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Nearly 30% of rural US hospitals at immediate or high risk of shutting down

by John R. Fischer, Senior Reporter | January 04, 2023
Business Affairs Emergency Medicine Primary Care
Across the entire U.S., 29% of small rural hospitals are at immediate or high-risk of closing.
Healthcare financial challenges and a lack of financial reserves has put over 200 U.S. hospitals at risk of immediately closing and 29% — 631 rural hospitals — across the entire country at immediate or high risk.

In all but seven states, at least one rural hospital is at immediate risk of shutting down, and in half of the states, 25% or more are at high risk. Half or more of rural hospitals in six states are at high risk of closing, according to the Center for Healthcare Quality and Payment Reform.

Texas had the most, at 76, while Hawaii had the highest percentage of at-risk rural hospitals at 75%.

Closing these facilities would mean longer travel distances for emergency and inpatient care. In small rural areas, hospitals are also often the only place for lab tests or imaging studies as well as the only or main source of primary care.

“The hospitals were losing money on patient services prior to the pandemic, and they did not have sufficient sources of other funds to cover those losses. Their losses will likely increase in the future due to higher costs and very low financial reserves,” said the authors in their report.

More than 150 rural hospitals nationwide closed between 2005 and 2019, with another 19 shuttering in 2020, more than any year in the last decade. Pandemic financial assistance kept this figure at six in 2021 and 2022, but the lack of it now is likely to result in closures increasing.

Those at immediate risk have had low or no existing financial reserves as well as a cumulative negative total margin over the last three years. High-risk users have low financial resources or depend on outpatient services revenues, including local taxes and state subsidies.

“The hospitals have more debts than assets, or the hospitals’ net assets (including pandemic-related funding, but excluding buildings and equipment) could offset their losses for at most two-to-three years. Fewer rural hospitals are at immediate risk than prior to the pandemic because of the federal pandemic aid they received,” wrote the authors.

Preventing closures would cost more than $3 billion annually, a 1/10 of 1% increase in total national healthcare spending. Spending is likely to surpass this if hospitals close as reduced access to preventive care and failure to receive prompt treatment would increase sicker rural patients.

Low payments from private insurers and Medicare Advantage plans are the biggest source of negative margins. Small rural providers also need Standby Capacity Payments to support the fixed costs of essential hospital services.

They also are not paid for physicians, nurses and other staff members who can treat serious issues quickly, nor do they have coverage for EDs, labs or treatment capability due to lacking these resources.

Delaware, Maryland, New Jersey and Rhode Island each had no rural hospitals at risk or in immediate danger and also no percentage of at-risk rural facilities.

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