As rural hospitals begin to face the financial pinch of life without Covid-19 stimulus funds, two new studies have found ways they are more likely to keep the doors open.

One study found that changing payment policies, methods, and conditions to support outpatient services is a key to rural hospitals’ financial sustainability. Another report released in June said financially struggling hospitals are more successful if they affiliate themselves with another healthcare facility.

In a study by the North Carolina Rural Health Research Program, researchers found that hospitals that focus their budgets on the services their communities are actually using are more financially successful. 

The study found that the typical rural hospital gets nearly 75% of its revenue from outpatient services. By focusing their budgets on those services, as opposed to spending more money on what it needs to provide inpatient services, a rural hospital can improve its financial situation. 

Lead researcher Tyler Leon Malone said, however, that when adjusting outpatient and inpatient care in hospitals, it’s important to weigh what the community needs first.

If a rural community is reliant on their hospital to provide inpatient services, and the hospital stops providing those services, it would hurt the healthcare options for the community, he said. 

“We clearly see that outpatient care is becoming a bigger part of rural hospitals’ financial portfolio,” Malone said. “So, the balance is wanting to preserve access to these important health care services that rural populations in particular, might not have as many options (to access) as certain populations across the board.”

Many issues are affecting rural hospitals’ financial stability, said Brock Slabach, National Rural Health Association (NRHA) chief operating officer, forcing hospitals to take cost-cutting measures, like cutting inpatient services, in order to stay open. In addition to falling revenues, hospitals also face paying back advanced Medicare disbursements from the federal government during the pandemic, he said. 

According to the NRHA, since the beginning of the year, three rural hospitals have closed – Galesburg Cottage Hospital in Galesburg, Illinois; Audrain Community Hospital in Mexico, Missouri; and Callaway Community Hospital in Fulton, Missouri. The closures bring the number of rural hospitals closed since 2005 to 183, a spreadsheet from the organization shows.

In the case of Galesburg, the hospital closure was due not to what kinds of services it offered, but whether or not it would receive reimbursement for the services. Galesburg closed after receiving notice from the Centers for Medicare and Medicaid Services that it would be terminating its agreement for services with the hospital and no longer covering patients’ bills. CMS cited conditions at the hospital as reasons it would no longer pay for services there.

In some cases, rural hospitals are looking to join other healthcare organizations in order to maintain financial stability. 

Another new research article, published in the JAMA Network, found that financially distressed rural hospitals that have affiliations with other hospitals have a lower risk of closure. Between 2007 and 2019, the percentage of rural hospitals in financial distress increased from 25% to 30%, the study said.

Looking at 2,237 rural hospitals operating in 2007, the study found that 140 had closed by 2019. Of those, the proportion that affiliated with another hospital increased from just over 31% in 2007 to nearly 47% in 2019. Among the financially distressed hospitals in 2007, those affiliated with another hospital had a lower risk of closure.

Unfortunately, that didn’t work for Audrain Community Hospital and Callaway Community Hospital. 

In March, Noble Health announced it was ending services at Audrain Community Hospital and Callaway Community Hospital. Noble Health, a three-year-old startup private equity firm, had acquired the two hospitals to keep them from shuttering. On March 18, the firm issued a statement on LinkedIn saying the hospitals had been closed due to a “technology issue” and on March 24, posted a statement on Facebook saying it was suspending all services to “restructure their operations” in order to keep the hospitals “financially viable.”

The study also found, however, that financially stable hospitals had a higher risk of closure if they chose to become affiliated with other healthcare organizations. 

Thanks largely to an infusion of cash from the federal government in the form of Covid-19 stimulus funds, only two rural hospitals closed in 2021. Many rural hospitals are at high risk of shutting down for good, studies say. Some estimates say that as many as 441 rural hospitals are at high risk of closure. 

A May report from the Center for Healthcare Quality and Payment Reform found that 892 rural hospitals were struggling financially and at risk of closing in the near future, or of closing immediately. The impact on rural communities when a hospital closes is severe.

“Closure of (a) hospital would mean the community residents would have to travel a long distance for emergency or inpatient care,” the study said. “Moreover, in many small rural communities, the hospital is the only place where residents can get laboratory tests or imaging studies, and it may be the only or principal source of primary care in the community. As a result, loss of the hospital would mean loss of access to many essential healthcare services.” 

The Center for Healthcare Quality attributed the hospitals’ financial problems to low financial reserves or persistent losses on patient services.

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