One out of four rural hospitals are at risk of closure if their financial situation does not improve.

One in four rural US hospitals at risk of closure

April 08, 2020
by John R. Fischer, Senior Reporter
One out of four rural hospitals in the U.S. is at risk of closing if their financial situation does not pick up.

That’s what Guidehouse — formerly known as Navigant — is saying in its 2020 annual analysis, attributing the problem to more patients choosing to receive care outside their local hospitals and areas. Known as outmigrating, the practice creates lost revenue not just for local hospitals but local economies as well, especially in the midst of the COVID-19 outbreak. The report was conducted prior to the pandemic.

"The COVID-19 pandemic has brought much needed attention to the availability of healthcare in America’s rural communities," Sarah Gaskell, associate director of Guidehouse, told HCB News. "Rural hospitals were already under significant financial distress during the longest period of uninterrupted economic growth our country has ever experienced (over 11 years). Any type of significant pandemic like COVID-19 — or a major economic downturn — has the potential to push rural hospitals already in financial distress to close, while pushing other rurals to the brink of closure."

More than 450 rural hospitals are considered vulnerable to closing, according to the Chartis Center for Rural Health, with 216 facilities "most vulnerable" to closure, and 237 others categorized as "at risk".

The assessment evaluated 354 at-risk rural hospitals across 40 states with a total patient revenue of $8.3 billion annually. Of these, 81% were considered highly essential to the health and economic well-being of their communities, with 34 states viewing at least half of their financially distressed rural hospitals as highly essential. All hospitals in 16 states were financially distressed.

Outmigration patterns in six states was found among 76% of patients in rural counties, compared to 35 percent in suburban areas and 23% in urban settings. Patterns were divided into three levels of care based on patient acuity, with the report finding even in lower-acuity cases 68% of patients seeking care elsewhere.

"In some cases, the hospital may not offer the specific service that the patient is seeking, or it could be simply a lack of awareness that the local hospital provides this care," said Gaskell. "In other cases, it could be patient preference."

Other factors include payer mix degradation, clinician shortages, suboptimal revenue cycle management and an inability to leverage technology due to a lack of capital. The impact of closures is expected to be most felt in Southern and Midwestern states, including Tennessee, Oklahoma, Mississippi, Alabama and Kansas, according to the analysis.

The study, however, suggests that the government could help reduce risk by passing the Rural Emergency Acute Care Hospital (REACH) Act. Reintroduced in 2017, the legislation would create a new Medicare classification under which critical access hospitals could reduce excess inpatient beds and focus more on outpatient services. The Act has yet to be voted on by the appropriate committee.

It also recommends that providers collaborate with state legislators to develop state-based Medicare demonstration waivers that alter local and regional rules around inpatient beds and emergency designation. In addition, many should seek out partnerships with tertiary and academic health systems to scale their enterprises; invest in telehealth, revenue cycle, EHRs, human capital, physician training and clinical optimization; and work with board members and community leaders to promote and sustain local hospitals and retain outmigrating patients.

"The pandemic has shown the power of state-level responses to healthcare issues, and now is the time for elected officials at all levels to dig into a crisis of care that has been lingering for decades," said Gaskell.