Rural hospitals face danger as pandemic funding runs out; 1 in 5 are at significant risk of closure or service reduction

Federal pandemic aid drastically slowed the pace of rural hospital closures. (Bipartisan Policy Center graph)

Federal pandemic aid helped slow the pace of rural hospital closures, but that aid is drying up, and the hospitals are still dealing with pandemic-driven financial problems and staffing shortages, and one-fifth are at significant risk of closure or service reduction, the Bipartisan Policy Center reports.

A new BPC report offers insights on the state of rural health care through interviews with providers, national organizations, federal and state policy experts, and rural hospital leaders in Iowa, Minnesota, Montana, Nebraska, Nevada, North Dakota, South Dakota and Wyoming.

The report focuses mostly on strengthening health-care delivery through Medicare and Medicaid, since those programs play an outsized role in rural America. Here are some highlights from the report:

• About one-third of Americans are enrolled in Medicare.
• Nearly one-quarter of Americans under age 65 rely on Medicaid as their primary health insurer.
• Many rural stakeholders said that, once federal pandemic aid dries up, many rural hospitals will once again be at risk of closure unless additional action is taken to protect them.
• Hospitals experiencing persistent financial losses (negative total operating margins over three consecutive years) ranged from 6% in Nevada to a high of 38% in Wyoming.
• Out of 2,176 rural hospitals, 441 (one-fifth) face three or more concurrent signs of financial risk that put them in danger of service reduction or closure, and 909 (42%) face two or more signs of risk. The risk signs include negative total operating margin, negative operating margin on patient services alone, negative current net assets, and negative total net assets.

Based on its interviews, the Bipartisan Policy Center recommends several short-term policies to stabilize and strengthen access to rural hospitals and health clinics:

• Provide rural hospitals full relief from across-the-board Medicare spending reductions, known as sequestration, until two years after the federal public health emergency ends.
• Take rural facilities out of the ongoing 'extender' and 'needing to be renewed' budget cycle, including by permanently authorizing the Medicare Dependent Hospital program and making rural low-volume payment adjustments permanent.
• Update or rebase Sole Community Hospital and Medicare Dependent Hospital payment structures to ensure reimbursement is in line with current costs.

The report also has a raft of recommendations to improve workforce recruitment and retention, and improve access to specific services such as ambulance care, telehealth, behavioral health, and maternal care services. Read the report here.