The Harsh Financial Realities of Rural Hospitals
The numbers are scary. Today, 50% of America’s rural hospitals are operating in the red. This is the highest percentage of rural hospitals losing money in the past decade. The jump from 43% operating in the red in 2023 to 50% in 2024 is the single largest percentage change we have seen in a 12-month period.
States with the highest percentage of rural hospitals operating at a loss include Kansas (89% in the red), New York and Wyoming (83% each), Vermont (75%), and Alabama (74%).
While the pandemic provided a measure of stability to rural hospital finances through various government intervention programs, 2024’s analysis indicates that any positive, residual financial affects have all but disappeared. Other government policies (e.g., sequestration and bad debt reimbursement) continue to chip away at rural hospital revenue. Sequestration alone will cost rural hospitals more than $500 million this year and the equivalent of 9,000 healthcare jobs. Cuts in so-called bad debt reimbursement (i.e., the delivery of charity care to rural patients unable to pay for medical services) will claim approximately $175 million in revenue and the equivalent of an additional 3,100 healthcare jobs.
42% of health system-affiliated rural hospitals are operating in the red, compared to 55% of independent rural hospitals. While system affiliation may not make rural hospitals immune to the issues facing the rural health safety net, this data does confirm that affiliation can be financially and operationally advantageous.
The aftermath of Closures and Conversions
As we have seen over the last 14 years, persistent downward pressure on rural hospitals often results in dire consequences for local care. Since 2010, 167 rural hospitals have either closed or adopted an operating model that excludes inpatient care (e.g., Rural Emergency Hospital conversion, urgent/emergency care center).
Rural hospital vulnerability indicated by metrics such as operating margin and the loss of access to inpatient care, is found the highest across the whole of the Southeast, part of the Southwest, and up into the Great Plains. States with the highest percentage of vulnerable rural hospitals are Florida (43%), Nebraska (41%), Tennessee (41%), North Carolina (40%), Kansas (38%), and Utah (38%).
When a rural hospital closes, the ripple effects are felt throughout the community. Within many rural communities, their local hospital is often among the largest employers and thus a major contributor to the economy.
Measuring the loss of access to inpatient care reveals that in 2023 inpatient care — meaning staffed hospital beds — disappeared in 28 rural communities, surpassing the previous high of 18 set in 2020. Hospital closures and the loss of inpatient care continue to be concentrated highest in states such as Texas (26), Tennessee (15), Kansas (10), Missouri (10), and Georgia (10).
Poor reimbursement management represents a significant hurdle for rural healthcare providers, affecting their financial stability, operating processes, human talent and cash flow. Unlock insights into your A/R Health, Get Your Free A/R Checkup Now!
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