Rural hospitals on ‘life support’, more closures likely: Report

The American Hospital Association is urging lawmakers to support key programs that are set to expire at the end of the month. More than 130 hospitals have closed since 2010.

Some rural hospitals are going to close if key federal programs are allowed to expire.

That’s the message from the American Hospital Association. The AHA is pushing Medicare to continue funding two federal programs that direct $600 million to rural hospitals. Unless Congress intervenes, the programs are slated to end.

Since 2010, 136 rural hospitals have closed, according to an AHA report issued last week. The report cited data from the University of North Carolina.

Rural hospitals account for about 35% of all of America’s hospitals, and many of them are small but essential healthcare providers for their communities. About half of all rural hospitals have 25 beds or less.

“Without the appropriate support and evaluation of existing policies by the state and federal government, rural hospitals will continue to be on life support,” the AHA said in its report.

Hospitals around the country are facing serious financial difficulties, with many hospitals seeing steep losses, according to Kaufman Hall, a consulting firm. Rural hospitals have still faced a particularly tough road, even before the pandemic.

The AHA report cites daunting challenges for hospitals, including low patient volume that is common in rural areas and their heavy reliance on government aid. Medicare and Medicaid reimburse less than half the cost of providing services, the AHA report said. Since so many of their patients are covered by the government, rural hospitals can’t offset the shortfalls with more revenue from commercial insurers.

State and local governments operate 35% of America’s rural hospitals, compared to 13% of urban hospitals, the AHA report noted. Only one of 9 rural hospitals (11%) are owned by a for-profit operator (compared to 34% of urban hospitals.)

Federal COVID-19 aid has helped rural hospitals, and hospitals nationwide, to weather the challenges of the pandemic. Indeed, the AHA report noted only two rural hospitals closed in 2021. However, as that aid dries up, many rural providers are going to be struggling to survive. Hospitals have been urging Congress and President Biden’s administration to offer more financial support.

The hospital association projects some rural hospitals may not make it.

“Although rural hospitals have long faced circumstances that have challenged their survival, we will most likely see more rural hospital closures as they attempt to adapt to the unprecedented challenges brought on by the COVID-19 pandemic,” the AHA report said.

While virtually all hospitals report challenges with staffing, rural hospital leaders have had a particularly hard time. Only 10% of America’s doctors work in rural areas, even though 20% of Americans live in rural communities, the AHA report noted.

The clock is kicking for the two Medicare funding programs that are critical for rural hospitals.

Lawmakers in the House of Representatives have introduced a bill to extend the programs for five more years.

The bill would extend the Medicare-dependent Hospital (MDH) program for five years. The program offers more assistance to smaller hospitals with a large share of Medicare patients. There are more than 170 hospitals with this designation.

In addition, the bill would also continue Medicare’s Low-Volume Hospital (LVH) designation. As its name suggests, the designation offers assistance to rural hospitals with a relatively small portion of Medicare patients. This program supports more than 600 hospitals.

A similar bill has been introduced in the Senate, with one significant difference: it would preserve the programs permanently.

The Federation of American Hospitals is also urging Congress to reauthorize the Medicare programs. Chip Kahn, president and CEO of the Federation of American Hospitals (FAH), wrote a letter to congressional leaders to continue the funding.

“Rural hospitals traditionally serve patient populations that are older, lower income, uninsured and more likely to rely on Medicare and Medicaid when compared to the national average and to their urban counterparts,” the letter stated.

The Centers for Medicare & Medicaid Services have proposed a new designation for rural providers to help keep them afloat. Beginning next year, CMS is planning to create a new provider designation dubbed “Rural Emergency Hospitals” to help hospitals with emergency and outpatient services.