The portion of rural hospitals operating with negative margins has dipped slightly from last year, though the number of facilities most likely to close has also crept up, healthcare advisory services firm Chartis found.
The group’s latest report on the state of rural healthcare providers found that 46% of rural hospitals are operating at a loss while 432 hospitals are deemed to be “vulnerable to closure.” This comes as 18 rural hospitals either closed or shifted to an operating model excluding inpatient care, per cited data from the Sheps Center for Health Services Research.
For comparison, the 2024 edition of the same report outlined 50% of rural hospitals operating in the red and 418 hospitals at risk of closure.
The firm determines a hospital’s closure risk by gauging 10 factors that it said are statistically significant indicators for determining closure likelihood, such as case mix index, occupancy, percent changes in net patient revenue, years operating with a negative margin and state Medicare expansion status.
Nationwide median operating margin for rural hospitals currently sits at 1%, though Chartis noted that 16 states have medians below 0%. Among the most troubled are Connecticut (all three rural hospitals operating in the red), Kansas (87% with negative operations), Washington (75%), Oklahoma (70%) and Wyoming (70%), according to the report.
Chartis also outlined a divide between Medicaid expansion and non-expansion states. The former had median rural hospital operating margins of 1.5% with 43% operating at a loss. Those in the other 10 non-expansion state, which hold 30% of all rural hospitals, had 53% of rural hospitals in the red, with a median operating margin of -1.5%.
Rural hospital closures similarly threatened some states more than others, with Arkansas, Mississippi, Kansas and Tennessee highlighted as states with the highest portions of their facilities deemed vulnerable to closure.
“Hospitals that consistently fail to generate a positive operating margin will struggle to meet their vital mission as a safety net provider for vulnerable communities,” the group wrote in its report. “Rural patients that need care the most are likely served by hospitals that are shedding vital services or are vulnerable to closure altogether.”
These communities are already facing care challenges, Chartis wrote, as chronic disease and premature death are more frequent in rural communities.
Further, inpatient care access has ended across 182 rural communities since 2010, due to either closures or transitions to other models such as long-term care or Rural Emergency Hospital designations.
Between 2011 and 2023, 293 rural hospitals stopped offering obstetrics services—nearly a quarter of all rural OB units. A similar trend was evident in regard to chemotherapy, with Chartis finding from 2014 to 2023 that 424 rural hospitals ended the service, or 21% of all that offered it.
Chartis’ report went on to outline key hurdles for rural hospitals, such as a 2% Medicare reimbursement cut that “will cost rural hospitals more than $509 million this year and result in over 8,000 jobs lost.” It also reiterated past warnings of these hospitals’ shifting payer mix, as more and more patients enrolling in Medicare Advantage plans with higher administrative burdens and barriers to prompt payments.
“Creating greater stability in the rural health safety net not only requires alleviating some of the reimbursement pressure but also reversing the direction of detrimental population health trends,” Chartis wrote. The group lauded the positive impacts of the Rural Emergency Hospital designation, which it said has saved services in 32 rural communities, and long-term partnerships between individual hospitals and community organizations tackling population health needs.
Chartis’ dire national snapshot comes shortly after a Wipfli survey found sparks of optimism among rural healthcare organization leaders.
Nearly all respondents told the firm they were either cautiously optimistic (72%) or completely optimistic (24%) about their organization’s current financial viability. Kelly Arduino, a partner in Wipfli, noted that some of that optimism is likely a reaction to the tougher times rural providers faced during the preceding years and that some of their views may have already changed in light of recent weeks’ political developments.