The Impact of the Pandemic on Rural Hospitals

Worsening financial losses on delivery of services to patients and the expiration of federal pandemic assistance could cause hundreds of rural hospitals across the country to close their doors. The Impact of the Pandemic on Rural Hospitals shows that during the pandemic, the majority of small rural hospitals lost money delivering services to patients, but they also received millions of dollars in special federal funding that offset those losses. The hospitals’ costs are continuing to increase due to inflation and workforce shortages, but the temporary federal aid is ending, so many small rural hospitals will begin experiencing significant financial losses. Unless changes are made so the payments for services cover their costs for providing care, many hospitals could be forced to close and rural residents will lose access to essential services.

The primary reason for the losses on patient services was inadequate payments from private insurance plans. While Medicare increased payments to hospitals during the pandemic to offset higher costs, private payers paid less relative to hospitals’ costs. Low payments from private health plans were causing many small rural hospitals to lose money prior to the pandemic, and these losses worsened during the pandemic. Although hospitals of all sizes experienced lower profit margins on services to patients with private insurance during the pandemic, most urban hospitals and larger rural hospitals continued to make profits on these patients, while most small rural hospitals lost money.

Saving Rural Hospitals and Strengthening Rural Healthcare

More than 600 rural hospitals - over 30% of all rural hospitals in the country - are at risk of closing in the near future. Most of these are small rural hospitals that provide not only emergency care, inpatient care, and outpatient services, but also primary care, rehabilitation, and long-term care services for their communities. Moreover, most of the hospitals are located in isolated communities where loss of the hospital could severely limit access to health care services. Millions of people could be directly harmed if these hospitals close, and people in all parts of the country could be affected through the impacts on workers in agriculture and other industries.

Saving Rural Hospitals and Strengthening Rural Healthcare identifies the reasons why small rural hospitals face such severe financial problems. It shows that the largest causes of losses are low payments by private health insurance plans, and that many hospitals remain open only because they receive significant supplemental funding from local taxes or state grants.

The report examines the potential effectiveness of several commonly proposed policies for rural hospitals, including:

The report describes a Patient-Centered Payment System for rural hospitals that would sustain essential healthcare services in small rural communities. This innovative approach to payment would include:

A detailed report is also available.

Why the CMS CHART Model Will Hurt Rural Hospitals

In August 2020, the CMS Center for Medicare and Medicaid Innovation (CMMI) announced plans to implement the “Community Health Access and Rural Transformation (CHART) Model” in 15 communities. The CHART Model is supposed to “increase financial stability for rural providers” and “enhance beneficiaries’ access to health care services by ensuring rural providers remain financially sustainable for years to come.” However, the analysis in Why the CMS CHART Model Will Hurt Rural Hospitals shows that rural hospitals and the communities they serve would be harmed, not helped, by participating in the CHART Model: