Jazmin Orozco Rodriguez | (TNS) KFF Health News
In just over two years as CEO of a small hospital in Wyoming, Dave Ryerse has personally seen the worsening financial problems affecting rural hospitals across the country.
In 2022, Ryerse’s South Lincoln Medical Center had to close its operating room because it couldn’t operate it 24/7 due to staff shortages. Shortly after, the obstetrics unit also closed.
Ryerse explained that the hospital, which is publicly owned, has been generating less revenue from providing care than its operating expenses for at least the past eight years. This has led to difficult choices to cut services in order to keep the facility open in Kemmerer, a town of about 2,400 in southwestern Wyoming.
The financial troubles at South Lincoln are not unique, and the risk of hospital closures is an immediate concern for many small communities. Ryerse said, “Those cities dry out. There’s a huge sense of urgency to make sure that we can maintain and really eventually thrive in this area.”
A recently published report from the health analytics and consulting firm Chartis presents a clear picture of the challenging reality faced by Ryerse and other managers of small hospitals. According to its financial analysis, the firm found that half of rural hospitals operated at a financial loss in the past year, compared to 43% the year before. The report also identified 418 rural hospitals across the U.S. that are at risk of closing.
Mark Holmes, director of the Cecil G. Sheps Center for Health Services Research at the University of North Carolina, stated that the findings of the report were not surprising, as the financial decline it described has been a concern for researchers and advocates of rural health for many years.
The report pointed out that small-town hospitals in states that expanded Medicaid eligibility have been more successful financially than those in states that did not.
In Montana, where nearly half the population lives in rural areas, leaders credit the expansion of Medicaid for helping their hospitals largely avoid the financial crisis highlighted in the report, despite increasing costs, workforce shortages, and growing administrative burdens.
According to Katy Mack, vice president of communications for the Montana Hospital Association, “Montana’s expansion of Medicaid coverage to low-income adults nearly 10 years ago has reduced the percentage of uninsured Montanans by half, increased access to care, preserved services in rural communities, and decreased the burden of unpaid care on hospitals by nearly 50%.”
She added that no hospitals have closed in the state since 2015.
Hospitals in other areas have not been as successful.
Michael Topchik, a national leader for the Chartis Center for Rural Health and a co-author of the study, anticipates that next year’s update to the report will reveal further deterioration in the finances of rural hospitals.
“In health care and many industries, we often say, ‘No margin, no mission,’” he said, referring to the difference between income and expenses. Rural hospitals “are all mission-driven organizations that simply don’t have the margin to reinvest in themselves or their communities because of deteriorating margins. I’m very, very concerned for their future.”
People who live in rural America are older, sicker, and poorer than those in urban and suburban areas. However, they often reside in locations where many health care services are not accessible, such as primary care. This lack of available health services contributes to the lower life expectancies in these areas, according to Alan Morgan, CEO of the National Rural Health Association.The shorter life expectancies in these communities are connected to the lack of success of their health facilities, said Alan Morgan, CEO of the National Rural Health Association, a nonprofit advocacy group.
“We’re really talking about the future of rural here,” Morgan said.
Other hospitals, like South Lincoln, may also be reducing services. According to Chartis, nearly a quarter of rural hospitals have closed their obstetrics units and 382 have stopped providing chemotherapy.
Reducing services has extensive effects on the health of the communities the hospitals and their providers serve.
While people in rural America are more likely to die of cancer than those in urban areas, providing specialized cancer treatment also helps ensure that older adults can stay in their communities. Similarly, obstetrics care helps attract and retain young families.
Reducing services due to financial and staffing issues is causing “death by a thousand cuts,” said Topchik, adding that hospital leaders face choices between keeping the lights on, paying their staff, and serving their communities.
The Chartis report noted that the financial problems are driving hospitals to sell to or otherwise join larger health systems, with nearly 60% of rural hospitals now affiliated with large systems. For instance, South Lincoln in Wyoming has a clinical affiliation with Utah-based Intermountain Health, which lets the facility offer access to providers outside the state.
In recent years, rural hospitals have faced many added financial pressures, according to Chartis and other researchers. The rapid growth of rural enrollment in Medicare Advantage plans, which do not reimburse hospitals at the same rate as traditional Medicare, has had a particularly profound effect.
Topchik predicted that securing the sustainability of rural health facilities will ultimately require greater investment from Congress.
In 1997, Congress responded to a rural hospital crisis by creating the “Critical Access Hospital” designation, aiming to reduce financial burdens and help keep health services available by providing facilities with cost-based reimbursement rates from Medicare and, in some states, Medicaid.
However, these critical access hospitals are still facing challenges, including South Lincoln.
In 2021, Congress established a new designation, “Rural Emergency Hospital,” which allows hospitals to reduce most inpatient services but continue running outpatient care. This newer designation, along with its financial incentives, has prevented some smaller rural hospitals from closing, but Morgan said those conversions still mean a loss of services.
“It’s a good thing that now we keep the emergency room care, but I think it masks the fact that 28 communities lost inpatient care just last year alone,” he said. “I’m afraid that this hospital closure crisis is now going to run under the radar.”
“It ends up costing more for local and state governments in the end, and it also costs the federal government more in dollars for health care treatment,” Morgan stated. “It’s simply not good public policy. And it's also not good policy for the local communities.”
(KFF Health News, previously named Kaiser Health News (KHN), is a national news organization that creates thorough journalism about health topics and is a key operational part of KFF — the independent source for health policy research, polling and journalism.)
©2024 KFF Health News. Distributed by Tribune Content Agency, LLC.
