Lifeline: The Crisis of Rural Healthcare

Post authored by: Ridwan Siddique and Alexander Papavassiliou (Limitless Foundation High School Research Fellows)

Cover Image: Photo by benjamin lehman on Unsplash

Long before the COVID-19 pandemic, a quiet crisis in health was unfolding in the vast reaches of American land. From 2007 to 2019, 6.3% of rural hospitals, 140 of 2,200 total hospitals, had closed down their doors due to financial hardships (Jiang). According to the Center for Healthcare Quality & Payment Reform, over 600 hospitals in rural America—or 30% of these hospitals—face an imminent risk of shutting down (Center for Healthcare Payment and Quality Reform).

Struggles with Patient Inflow

While their urban counterparts are able to maintain health operations, rural facilities constantly clash with financial troubles. Though the vast majority of the United States—97% —is classified as rural, only 1,800 remaining hospitals are designated to serve these communities (American Hospital Association). As such, these communities find themselves in a dire situation: a sparse population distributed across a wide area of America with a patient inflow too low to cover costs.

Moreover, widely dispersed areas of the United States often consist of older, lower income populations. Thus, the patients that find themselves in rural healthcare tend to be sicker and unable to pay enough to hospitals (American Hospital Association). This forces remote facilities to care for patients unable to afford treatment, making it difficult to help the most vulnerable populations.

Low Reimbursement

In the event that a patient even is insured, the payout still is too low for long-term sustainability. On the one hand, a recipient of care falls under a government plan. Be it Medicare or Medicaid, federally provided insurance fails to meet the baseline for breaking even, posing issues with the state-sponsored healthcare clients that comprise the largest share of rural patients (American Hospital Association).

On the other hand, privately insured patients leave smaller facilities even worse off. Commercial coverage is typically expected to be more generous than the public alternative, but rural hospitals are sometimes unable to see these benefits. For one, large private insurance companies are given free rein to negotiate payments with small facilities that lack the resources necessary to push for greater payments. As commercial plans are often aware of the financial limitations these centers face, they can subvert what they normally would have to give. Moreover, isolated communities find themselves at a disadvantage in insurance plans, as many of the providers / facilities near them can be out of network (American Hospital Association). As a result, private insurance plans pay out less to small medical institutions when compared to larger ones able to leverage higher prices. Simultaneously, smaller care centers face higher costs for serving each patient, intrinsic to establishments that serve less patients. Thus, the American Medical Association reports that commercial insurers pay out less than the cost of service to smaller rural hospitals while paying more than the cost of service to larger, urban counterparts (American Medical Association).

Scarce Talent

Along with profitability issues, remote areas of the US struggle with staffing medical institutions as well. Reimbursement to workers plays a major role in discouraging professions from choosing rural settings, but more forces are at play when it comes to finding healthcare professionals.

First, practitioners would be plunging themselves into extremely challenging work environments. Lacking staff and missing resources contribute to rural hospitals being constantly overburdened with patients. With sudden spikes in patient inflow, workers are sometimes forced to use outdated equipment to deal with anything from the common cold to chronic illnesses that require treatment which can’t be found for hundreds of miles.

At the same time, working at institutions without significant market share or bargaining power makes it impossible to negotiate adequate coverage and payouts for both patient and provider. This leaves medical professionals underpaid and overworked.

Location itself presents another issue. Rural communities don’t have access to the same types of infrastructure that metropolitan centers enjoy. High–speed internet, effective public transportation, high quality education, and more traditional facilities are frequently missing, disincentivizing workers from leaving more urbanized communities for under-developed areas.

Indeed, rural healthcare markets face chronic workforce shortages. Despite having one-fifth of the American population, rural areas make up a disproportionate 61% of federally designated healthcare professional shortage regions. Moreover, only 12% of physicians are located in these rural communities, which, compounded by ever decreasing job applicants, has left millions of Americans without doctors or nurses (Charalambous).

Pandemic Problems

While the rural healthcare landscape has faced dire straits for some time, the COVID-19 pandemic has presented a uniquely threatening environment. Fearing the spread of the coronavirus disease, rural settings saw patient inflow plummet during the outbreak. This exacerbated revenue shortages as hospitals were forced to stay up and running without any source of profit. Specifically, outpatient services—services that don’t require patients to stay overnight—took a massive hit, with large swathes of hospitals suspending these treatments to restrict the spread of COVID-19 to fellow patients and healthcare workers. Unfortunately, 77% of revenue for rural hospitals comes from outpatient services, with closures of outpatient services costing millions of dollars monthly (King).

