Nearly a Third of Rural Hospitals Are at Risk of Closing: What it Means for Nurses

When a rural hospital closes, it strikes a devastating medical and economic blow to the community. The Center for Healthcare Quality and Payment Reform (CHQPR) reports there are more than 600 hospitals across the U.S. at risk of closing and over 250 at immediate risk.

Hospital closures mean people must travel a significant distance for healthcare, which can be dangerous in emergencies. Rural hospitals are often the sole source of healthcare in their area, and a significant employer in the community.

As hospitals struggle financially, they hire less support staff to care for laundry and cleaning services. This leaves nurses in the position of caring for patients and performing additional duties, impacting their ability to care for the population.

Rural hospitals were struggling long before the COVID-19 pandemic. Nursing and physician shortages, payment inequities, and lower patient volumes contributed to a growing number of hospital closures before 2020.

However, the pandemic and rising costs created a greater burden for hospital systems that were already unable to meet their financial obligations.

In 2021, Medicare established a new “Rural Emergency Hospital” (REH) designation they hoped would provide financial support to struggling hospitals — with one critical caveat: The hospitals must discharge or transfer all patients within 24 hours.

The number of rural hospital closures peaked in 2020. The University of North Carolina (UNC) Chapel Hill reports 18 hospitals closed their doors that year, which represented a loss of at least 600 hospital beds.

UNC defined a hospital as closed when it “stopped providing general, short-term, acute inpatient care.” By that definition, there have been more than 190 closures or conversions since 2005, and a loss of 6,836 hospital beds to communities throughout the U.S.

Facilities that moved to an REH designation were classified as converted, and those that provided some healthcare but no inpatient services were classified as converted closures. This included facilities that provided some primary care, or skilled or long-term residential care.

Since 2005, just two hospitals fit the REH designation, 87 were converted closures, and 101 hospitals completely closed, no longer providing any healthcare to the community.

The line graph below demonstrates a significant rise in the number of hospital closures, but numbers cannot address the traumatic impact on lives when healthcare is no longer available.

UNC data included only the number of closures and conversions, not the hospitals that are closing labor and delivery care to help control costs.

As the New York Times notes, childbirth doesn’t pay in low-income communities. According to the American Hospital Association, by 2020, roughly half of all rural hospitals did not provide obstetric care.

Yet, at least 10% of babies are born in rural community hospitals. These rural hospital closures have left more than 2.2 million women of childbearing age in counties without obstetric care, birthing centers, or obstetric providers.

Ruby Kirby is the CEO of Bolivar General and Camden General Hospitals in rural Tennessee. She has first-hand experience with the important role hospitals play in a community’s access to healthcare and economic stability.

“There are unintended consequences of hospital closures for patients and the community, such as creating barriers to access for patients and economic damage, as hospitals are often an economic mainstay in their communities,”Kirby said, adding “In 2020, rural hospitals supported one in every 12 rural jobs in the U.S., as well as $220 billion in economic activity in rural communities.”

Rural hospitals have a much higher risk of closure or conversion than metropolitan hospitals. The Government Accountability Office (GAO) examined the effects that closure had on rural residents from 2012-2018. They found the median distance to access common healthcare services, including emergency services, increased by 20 miles.

The median distance to access less-common services, such as drug and alcohol rehabilitation, increased by 39.1 miles. Access to a coronary care unit, which remains the leading cause of death in the U.S., increased by 30.6 miles.

The map below offers an overview of states that have the highest percentage of rural hospitals at risk of closing. According to CHQPR:

“Risk of closure is defined as persistent financial losses on patient services, and insufficient financial reserves to allow continued operation unless the hospital receives large grants, local taxes, or other revenues not derived from services to patients.”

Of the different Medicare payment classifications, hospitals classified as prospective payment systems (PPS) had the highest rate of closure. This is a payment method in which Medicare pays a predetermined and fixed amount derived from a classification system for that service.

There were 76 hospitals paid under PPS and 66 paid as critical access hospitals (CAH) among the hospitals that closed. The CAH designation applied to certain rural hospitals under the Balanced Budget Act of 1997.

The remainder of the closures were spread across hospitals designated as Medicare-dependent hospitals (MDH) and sole community hospitals (SCH). One rural referral center (RRC) and three Indian Health Service (IHS) hospitals were part of those closures.

The reasons that rural hospitals are closing vary, depending on the hospital, location, and services offered. However, hospitals with a higher or immediate risk of closure have several consistent characteristics, including:

Some health experts have noted that the states where rural hospitals have a higher closure or conversion rate are also those that have not accepted Medicaid expansion. The Medicaid expansion program covers people in households where income is below a specified level.

An analysis by The Kaiser Family Foundation ( KFF) of hospitals from July 2021 to June 2022 showed hospitals in non-expansion states had operating margins that dropped into the negatives when documented relief funds were excluded.

