State of U.S. rural hospitals: No margin, no mission

A new study from The Chartis Center for Rural Health finds that nearly half of U.S. rural hospitals are in the red as reduced reimbursements, dwindling access to care and deteriorating population health status ravage rural health.

The national median operating margin for rural hospitals is 1.0%, according to the study. However, the median rural hospital operating margin in 16 states is negative, and only two states (Alaska and Wisconsin) can boast a percentage of rural hospitals in the red as less than 20%.

The financial state of rural hospitals gives life to the adage "no margin, no mission," researchers stated.

"Hospitals that consistently fail to generate a positive operating margin will struggle to meet their vital mission as a safety net provider for vulnerable communities," the report said. "Rural patients that need care the most are likely served by hospitals that are shedding vital services or are vulnerable to closure altogether."

In the last year, 18 rural hospitals have closed or converted into an operating model that excluded inpatient care. These additions bring rural hospital closures or conversions to a total of 182 since 2010. The report estimated that 432 rural hospitals are now vulnerable to closure.

Dwindling reimbursements are straining rural hospitals, researchers explained. For example, they estimate the 2% Medicare reimbursement under sequestration to cost rural hospitals more than $590 million in 2025, resulting in over 8,000 jobs lost.

Additionally, the 35% reduction in reimbursement for charity care will eat away at another $159 million in rural hospital revenues this year.

A payer mix shifting more to government payers will continue to put financial strain on rural hospitals, possibly leading to more vulnerable or closed facilities.

The loss--and potential loss--of these rural hospitals creates a significant access to care problem, worsened by rural health's weakening population health status and expanding care deserts, the report explained.

About 180 rural communities have lost inpatient care access since 2010 as a result of rural hospital closures and conversions. The report also found access to obstetrics and chemotherapy services has taken a big hit recently. Nearly 300 rural hospitals have stopped offering obstetrics and 424 stopped chemotherapy services.

As rural hospitals close, communities are left without access to much-needed services, creating care deserts. These deserts are areas in which there are significant shortages of healthcare professionals, which forces people to travel greater distances to receive care, even emergency care.

Population health in rural America is also worsening. Not only do social drivers of health show rural communities having lower median household income (-36 percentile points) and higher rates of child poverty (+16 percentile points) versus urban counterparts, but rural Americans also represent a larger share of the chronic disease burden. Rural communities, according to the report, have higher rates of adult obesity (+30 percentile points) and premature death (+20 percentile points).

"Our analysis of population health domains indicates that rural hospitals will be challenged to meet the needs of vulnerable communities in the years ahead," said Michael Topchik, executive director of The Chartis Center for Rural Health.

Jacqueline LaPointe is a graduate of Brandeis University and King's College London. She has been writing about healthcare finance and revenue cycle management since 2016.