rural hospitals have encountered difficulties over at least the last 10 years. In that period, more than 100 closed. Since 2023, more than two dozen eliminated inpatient services to qualify for federal grants available only to Rural Emergency Hospitals, ending the roughly 7,000 inpatient treatments they provided annually.
In percentages of total rural hospitals at risk of closing, the top 10 states were Connecticut (67%), Kansas (63%), Vermont (62%), Hawaii (62%), New York (56%), Alabama (54%), Arkansas (54%), Mississippi (52%), Texas (50%), and Oklahoma (50%).
By immediate risk, they are Alabama (46%), New York (38%), Mississippi (37%), Oklahoma (33%), Connecticut (33%), Kansas (32%), Tennessee (31%), Vermont (31%), Arkansas (28%), and Virginia (27%).
For more than half the states, at least 25% of rural hospitals are in danger of closing. In nine states, it’s the majority of hospitals.
There are three major systemic problems all these rural hospitals are facing.
Patient services cost more than hospitals receive. The expenses are higher in rural areas and many health insurance plans don’t pay enough to cover the true costs.
There are insufficient alternative funding sources. Rural hospitals have come to depend on other forms of income, like local tax revenue or state grants, to keep them running. But there’s no guarantee the money will continue to be available. Extra money paid to hospitals under Covid pandemic relief is long over. According to the CHQPR report, more than a third of rural hospitals operated in the red from 2022 to 2023.
Hospitals have low financial reserves. If a hospital has them, it has more staying power. The rural hospitals at risk of immediate closure have higher debts than they have net assets (those other than buildings and equipment, minus debt) to last more than a few years.
Beyond that, the single largest issue facing the most financially stressed hospitals is that private insurance companies don’t pay enough for service delivery. Although there is often a focus on uninsured and Medicaid patients, the losses from private insurance are even higher.
Increasing funding to prevent closures of the at-risk hospitals would cost about $5 billion a year.