Yet hospitals in Medicaid expansion states kept positive operating margins, even after documented relief funds were excluded from the data.

States with the most rural hospitals at risk of closing are some of the same states without Medicaid expansion, including Kansas, Texas, Tennessee, Mississippi, Georgia, and Alabama.

While important, the Medicaid expansion program is not the sole factor driving rural hospital closures. Rural hospitals also face staffing shortages.

For example, Kirby noted “Only 10% of physicians in the United States practice in rural areas, despite rural populations accounting for 20% of the population. Nearly 70% of the primary care Health Professional Shortage Areas (HPSAs) are located in rural or partially rural areas.”

The majority of revenue at rural hospitals comes from Medicare and Medicaid. Yet reimbursement is often less than the cost of providing the services. Kirby noted that rural hospitals had $5.8 billion in Medicare underpayment and $1.2 billion in Medicaid underpayment in 2020.

This was in addition to the $4.6 billion in uncompensated care that rural hospitals provided to the community. Lower patient volumes also make it challenging to maintain fixed operating costs.

The Centers for Medicare and Medicaid Services (CMS) initiated value-based programming that provides incentive payments to healthcare providers in an effort to reform delivery. However, as Kirby noted, lower patient volumes have a significant impact on performance measurements and quality improvement activities.

“Rural providers may not be able to obtain statistically reliable results for some performance measures without meeting certain case thresholds, making it difficult to identify areas of success or areas for improvement,” she said.

Nurses in rural hospitals face unique challenges. As hospitals cut support staff, remaining staff may need to clean bathrooms, floors, and laundry. Yet, some nurses prefer working in rural areas where they develop long-term relationships with patients and their families.

Nurses may practice with a greater degree of autonomy and independence, but must also have a deep understanding of the culture of the people within their community.

Strongly held cultural beliefs define how people feel and think about their health problems and how they respond to lifestyle recommendations, treatments, and interventions. Rural nurses play a unique role in respecting cultural differences, which ultimately is critical to reducing health disparities.

With hospital closures in small communities, nurses living in those areas must travel greater distances to be employed or may have to leave the community entirely. This creates an even larger gap within the community.

Most rural hospitals have experienced nursing staffing shortages for several years, even before the pandemic. Kirby described strategies her hospitals used to compete with some of the larger urban hospitals where wages were higher.

With a significant increase in inpatient and emergency room volume, they were forced to close the outpatient services and move nurses to the acute areas. In the past months, the focus has shifted to recruiting and retaining staff.

In addition to evaluating the compensation program and offering recruitment bonuses, Kirby’s hospitals have developed some unique strategies to encourage people from the community to enter the healthcare field.

“Our teams are working on ways to encourage, recruit and support young people from the community who choose healthcare. We provide work-based learning opportunities to expose them to areas of interest, offer scholarships, and mentor them with the hope they will return to their communities,” she said.

Rural healthcare is vital to maintain the health of America’s heartland. Telehealth can help fill some gaps and lower the need for outpatient clinic visits. Still, inpatient, surgical, and emergency room services are crucial to maintaining the health of small communities.

For rural hospitals to survive and thrive, they must receive adequate payments for services. This includes Medicare, Medicaid, and private insurance companies.

According to data from CHQPR, private insurance pays urban hospitals differently than rural hospitals. This allows urban hospitals to use private insurance payments to cover the lower reimbursement from Medicare and Medicaid.

Closures can be prevented and high-quality healthcare can be supported by ensuring rural hospitals are adequately reimbursed for the services they deliver.

According to CHQPR, the available data indicates that the majority of losses in underpayments are in primary care and emergency services, and not inpatient or ancillary services.

Creating rural emergency hospitals (REH) will likely increase the financial losses of the hospital while reducing access to inpatient care. Expanding Medicaid eligibility would increase the number of low-income patients who could afford healthcare, but it is not the answer to protecting healthcare in rural communities.

For these communities to receive quality healthcare, some experts believe the healthcare system must consider a patient-centered payment program for rural hospitals that supports the fixed costs of essential services in communities where there is low patient volume. This system also holds hospitals accountable for quality and spending as well as offers value-based cost-sharing for patients.

Kirby recognized that healthcare leaders must assess how to best address the community’s needs and ensure that residents have access to essential medical services. Rural hospitals should investigate new models of care and must stay flexible to be successful.

“The solutions needed in rural healthcare are not one-size-fits-all. Rural America is not a monolith, but a patchwork of unique communities and populations. Depending on the community, the types of facilities needed to ensure access to essential medical services could vary, but may include outpatient clinics, health clinics, physician offices, or the new Medicare provider type, the rural emergency hospital,” she said.

She believes this responsibility lies with more than one segment or stakeholder. “Collaboration and contributions at all levels — facility, community, nonprofit and corporate, state and federal governments — are necessary to implement and to continue to inspire and sustain innovations that promote the health of rural residents and their communities.”