Similarly, economic repercussions have taken their toll. Supply chain disruptions made it difficult to acquire necessary medicine and updated technology. As a result of delays, manufacturing quality issues, and scarcity of key production materials, essential pharmaceuticals to daily life were scarce on the market. Moreover, the rise in prices of medical technology, coming from a decline in the supply of technological components, strained the ability to disseminate effective, updated treatments. Alongside a surge in inflation, the cost of operating for rural hospitals has skyrocketed, leaving many communities without long-term viable care options.

Effects of Hospital Closure

The sparse dispersion of medical centers leaves rural residents a long drive away from access to key medical practices. For many, a communal hospital is the only medical center in reach at all, with one closure making healthcare next to inaccessible for entire locales. Beyond rural regions, these facilities share patients with neighboring areas, even municipal ones. Excess patient inflow and even general treatments that require different resources can be offloaded on rural hospitals, while shutting down overburdens urban medicine as well. Studies find that closures of a rural hospital raises mortality by nearly 9% for rural dwellers and nearly 8% for their urban counterparts (Gujral).

Beyond the livelihood of the people they serve, healthcare pumps the blood of local economies as well. Medical establishments provide millions of jobs nationwide and spur economic growth by improving the productivity of local businesses. Every dollar spent in healthcare returns over twice as much in business activity, especially in rural communities that rely more on hospitals in the absence of a large pool of labor opportunity (Bruce and Wolters).

The crisis of rural health isn’t a new one, but COVID-19 has made the modern healthcare landscape one of the worst ever for rural hospitals. One-fifth of the American population has been forced to contend with struggling medical facilities around them, and the future healthcare market is looking even more grim as we struggle to bounce back from the pandemic.

Sources

Jiang, H. Jianna et. al. “Risk of Closure Among Independent and Multihospital-Affiliated Rural Hospitals” JAMA Network, 1 July, 2022 https://jamanetwork.com/journals/jama-health-forum/fullarticle/2793908
“Rural Hospitals at Risk of Closing – CHQPR.” Center for Healthcare Quality and Payment Reform, Center for Healthcare Quality and Payment Reform, July 2023, ruralhospitals.chqpr.org/downloads/Rural_Hospitals_at_Risk_of_Closing.pdf.
“Fast Facts on U.S. Hospitals, 2023: AHA.” American Hospital Association, American Hospital Association, May 2023, www.aha.org/statistics/fast-facts-us-hospitals.
“Rural Hospital Closures Threaten Access – American Hospital Association.” American Hospital Association, American Hospital Association, Sept. 2022, www.aha.org/system/files/media/file/2022/09/rural-hospital-closures-threaten-access-report.pdf.
“Issue Brief: Payment & Delivery in Rural Hospitals | AMA.” American Medical Association, 2021, www.ama-assn.org/system/files/issue-brief-rural-hospital.pdf.
Charalambous, Peter. “Less Staff, Longer Delays and Fewer Options: Rural America Confronts a Health Care Crisis.” ABC News, ABC News Network, 18 Mar. 2023, abcnews.go.com/Health/staff-longer-delays-fewer-options-rural-america-confronts/story?id=97911613#:~:text=Rural%20areas%20comprise%20about%20two,likely%20to%20worsen%20over%20time.
King, Robert. “Nearly Half of Rural Hospitals Face Negative Operating Margins as COVID-19 Hits Outpatient Revenue.” Fierce Healthcare, 10 Feb. 2021, www.fiercehealthcare.com/hospitals/chartis-nearly-half-rural-hospitals-face-negative-operating-margins-as-covid-19-hits.
Gujral, Kritee. “Rural Hospital Closures Increase Mortality.” Centre for Economic Policy Research, 10 June 2020, cepr.org/voxeu/columns/rural-hospital-closures-increase-mortality.
Bruce, Carolyn, and Tim Wolters. “Rural Hospitals: The Beating Heart of a Local Economy.” National Rural Health Association, 18 June 2018, www.ruralhealth.us/blogs/ruralhealthvoices/july-2018/rural-hospitals-the-beating-heart-of-a-local-econ.