One in five US rural hospitals are at high risk of shutting down: study

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One in five US rural hospitals are at high risk of shutting down: study

by Lauren Dubinsky, Senior Reporter | February 25, 2019
What can be done about this?
One in five rural hospitals in the U.S. are at high risk of closing, yet 64 percent of them are crucial to the health and economic success of their communities, according to a new Navigant Healthcare study.

David Mosley, a managing director at Navigant, told HCB News that a large furniture company was planning to open a new manufacturing facility in an impoverished area two years ago. But when a local hospital closed, the deal was off the table and the company built the facility in another state.

“I was absolutely shocked that the local community leaders had no clue the hospital was in such poor financial shape,” said Mosley. “My colleagues suggested that we could utilize public data to assess not only the financial status of every hospital that serves Medicare patients, but we could also gauge ‘essentiality.’”

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This study evaluated over 2,000 rural hospitals around the country and found that 21 percent are at a high risk of closing based on their total operating margins, days cash on hand and debit-to-capitalization ratio. That means that 430 hospitals in 43 states that employ 150,000 individuals are in danger of shutting down.

The researchers dug deeper to determine how essential these hospitals are to their communities in terms of trauma status, services they provide to vulnerable populations, geographic isolation and economic impact. They found that 64 percent of the hospitals are considered essential.

The data also revealed that Mississippi, Alabama, Kansas, Georgia and Minnesota are expected to the experience the biggest impact.

According to the study, that factors contributing to this are low rural population growth, payor mix degradation, decrease in inpatient care, excess hospital capacity, as well as a lack of capital and necessary technology.

One potential solution is for rural hospitals to partner with academic and regional health systems. That could involve telehealth, revenue cycle, human capital, EHR use, physician training and clinical optimization.

“They must form strategic relationships with academic medical centers or other large, viable entities that can assist with telehealth, rotation of specialists, even leveraging down the cost of IT systems, coding, billing, collections, and backroom support,” said Mosley.

He added that excess capacity and the fixed costs associated with that must be addressed as well as margin compression caused by the pervasiveness of government payors.

“Meanwhile, they have to stay relevant to their community," he concluded. “Think of the ‘hub and spoke’ model where the rural community hospital can be the hub to coordinate the delivery of a myriad medical and social services.”

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