Rural hospitals' financial data show a significant advantage for them if their state has expanded its Medicaid program

Kaiser Family Foundation graph, adapted by The Rural Blog, based on KFF analysis of hospital data from 527 short-term general and/or critical access rural hospitals. Expansion status is as of July 2017 and excludes states that expanded Medicaid during the period, as well as Wisconsin (the only non-expansion state without a coverage gap), leaving 438 facilities. Margins reflect profit earned on patient care and other operations such as gift shops, parking, and cafeterias.

Just how big an advantage is Medicaid expansion for rural hospitals? It's significant, according to hospital finalcial data that the Kaiser Family Foundation compiled from Medicare cost reports.

"Median operating margins among the rural hospitals in our analysis increased earlier in the Covid-19 pandemic, likely as a result of government relief funds, but that these facilities face renewed financial challenges, especially in states that have not expanded Medicaid," Kaiser reports. "Among rural hospitals in non-expansion states, median operating margins were 2.1 percent during the July 2021-June 2022 period and were -0.7 percent when excluding documented relief funds. In Medicaid expansion states, median operating margins dropped, but remained positive even after excluding documented relief funds."

Now that the pandemic funds are going away, rural hospitals "face renewed financial challenges," Kaiser reports. "After increasing substantially earlier in pandemic, median operating margins among the rural hospitals in our analysis fell from 7.7% in July 2019-June 2022 to 3.3% in the July 2021-June 2022 period. When subtracting out relief funds documented in hospital cost reports, median operating margins were slightly lower than pre-pandemic levels during the July 2021-June 2022 period and would likely have been even lower if accounting for relief funds that were not specifically documented by hospitals. Industry reports suggest that the outlook for hospitals and health systems deteriorated in 2022, which is only partially reflected in our analysis of July 2021-June 2022 data. In this context, it is not clear whether hospital closures may reemerge as an issue facing rural communities. There were seven hospital closures in 2022, which was greater than the number in 2021 (two closures), but still less than the average number from 2005-2022 (10.3)."