GAO: These are the rural hospitals most likely to close

The Government Accountability Office's analysis showed rural hospital closures disproportionately occurred in the South and among for-profit hospitals. (Getty/OgnjenO)

More than 60 rural hospitals closed in the last five years—more than double the number of rural hospital closures that occurred in the prior five years, according to a new federal report.

Among hospitals most likely to close? An analysis (PDF) from the Government Accountability Office looking at the years between 2013 and 2017 shows rural hospital closures disproportionately occurred in the South and among for-profit hospitals.

The closures were also more likely to occur among hospitals that received the Medicare-dependent hospital payment designation, one of the special Medicare payment designations for rural hospitals.

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Although rural hospital closures are not a new phenomenon, the report says, the number of closures is a point of concern because it represents about 3% of all rural hospitals in that time period between 2013 and 2017. 

The report also found: 

  • They were generally not a total surprise. Rural hospitals that closed typically had negative margins that made it difficult to cover their fixed costs, the report said. 
  • Problems were generally compounded by another factor. The report said hospitals that closed had seen financial distress exacerbated in recent years by multiple factors, including the decrease in patients seeking inpatient care and across-the-board Medicare payment reductions. (The report found rural hospitals located in states that increased Medicaid eligibility and enrollment experienced fewer closures.)

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  • Size mattered. Rural hospitals with between 26 and 49 inpatient beds accounted for a disproportionate number of closures, while critical access hospitals with 25 acute inpatient beds or less and make up a majority of the rural hospitals, but were less likely than other rural hospitals to close. 
  • Cuts in Medicare funds were a factor. The report cited drops in Medicare reimbursements due to 2% across-the-board cuts under sequestration as well as reductions in Medicare bad debt payments beginning in fiscal year 2013.

Finally, the report found there was simply increased competition for a shrinking rural population, part of the reason for a drop in patients seeking inpatient care.

But they also pointed to new approaches in rural health care delivery and payment to value instead of volume under CMS’ Center for Medicare & Medicaid Innovation. That shift to outpatient care has begun affecting hospitals' bottom line, the report noted.

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