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March 11, 2022

Why are 800 rural U.S. hospitals at the risk of closure?

Daily Briefing

    At least 40% of rural U.S. hospitals are at risk of shutting down in the near future, according to a new study from the Center for Healthcare Quality and Payment Reform (CHQPR)—a situation that could potentially leave millions in smaller, less affluent communities with no access to nearby emergency and critical care facilities.

    Defining what it means to be a best-in-class rural health system

    Study details and key findings

    For the study, researchers analyzed publicly available data to evaluate rural hospitals' finances over a three-year period, according to Harold Miller, CHQPR's CEO and author of the report.

    In the analysis, researchers identified more than 500 hospitals at immediate risk of closing in the next two years, largely because of significant, multi-year financial losses. In addition, they found that more than 300 other hospitals are at high risk of closing because of low funds or high dependency on state grants and local taxes.

    In total, there are roughly 38 million Americans in the areas at risk of these hospital closures. If these rural hospitals close, patients living in rural areas would have to drive at least 20 minutes farther to reach emergency care—and around half of them would be at least 30 minutes farther from care, according to Miller.

    Notably, many rural hospitals are the only provider of health care services in these communities, including laboratory testing, maternity care, rehabilitation, and even primary care. Unfortunately, when these facilities close, their surrounding communities often lose access to all nearby health care services.

    Rural hospital closures also have ramifications beyond the surrounding communities, according to the report. For instance, most of the nation's food supply comes from rural communities, and the workers and families in those areas depend on rural hospitals for health care services. The Covid-19 pandemic underscored how health problems in farming communities can trigger food shortages in urban areas.

    "The myth is that these are hospitals that should no longer exist in communities that should no longer exist," Miller said.

    According to the study, keeping at-risk rural facilities open would cost around $3.4 billion— which would increase national health care spending by about 1% annually. In contrast, if these rural hospitals are allowed to close, spending would likely increase even more because of increased health problems among rural residents who have lost access to preventative care and adequate treatment.

    Further, the study found that the most recent federal proposal, CMS' Community Health Access and Rural Transformation (CHART) model, won't adequately address the issues facing small rural hospitals—and could even make the problem worse in some instances. 

    For example, if small rural hospitals are required to eliminate inpatient services, it would likely increase financial losses at most hospitals and reduce access to care for residents. In addition, the CHART model would increase financial losses at rural hospitals by reducing their Medicare payments. Ultimately, researchers found that any short-term financial assistance likely won't solve the long-term issues many rural hospitals face.

    According to Kaufman Hall chair Kenneth Kaufman, the system needs more coordinated planning to ensure access to care in all communities. "We have a reimbursement problem of course, but we also have a structural problem," Kaufman said. "There's just not enough patients to sustain a lot of these hospitals." 

    For his part, Miller suggested that insurers fund rural hospitals through monthly payments in addition to reimbursement for services in a system that mirrors other public services. "We don't pay the fire department based on the fire," he said. (Coleman-Lochner, Bloomberg, 3/9; Center for Healthcare Quality and Payment Reform study, accessed 3/10)

     

    Advisory Board's take

    Federal efforts to 'save rural health' aren't cutting it

    The dire state of rural hospitals is not new. Since 2010, at least 138 rural hospitals have shuttered their doors, leaving their communities without access to timely, quality health care. It's no surprise, then, that 60% of health professional shortage areas are rural counties—if a hospital closes in New York City, there are myriad other providers to choose from—the same is rarely true in rural areas.

    It's not just acute care at risk when a rural hospital closes. A 2019 Health Affairs study found that rural hospital closures are associated with an 8% annual decrease of the supply of general surgeons in the years preceding closure and 8% annual decrease in the supply of PCPs in the years following. And while a 20–30-minute increase in drive time may not seem like a lot, not all geographies are equal—an extra 20-minutes down mountainous or snowy roads may make the difference between a patient accessing care or abandoning their appointment. And with gas prices reaching all-time highs (national average of $4.33/gal today), an extra hour of driving is money out of patients' pockets. These volumes may artificially disappear in the short term, but they will ultimately migrate to the next nearest hospital when underlying problems go unaddressed, placing further strain on hospitals that have managed to stay afloat.

    Federal actions alone can't solve the problem

    It's vital that policymakers continue working on new payment models for rural hospitals to prevent further closures—and there are signs that the interest is there. Rural health is a bipartisan issue: CMS created of the Rural Health Council in 2016 (under the Trump administration) and Congress pumped billions of federal aid dollars into rural health across the past two years (under the Biden administration). But despite the nod from federal agencies, rural provider leaders will tell you that national advocacy efforts by rural stakeholders have not translated to health policy changes. Instead, most rural-sensitive policy changes happen at the state level. And while roughly 50-100 hospitals are expected to be eligible for the federal REH model that will roll out next year, the CHQPR study found that 800 hospitals are at risk of closure—it's far from a universal solution.

    Rural providers are taking matters into their own hands

    In the absence of federal solutions, rural providers have been taking matters into their own hands. Many health systems with meaningful rural footprints establish partnerships with nearby critical access hospitals to help them stay afloat and protect the regional health infrastructure. And rural providers that can effectively leverage grant funding are coming up with creative ways of delivering care, operating mobile clinics, or devising school-based primary care programs to protect access to care for their patients and retain upstream patient volumes.

    Rural providers aren't providing "rural health care"—they're providing health care in a rural setting. While niche policies can help in pockets, rural providers need federal policymakers to consider rural needs in overall health policy to meet the magnitude of the crisis.

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