Despite receiving billions in federal stimulus funds in 2021, officials say without more federal funding, one in four rural hospitals are at risk of closure in 2022.
Lack of federal funding, the reversion to pre-Covid-19 Medicare and Medicaid reimbursement rates, and a return to pre-Covid patient numbers could put some rural hospitals back on a downward trajectory.
Since 2010, according to the University of North Carolina’s Rural Health Research Program, 138 rural hospitals have closed. In 2020, a record 20 hospitals closed across the country. In 2021, the number of hospital closures shrank to one.
“When it comes to rural hospital closures, 2021 is more likely an anomaly rather than a turning of the tide,” Chris Balfour, spokesman for the Chartis Center for Rural Health, said in an email interview. “The different pandemic-related relief programs brought a tremendous amount of stability to rural hospitals at a time when it was desperately needed, and it’s likely those funds played a role in slowing the rate of closures last year (and perhaps for this year as well). What we have to keep in mind, however, is that those funds are a short-term solution.”
A study by Chartis Center for Rural Health in 2021 found that 453 rural hospitals were at risk for closure, with 216 at high risk. Currently, there are about 1,800 rural hospitals of 100 beds or less – meaning more than one in four rural hospitals are at risk of closing. Billy Balfour, director of communications for Chartis, said last year’s single hospital closing isn’t a sign those numbers are reversing.
Rural hospitals close due to a variety of reasons, such as whether or not a hospital is affiliated with a health care system, or has a low percentage of outpatient revenue, as well as whether or not their state expanded Medicaid benefits.
The reason so few closed last year, said Brock Slabach, COO of the National Rural Health Association, was due to increases in hospital volume because of Covid and increased federal funding. Rural hospitals received billions in federal funding as part of the Coronavirus Aid, Relief and Economic Stimulus Act, as well as part of the American Recovery Plan. Without that stimulus money, hospitals face a return to pre-Covid funding levels.
Chartis found that being in a state that did not accept Medicaid expansion meant a rural hospital was more likely to close. Six states that refused to expand Medicaid – Texas, Tennessee, Oklahoma, Georgia, Alabama and Missouri – have the most rural hospital closures since 2009, researchers found. Of the 216 hospitals at highest risk of closing, 75% are in non-expansion states, the research indicated.
Slabach said that without additional federal funding, or permanent changes in the way hospitals are reimbursed by Medicare/Medicaid, some rural hospitals may close.
One change rural hospitals would like to see is the permanent elimination of sequestration in Medicare and Medicaid. In sequestration, the Centers for Medicare and Medicaid Services withholds two percent of the reimbursement to a hospital per patient. Put on hold during the pandemic, sequestration is scheduled to come back in the beginning of 2023, Slabach said.
However, the Consolidation Appropriations Act of 2021 created a new hospital designation, the Rural Emergency Hospital that would act as a new Medicare provider type, according to the U.S. Department of Health and Human Services, National Advisory Committee on Rural Health and Human Services. The REH model will allow rural hospitals with fewer than 50 beds to convert to REH status. REHs would be reimbursed by CMS at a higher rate, as well as receive a monthly facilities fee. The new designation would go into effect on January 1, 2023.
Slabach said his association and rural hospitals would be watching the regulations surrounding the new designation as they are released this spring.
While the pandemic has brought financial assistance to rural hospitals, it has also brought a spotlight on the importance of rural hospitals to their communities.
“The Biden administration understands the importance of rural communities to the food, fuel and fiber of our country,” he said. “We hope the current spotlight does not dim. During the pandemic rural communities got a lot of federal assistance, and we hope that the attention paid to rural issues continues.”
Slabach said there is talk of another relief bill, but that those discussions are in the early stages.
“In terms of closures, nothing happens with more relief,” he said. “But once the funding runs out, our hospitals will fall further back to the pre-pandemic levels, and some will fall back to being at risk of closure.”
The Committee for a Responsible Federal Budget, a non-profit, non-partisan think tank focusing on fiscal responsibility and chaired by former Indiana Gov. Mitch Daniels, former Secretary of Defense Leon Panetta and former U.S. Rep. Timothy Penny (D-Minnesota), said they would be opposed to any additional relief bills.
“The Omicron variant represents a real public health and economic threat, and policymakers should take it seriously,” said Maya MacGuineas, president of the Committee said in a statement. “Between the $900 billion of Covid relief allocated to state and local governments and the $4 trillion of additional Covid relief, there are still substantial resources available to respond to the pandemic. Before the federal policymakers allocate another dollar, they should show how much has been spent already, what remains, what could be repurposed, and why new funding is justified.”
Already one rural hospital has closed in 2022 – Galesburg Cottage Hospital in Galesburg, Illinois, a town of 30,000. On Saturday, according to the Galesburg Register-Mail, the hospital sent an email to its employees telling them that the hospital had closed and that their employment had been terminated.
But the closure seemed to be due more to management issues and staffing shortages than financial difficulties, the newspaper reported. The hospital had recently lost its Medicare and Medicaid funding, after an investigation by the Centers for Medicare and Medicaid Services found that services provided at Cottage Health provided “an immediate risk of injury, impairment or death,” the paper said.