As more and more rural hospitals find their operations dropping into the red, the rising enrollment of rural residents in Medicare Advantage plans could pull these providers under, healthcare advisory services firm Chartis warned in a new report.
What's more, this trend could erode the rural health safety net if policymakers don’t take action, according to Chartis' analysis.
The group’s analysis found that half of the nation’s rural hospitals are losing money from their operations, up from 43% last year. The 50% total is the highest percentage of the past decade as well as the largest single-year jump, Chartis claims.
Rural hospitals in 19 states had a median operating margin in the red, with Kansas (89% of rural hospitals losing money), New York (83%) and Wyoming (83%) leading the way, according to the analysis (PDF).
Chartis noted that rural hospitals continue to fare worse in the 10 remaining Medicaid nonexpansion states, which together are home to more than 600 rural hospitals, and that any positive financial effects from government intervention programs launched during the pandemic “have all but disappeared.”
The group expects other government policies to weigh down rural hospital finances: Sequestration is expected to cost the hospitals more than $500 million this year, while cuts to bad debt reimbursement will trim $175 million in revenue, per the analysis.
All told, Chartis projects that 418 of the nation’s rural hospitals, or about a fifth, are vulnerable to closure and could contribute to the “rural care deserts” found throughout the country. The threatened facilities are prevalent across Florida (43% of rural hospitals considered vulnerable), Nebraska (41%), Tennessee (41%) and North Carolina (40%).
A major contributor to rural hospitals’ financial difficulties is the growing share of rural residents enrolled in Medicare Advantage plans, the group wrote. These plans often bring lower net reimbursement to Critical Access Hospitals, don’t cover all of the same services as traditional Medicare, bring new administrative hurdles and have different public data reporting practices that can make it harder for hospitals to characterize beneficiaries’ care needs.
The total number of rural community residents enrolled in Medicare Advantage rose from 6.3 million in 2019 to 9.2 million in 2023 and now comprise 38% of all Medicare-eligible patients living in rural communities, according to Chartis’ analysis. That share exceeds 50% in seven states, while 15 others have percentages between 40% and 49%, the group said.
As Medicare Advantage grows and potentially places more pressure on hospitals, Chartis said policymakers and rural healthcare advocates should be aware of “several key levers that may need to be considered.” These could include moves to ease administrative burdens, similar to the recently finalized Interoperability and Prior Authorization rule; to increase the availability and visibility of Medicare Advantage claims data; and to create greater alignment between traditional Medicare and Medicare Advantage, potentially around the handling of swing beds or clinical criteria.
“The fact that 50% of rural hospitals are operating in the red and nearly 420 are vulnerable to closure should serve as an urgent call to accelerate efforts at the state and national levels to reinforce the rural health safety net and ensure access to care for under-resourced and socioeconomically disadvantaged communities,” the group wrote in its report.