1 in 4 rural hospitals is vulnerable to closure, a new report finds

The financial crisis for America’s rural hospitals is getting worse.

A new report from the Chartis Center for Rural Health puts the situation in dire terms: 2019 was the worst year for rural hospital closures this decade, with 19 hospitals in rural America shutting their doors. Nearly one out of every four open rural hospitals has early warning signs that indicate they are also at risk of closing in the near future.

Since 2010, 120 rural hospitals have closed, according to University of North Carolina researchers. And today, 453 of the 1,844 rural hospitals still operating across the country should be considered vulnerable for closure.

The Chartis researchers sought to identify key risk factors that precipitated rural hospital closures and then used those indicators to project which hospitals are at risk of closing soon. Some of the criteria was obvious, like changes in revenue or how many beds are occupied on average.

But there was one other leading indicator that has an obvious political explanation and which should be entirely avoidable: whether the hospital is in a state that expanded Medicaid under Obamacare.

According to Chartis, being in a Medicaid expansion state decreases by 62 percent the likelihood of a rural hospital closing. Conversely, being in a non-expansion state makes it more likely a rural hospital will close.

The states that have experienced the most rural hospital closures over the last 10 years (Texas, Tennessee, Oklahoma, Georgia, Alabama, and Missouri) have all refused to expand Medicaid through the 2010 health care law. It seems their rural hospitals are paying the price. Of the 216 hospitals that Chartis says are most vulnerable to closure, 75 percent are in non-expansion states. Those 216 hospitals have an operating margin of negative 8.6 percent.

Research has consistently shown Medicaid expansion improves hospitals’ financial performance by reducing the amount of uncompensated care. The only question is by how much, as Medicaid payments can sometimes not be enough to match the cost of providing care to Medicaid patients, which can partially offset the savings in uncompensated care.

Nevertheless, here is how the Kaiser Family Foundation summarized the available research:

Studies demonstrate that Medicaid expansion has significantly improved hospital operating margins and financial performance. A study published in January 2018 found that Medicaid expansion was associated with improved hospital financial performance and significant reductions in the probability of hospital closure, especially in rural areas and areas with higher pre-ACA uninsured rates. Another analysis found that expansion’s effects on margins were strongest for small hospitals, for-profit and non-federal-government-operated hospitals, and hospitals located in non-metropolitan areas. A third study found larger expansion-related improvements in operating margins for public (compared to nonprofit or for-profit) hospitals and rural (compared to nonrural) hospitals.

As you can see, the consistent conclusion is that Medicaid expansion is particularly helpful for rural hospitals. And yet a state like Texas, where more than half of its rural hospitals are vulnerable to closure, still refuses to accept the generous federal funding that covers 90 percent of the costs for Medicaid expansion.

Hospitals have always been among the biggest advocates of Medicaid expansion. In some states, they’ve even been willing to chip in by paying new fees or taxes to cover the state’s 10 percent share of the expansion costs. It’s worth it to them because of the new federal funding that will come in and pad their bottom lines.

The problems for rural hospitals are bigger than Medicaid expansion. By definition, these are facilities that serve smaller populations that often have unique challenges in accessing primary care that can stave off bigger health problems (which are more expensive to treat once they get to the hospital). According to the Chartis researchers, the simple age of the physical hospital building is a risk factor for closure.

But some of those problems are just a byproduct of providing health care in rural communities. States had a choice about expanding Medicaid, and so far, 14 states have rejected the offer. They’ve left 2.3 million people uninsured.

And they are putting the future of their rural hospitals at risk.

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