Lack of telehealth services hurts rural hospital finances

New research reveals that rural healthcare providers lose patients to urban healthcare providers that offer telehealth. This hurts rural providers by causing a decrease in revenue and profit.

The study published in the Review of Financial Studies examined the financial effects of telehealth and the consequences on rural hospitals that do not offer these services. Amid the rapid rise in telehealth utilization over the last few years, healthcare stakeholders have noted its various benefits, including increasing healthcare access and improving patient outcomes.

Researchers from the University of Tennessee, Knoxville Haslam College of Business, Penn State University Smeal College of Business, and Columbia Business School set out to assess the financial effects of telehealth-based care delivery in the healthcare industry. They analyzed telehealth claims data and hospital financial statements from 2009 to 2018. Of the 4,244 hospitals included in the study, 1,987 operated in rural areas.

The researchers found that urban healthcare providers offering telehealth attract rural patients, which negatively affects rural healthcare providers' investment decisions and capital structure. After losing patients to urban telehealth providers, rural hospitals experience decreased revenue and profit, credit rating downgrades, increased cost of capital, and, ultimately, the risk of closure, which leaves rural communities without access to needed acute care.

"As communication technology now impacts all of our lives, we should be aware of the consequences that come with it," said study co-author Zihan Ye, assistant professor of finance at the Haslam College of Business, in a press release. "When patients are getting access to better healthcare through telehealth, they should also be aware of the potential negative spillovers to rural hospitals and rural patients."

Ye added that healthcare policies should support collaboration programs that enable rural hospitals to offer telehealth so "they do not end up in bankruptcy."

The study underscores the need for broader telehealth availability in rural areas. Prior research has revealed additional benefits of virtual care for rural communities.

For instance, a study published in 2022 revealed that telehealth drives up appointment completion rates among rural residents in America. For the study, researchers examined data from the West Virginia University Department of Family Medicine between January 2019 and November 2020. The study sample included 110,999 patient visits, of which 13,013 were through telehealth.

The researchers found that telehealth can boost appointment completion rates by about 20 percent. The increase was especially pronounced among those who lived further away from the clinical location and those with more severe health issues.

Additionally, research published in 2023 showed that increasing access to telehealth in rural areas could result in millions in healthcare cost savings.

The research by the Southern Rural Black Women's Initiative for Economic and Social Justice examined the most common health issues in 10 counties in rural Alabama, Georgia and Mississippi.

According to the research findings, telehealth interventions could help save almost $43 million in healthcare costs annually. More specifically, broader telehealth access could result in approximately $13 million in cost savings from avoided emergency department visits across the counties, $5.6 million from avoided preventable readmissions, and $1.7 million from avoided preventable admissions.

Anuja Vaidya has covered the healthcare industry since 2012. She currently covers the virtual healthcare landscape, including telehealth, remote patient monitoring, and digital therapeutics.