Financial struggles threaten to close rural hospitals, reduce access to care

Sept. 16, 2019

The Center for American Progress has released a new report on the financial distress of America’s rural hospitals; how their perilous financial situation is impairing access to care in rural communities; and what steps policymakers should take to preserve access to care in rural America.

On average, rural residents live 10.5 miles from the nearest acute care hospital compared with 4.4 percent in urban communities. Looming hospital closures threaten to substantially increase the distance rural residents must travel to access hospital-based emergency care, which they disproportionately rely on.

CAP’s analysis finds that, among the 222 low-margin rural hospitals, 55 percent were more than 20 miles away from the next-closest hospital-based emergency department, and one-tenth were more than 35 miles away.

“This analysis shows that rural hospitals make up a disproportionate share of hospitals with the lowest operating margins, making them acutely susceptible to closure,” said Emily Gee, health economist at the Center for American Progress. “Policymakers should move swiftly to expand Medicaid and adopt other reforms to protect rural residents’ access to care.”

Key findings from the report include:

  • In 2017, rural hospitals comprised only 27.9 percent of the hospitals with operating margins in the highest decile but comprised 59.7 percent of the hospitals in the lowest decile.
  • Southern and Midwestern states had the greatest proportion of rural hospitals with low operating margins.
  • Rural hospitals in states that expanded Medicaid had a higher median operating margin (negative 3.4 percent) than those in states that have not expanded Medicaid (negative 5.7 percent).
  • Among hospitals most vulnerable to closure, smaller, low-occupancy rural hospitals were most likely to struggle financially. Nearly 1 in 6 (15 percent) of hospitals with 25 or fewer beds had operating margins in the lowest decile, and nearly one-fifth (17 percent) of rural hospitals with low-occupancy rates had operating margins in the lowest decile.

The report also includes policy recommendations to slow rural hospital closures, including:

  • Expanding Medicaid
  • Creating a greater number of rural emergency centers
  • Instituting global budgeting for rural hospitals
  • Improving transportation infrastructure and options for rural residents
  • Strengthening the rural health care workforce