Rural Hospital Closures Could Accelerate in 2023
Federal assistance during the pandemic slowed rural hospital closures to only six the past two years - things could get worse in 2023.
A year ago, I looked at how the pandemic was exacerbating an already existing crisis in America’s rural healthcare system. History of hospital closures, staffing shortages, and vaccine hesitancy had the potential to worsen an already strained healthcare system. Now, after an influx of federal aid has lessened the pace of rural hospitals shutting down, there is concern closures could accelerate next year.
This posts looks at how pandemic-related federal aid affected rural hospitals and what’s at stake in 2023.
Federal Aid to Rural Hospitals Helped Facilities Remain Open
As a result of increased financial assistance during the pandemic only six rural hospitals have closed in 2021 and 2022, compared to 19 in 2020 and 18 in 2019.
In the March 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act, rural hospitals benefited from several provisions. Here are a few from a list compiled by the American Hospital Association (AHA)
$100 Billion in New Funding for Health Care Providers
Small Business Loans via the “Paycheck Protection Program.”
Temporary Elimination of Medicare Sequestration
Inpatient Prospective Payment System (PPS) Add-on Payment.
Expansion of Health Resources and Services Administration (HRSA) Grant Programs for Rural Entities
The American Rescue Plan (ARP) provided additional funding allocated to rural healthcare centers. In November 2021, the administration announced it would start distributing $7.5 billion in ARP Rural payments to providers and suppliers who serve rural Medicaid, Children's Health Insurance Program (CHIP), and Medicare beneficiaries.
Another $9 billion was announced through the Provider Relief Fund to health care providers who had experienced revenue losses and expenses related to the pandemic, including a “bonus” payment to rural healthcare providers. The Health Resources and Services Administration (HRSA) notes that ARP Phase 4 Rural Distributions funding totaled approximately $15.4 billion to more than 90,000 providers and ARP Rural Payments have totaled more than $8.3 billion to more than 47,000 providers.
The decline in rural hospital closures the past two years is largely attributed to extraordinary federal assistance during the pandemic -- expiration of that aid increases the risk of closures.
When Federal Aid Ends, Rural Healthcare Facility Closures Could Accelerate
From 2010 to 2020 there have been 134 rural hospital closures, 51 of those shutdowns were from 2018 to 2020 alone. With only six total rural hospital closures in 2021 and 2022, its clear that pandemic related assistance prevented additional facilities from shutting down. As we move toward 2023, there is concern about an acceleration of hospital closures.
According to The Chartis Group, a healthcare consultancy company, an estimated 45 percent of rural hospitals are operating at a loss when pandemic related relief is excluded. This builds on their 2020 study when they identified 453 rural healthcare centers “vulnerable” to closure based on performance levels: a group of 216 which can be considered “most vulnerable” and a second group of 237 which are defined as “at risk.”
The Center for Healthcare Quality and Payment Reform (CHQPR) estimates that “more than 600 rural hospitals – nearly 30% of all rural hospitals in the country – are at risk of closing in the near future.” Event more dire, over 200 of these rural hospitals are at immediate risk of closing. The communities most likely to be affected are in isolated rural areas.
Problems related to closures are largely financial with rural hospitals struggling for years. A 2016 Kaiser Family Foundation (KFF) study found that a number of factors contributed to closures, including:
Demographics: An aging, poor, and shrinking population,
Financial: High uninsured rates and a payer mix dominated by Medicare and Medicaid, along with outdated payment and delivery system models
Economic challenges in the community and aging facilities
Staffing is also a major problem. According to the AHA, only 10% of physicians in the U.S. practice in rural areas despite rural populations accounting for 20% of the national population. The pandemic exacerbated staffing shortages when nurses could seek higher paying jobs elsewhere. Rural providers have long had difficulty recruiting and retaining health care professionals.
In August, “more severe-than-expected macro headwinds” prompted Fitch Ratings to place its sector outlook for non-for-profit-hospitals to “deteriorating.” Nationally, two-thirds of Americans (65%) live closest to a nonprofit hospital and is a significant source of health care for millions of Americans.
How Rural Healthcare Closures Affects Communities
According to the Federation of American Hospitals, “rural hospitals serve more than 60 million Americans who live in rural regions, representing 20% of the entire U.S. population.” These hospitals provide an important source of health services and can be a critical component of the area’s economy.
When a hospital closes it has a major impact on quality of life. In many small rural communities, the hospital is the only place where residents can get laboratory tests, imaging studies, or primary medical care. After a facility closes it can take considerably longer to reach a healthcare facility.
According to the Government Accountability Office (GAO):
When rural hospitals closed, people living in areas that received health care from them had to travel farther to get the same health care services—about 20 miles farther for common services like inpatient care. People had to travel even farther—about 40 miles—for less common services like alcohol or drug abuse treatment.
A Pew Research Center study found nearly a quarter (23%) of Americans in rural areas say access to good doctors and hospitals is a major problem in their community – starkly different than 18% of urbanites and 9% of suburbanites.
But are rural hospital closures a symptom or a driver of economic decline? In one recent study adverse economic trends were observed in areas preceding hospital closures, but other than a decline in healthcare sector employment post-closure, researchers found no association between the hospital closures and a county’s economic outcomes.
Improving Rural Healthcare Starts with Medicaid
Rural residents face barriers to accessing health care, including limited availability of providers, lack of access to reliable transportation, and long travel times. Residents in rural areas also tend to be “older, poorer, and sicker than those in urban areas.”
One place to start improving rural healthcare is Medicaid expansion. One study found that Medicaid expansion was associated with improved hospital financial performance and lower likelihood of closure, particularly in rural areas.
A report by the Bipartisan Policy Center noted that a Montana Hospital Association executive commented that with 49 critical access hospitals in the state and 50% of facilities bringing in less than $10 million in annual revenue, what has sustained these hospitals is Medicaid supplemental payments and Medicaid expansion. If a patient shows up at a healthcare facility with Medicaid, instead of with no insurance, it improves the hospital's financial operations. Having Medicaid also improves health outcomes compared to no insurance at all.
Kentucky, widely viewed as a success for Medicaid expansion, had a 50% reduction in its uninsured rate from 2010 to 2019 and a 161% increase in total Medicaid/CHIP enrollment. States that have still not expanded Medicaid according to KFF include: Alabama, Florida, Georgia, Kansas, Mississippi, North Carolina, South Carolina, South Dakota, Tennessee, Texas, Wisconsin, Wyoming.
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