The Crisis of Rural Hospital Closures

The Crisis of Rural Hospital Closures

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Located near U.S. Route 66 in eastern New Mexico, a 10-bed hospital has long been a crucial source of emergency care for car crash and ranching accident victims. Additionally, it has served as a convenient option for overnight stays, primarily for older residents dealing with pneumonia or heart ailments. Covering a vast area of 3,000 square miles (about twice the area of Rhode Island), home to over 4,500 people, this hospital stands as the sole medical facility in the region. However, despite a tax levy in place to support it, the hospital has suffered a financial loss of over $1 million in the last six months. Christina Campos, administrator of Guadalupe County Hospital in Santa Rosa, expressed their anticipation of closure while hoping for a sustainable program to intervene. 

In response to the challenges faced by rural hospitals across the country, Guadalupe is among the first to undergo the transformation into a Rural Emergency Hospital. This designation is part of a new federal payment program introduced by the Centers for Medicare & Medicaid Services, specifically designed to assist rural providers. Although not a permanent solution, policymakers and hospital operators are optimistic that it will help alleviate the ongoing financial struggles that have forced numerous rural hospitals to shut down. 

This narrative reflects the crisis in many of our rural hospitals. Rural hospitals have long been facing an ongoing crisis, with over 150 closures since 2010 and over 300 more at risk, a problem further intensified by the challenges brought on by the COVID-19 pandemic. As a result, out of approximately 5,000 facilities across the country, only about 2,230 rural hospitals remain. The closures have been escalating in recent years, leading to subsequent shutdowns of primary and specialty care providers in affected areas. While federally qualified health centers (FQHCs) attempt to address the gaps, significant healthcare deficiencies persist following these closures. 

Why are rural hospitals closing? 

Understanding the causes of rural hospital closures is challenging due to multiple ongoing changes in rural communities. However, certain factors have been identified. States that did not expand Medicaid under the ACA saw a higher likelihood of rural hospital closures. Other factors associated with closure include financial instability, declining economic conditions in rural communities, and a higher proportion of for-profit hospitals among recent closures. Additionally, rural patients increasingly bypass local hospitals, opting for care at more distant facilities, which contributes to lower occupancy rates. The reasons for this behavior remain uncertain but could be influenced by perceptions of better-quality care elsewhere or concerns about the adequacy of local hospitals. 

Rural hospitals, compared to their urban and suburban counterparts, are smaller in size and face lower occupancy rates, making them more vulnerable to financial instability. Consequently, rural hospitals typically have less than half the median profit margins of urban hospitals. 

Regarding the impact of the COVID-19 pandemic on rural hospitals, approximately 21 closures have been recorded since its onset, which aligns with pre-pandemic closure trends. However, some argue that rural hospitals may have been relatively resilient in the face of pandemic-related financial pressures due to the diverse roles played by staff members and the strong community-hospital relationships that were established prior to the pandemic. 

Using new econometric methods, researchers have conducted a comprehensive analysis comparing counties with and without hospital closures over time. They examined 10 economic indicators, including healthcare sector jobs, overall unemployment, per capita income, and bankruptcies, providing detailed insights into the relationship between closures and economic conditions. Their findings revealed that only healthcare-sector employment experienced a significant decline, with a 14% reduction in jobs in counties with hospital closures compared to those without closures. Other outcomes, such as overall employment, total jobs, and county population, did not show significant declines. However, the analysis highlights the importance of pre-existing trends, as economies in areas with hospital closures were already deteriorating before the closures. These trends included declining per capita income, total job numbers, and increased unemployment, observed up to seven years before the hospital closures. These findings suggest that factors like unemployment in non-healthcare sectors and a general loss of local investment contribute to low hospital occupancy and financial difficulties, ultimately leading to eventual closures. 

Closure Effects & Support 

One concern is that rural hospital closures disproportionately affect communities of color. Research indicates that closures are more likely to occur in counties with larger non-white populations. As rural America experiences shifting demographics and increased representation of racial and ethnic minorities, previous studies have shown that rural counties with higher proportions of non-Hispanic Black populations were more prone to losing access to obstetric care. These trends raise apprehension that communities of color may be overrepresented among the populations adversely impacted by hospital closures. 

Rural hospitals receive financial support from over 20 programs operated by the Department of Health and Human Services, along with local or state government subsidies and provider taxes. However, despite the availability of these support mechanisms, rural hospitals continue to face ongoing financial challenges. 

What should Policymakers do? 

To bolster rural health care, policymakers should focus on strengthening rural communities as a whole, considering the broader socioeconomic challenges they face rather than solely addressing health care payment and infrastructure. Policies should be integrated to prioritize improving economic and employment conditions, as these factors have a significant impact on health outcomes. While enhancing rural healthcare delivery remains essential, novel approaches like the Rural Emergency Hospital Program and the Pennsylvania Rural Health Model offer creative solutions. The former allows rural hospitals to convert to emergency departments, maintaining access to emergency care while avoiding unnecessary fixed and overhead costs of inpatient units. The latter, implemented in 2019, provides a "global budget" to rural hospitals, ensuring financial predictability and enabling transformation in patient care through telemedicine and community health worker programs. These approaches adapt to meet the unique needs of different rural communities, providing flexibility alongside financial support. Monitoring the evolution of these programs in the years to come will be crucial and promising. 

Resources: 

UNC Rural Hospital Closures Tracker – dynamic data for tracking by state the nationwide closures and conversions since 2005. https://www.shepscenter.unc.edu/programs-projects/rural-health/rural-hospital-closures/ 

Saving Rural Hospitals – another dynamic chart offers granular detail of hospitals with reduced services, closures and profit.  https://ruralhospitals.chqpr.org/index.html 

Economic Impact of Rural Hospital Closures By: Chris Tachibana, PhD, MS https://ldi.upenn.edu/our-work/research-updates/economic-impact-of-rural-hospital-closures/