As federal funding aid packages expire, and policy-driven reimbursement cuts to Medicare and Medicaid are reinstated, rural hospitals face a return to pre-pandemic financial threats.
A new study by The Chartis Group found that these financial strains could lead to a new wave of closures in 2023.
The study found that prior to the pandemic, 46% of all rural hospitals operated in the red. One hundred thirty-eight rural hospitals have closed since 2010, and more than 450 were at risk of closure prior to the pandemic. In 2019, 18 rural hospitals ceased operations, and a record 20 closed in 2020. But in 2021, only two rural hospitals closed.
The study found that rural hospital economic pictures have improved, with only 40% operating in the red. The study attributed the stabilization to increases in federal funding through pandemic relief programs and legislation, including a pause on the Medicare sequestration, which automatically reduced payments to comply with federal deficit-control legislation.
Michael Topchik, national leader of the Chartis Center for Rural Health, told the Daily Yonder in an interview that the Medicare reimbursement cuts from sequestration will return in March. By July, the full 2% cut would return. That means that rural hospitals with Medicare patients will see a 2% reduction in their Medicare reimbursements for those patients’ care.
“A decrease in reimbursement from Medicare across the board would be, to say devastating, is an understatement,” he said. “It would be catastrophic to rural hospitals.”
The research found that the return of the sequestration could result in a loss of more than $228.5 million for rural hospitals by the end of the year. Most affected will be rural hospitals in Texas, California, Minnesota, North Carolina, and Wisconsin. The research found that the cuts could result in a loss of more than 4,600 jobs nationally, with the greatest losses in Texas, North Carolina, New York, Minnesota and Michigan.
Topchik said he hoped cooler heads would prevail and that the sequestration cuts would be waived temporarily, if not permanently, but that it would take an act of Congress to accomplish.
Adding to rural hospitals’ vulnerability, he said, is a nurse shortage. Already, rural hospitals have been forced to scale back services due to a lack of staffing. The study found that 62% of primary care facility Healthcare Professional Shortage Areas (HPSA) are in rural communities.
That lack of staffing forces rural hospitals to depend on traveling nurses, who make sometimes 10 times what a regular nurse would make.
The problem, Topchik said, was that rural hospitals can’t recruit and retain nurses to work there. With traveling nurses making as much as $120 an hour, it’s more appealing to some to work as a traveling nurse than as a regular paid staffer.
According to the study, prior to the pandemic, just over half of the rural hospitals surveyed said they rarely used traveling nurses, while a quarter said they never used traveling nurses. Now, as need and competition increase, hospitals said they are providing sign-on bonuses and financial incentives for employees – including moving wages up and offering as much as a $25,000 signing bonus.
But without bodies to fill those slots, the hospitals must rely on traveling nurses, the study found.
“Right now, the free market is making a run on nurses just like we had to run on toilet paper,” Topchik said. “Heretofore, local nurses were very happy to stay more local, to stay in their community and to stay at home. Now they’re traveling 30 miles, 50 miles or more because they are making significantly more money.”
Recently, U.S. Representative Peter Welch (D-Vermont) and H. Morgan Griffith (R-Virginia) sent a letter signed by nearly 200 members of Congress to the White House’s Covid-19 Response Team Coordinator Jeffrey Zients, asking the administration to look into price gouging by nurse staffing agencies.
These dual crises facing rural hospitals, Topchik said, probably will not result in any closures this year. But the outlook is bleak for 2023, he said.
“I would say the thing that I’m concerned about in my corner right now, is that as we get back to business as usual, we will start to see a return to that downward spiral of pressure in terms of revenues,” he said. “I do believe 2022 will be relatively calm …and I would expect that pressure to slowly start building back in 2023 as those relief valves are shut off and the pressure starts to build again.”