- A Guidehouse analysis of rural hospitals across the country prior to the COVID-19 pandemic found that 25% are at high risk of closing unless their financial situations improve, up from 21% last year.
- Rural hospitals represent more than 222,350 annual discharges, 51,800 employees and $8.3 billion in total patient revenue, the report found, and 40 states have at least one rural hospital at high financial risk of closure.
- The analysis based hospitals' financial volatility on factors like total operating margin, days cash on hand, debt-to-capitalization ratio, current ratio and inpatient census. It also considered how essential a facility is to the surrounding community based on service to vulnerable populations, geographic isolation and economic impact.
Rural hospitals provide essential medical services to local communities while powering their economies. The problem is rural hospitals are so essential to their communities but limited in staff, specializations and at the same time struggle to make money on the locals that need them.
Already budget-strapped, many have been unable to keep up with technological trends, as they lack the capital to invest in updated, innovative technology such as EHRs, telehealth and advanced imaging platforms.
Patients migrating to metro areas with large health systems that can offer higher levels of care isn't a new phenomenon, but a growing threat to the financial viability of struggling rural hospitals.
The report found that 76% of patients living in rural counties with a local hospital still out migrated for care — or left their local area and hospital to receive treatment elsewhere — compared to 35% and 23% of suburban and urban patients.
Nearly 70% of rural patients traveled for lower-acuity conditions for which most services can be provided at their community hospitals, the report found.
Dave Mosley, a partner with Guidehouse who co-authored the report, told Healthcare Dive some rural hospitals, however, are seeing more patients than usual right now.
An unintended effect of COVID-19 case surges in metro areas like New York City and Seattle is that "folks are actually going to the small hospitals in lieu of going to the large hospital where they believe, rightfully so in many cases, that that's where the folks with COVID are," Mosley said.
But that trend is unlikely to persist, nor will it be enough to remedy the major financial woes the hospitals already face.
The Guidehouse report looked at most recent available data submitted by hospitals to CMS and refined geographic designations based on a U.S. Department of Agriculture model, designating each hospital's ZIP code as either rural, suburban or urban.
It found that another factor driving the rural hospital crisis is a payer-mix degradation. Residents who remain in rural communities tend to be either very old or very young, and these communities often have higher rates of uninsured, Medicaid and Medicare patients.
This leads to more uncompensated and under-compensated care for local health systems. Medicare payment reductions are also a major factor, with the average rural hospital counting on Medicare for 46% of gross patient revenue.
The exception is critical access hospitals, which are paid cost-plus for Medicare-fee-for-service patients, and in some states, by managed Medicaid plans as well.
Declining inpatient care is also driving excess capacity at some rural hospitals and straining them financially. According to a 2016 Kaiser Family Foundation analysis cited in the report, the average rural hospital has 50 beds and 321 employees, but a daily census of just seven patients.
Mosely said the current pandemic is bringing the rural hospital crisis to more people's attention.
"People are starting to discuss how rural hospitals are fitting into the continuum of regional healthcare," he said. "In many instances we heard about hospitals that were overcrowded, didn't have enough rooms, but 30 miles up the road was a smaller rural hospital that was at 20% occupancy."
But it's not as simple as turning on the lights, Mosely said. "The problem is that they don't have the specialized medical professionals in those rural communities."