How Hospital Affiliation Impacts Risk of Closure for Rural Hospitals

Hospital affiliation was associated with a lower risk of closure for financially distressed rural hospitals but there was a higher closure risk for financially stable hospitals, according to a study published in JAMA Health Forum.

Rural healthcare access is an ongoing struggle as rural communities tend to have more health needs than urban communities but have fewer healthcare resources. In addition, rural hospitals often face financial challenges and high risks of closure due to low patient volumes.

Merging with another hospital or a multihospital system may offer some protection from closure for rural hospitals but only under certain circumstances.

To determine the association between affiliation and rural hospital closure, researchers looked at 2,237 rural hospitals that were open in 2007. They identified mergers and acquisitions between 2007 and 2019 and classified hospitals as independent, affiliated, or closed for each year.

Data was gathered from the American Hospital Association Annual Survey, Irving Levin Associates, the University of North Carolina Sheps Center, and the Healthcare Cost and Utilization Project State Inpatient Databases.

Across the study period, affiliations and closures increased for independent hospitals. In 2007, 68.9 percent of rural hospitals were independent compared to 47.0 percent in 2019. Out of the 2,237 open hospitals in 2007, 46.7 percent were affiliated and 6.3 percent had closed by 2019.

Compared to independent hospitals, hospitals that became affiliated during the study period or were already affiliated in 2007 were more likely to experience financial distress.

The percentage of hospitals in financial distress increased from 25.0 percent in 2007 to 30.2 percent in 2019. The prevalence of financial distress increased among hospitals that became affiliated and those that were independent until 2019. But financial distress did not increase among hospitals that were already affiliated in 2007.

Hospital affiliation was generally not associated with a greater or lower risk of closure compared to being independent. However, that changed when looking at the financial status of hospitals.

For example, among hospitals experiencing financial distress, affiliation was associated with a lower risk of closure.

“This finding supports the notion that some financially distressed affiliated rural hospitals may have protection from closure from their expanded access to resources,” researchers wrote.

“Further, to avert the risk of closure, system-affiliated hospitals may adjust their operations through downsizing and improving efficiency.”

When limiting the cohort to hospitals that were independent in 2007, new affiliation was not associated with a lower risk of closure.

On the other hand, affiliation was associated with a higher risk of closure for financially stable hospitals. This remained true for the subset of hospitals that were independent in 2007, researchers noted.

Hospital affiliations were associated with other aspects of hospitals as well, researchers found. Affiliated hospitals were more likely to offer maternal and neonatal, MSUD, and surgical inpatient services. But affiliated hospitals had higher decreases in the number of surgical stays compared to independent hospitals.

Hospitals that became affiliated during the study also had a higher rate of financial distress and a greater reduction in total inpatient volume by 2019. This suggests that these hospitals may not have performed well after merging with another system.

Private for-profit ownership was also associated with an increased risk of closure for financially stable rural hospitals, indicating that some closures may have been a business decision and did not prioritize community needs, researchers pointed out.

Despite mixed results of hospital mergers and acquisitions, research from September 2021 found that rural hospital mergers were associated with improved patient outcomes. Researchers attributed these improvements to the increased access to resources and technology that mergers led to.