Topics
More on Operations

Rural hospitals owned by for-profit companies more likely to close, says Government Accountability Office

In all, 3 percent of all rural hospitals closed between 2013 and 2017, hurt by negative margins and cuts to Medicare reimbursement.

Jeff Lagasse, Associate Editor

WHAT HAPPENED

The past five years have been rough for rural hospitals. More than 60 of them have closed during that span, and a disproportionate number of them were owned by for-profit companies, according to a new report from the Government Accountability Office.

IMPACT

The closures also happened in disproportionate numbers in the South, and were more likely to occur among those that were given the Medicare-dependent hospital payment designation.

In all, 3 percent of all rural hospitals closed between 2013 and 2017. Almost all of them were in financial distress, but the GAO pointed to data showing investor-owned hospitals were more likely to respond to shrinking profit margins.

The hospitals that closed had negative margins that all but precluded any attempts to cover their fix costs, but those margins were just one of many factors that played into their closures. Medicare payment reductions and dwindling numbers of patients seeking inpatient care also played a part. States that expanded their Medicaid programs saw fewer closures overall.

Medicare reimbursements dipped 2 percent owing to across-the-board cuts under sequestration, and in 2013 the sector saw reductions in Medicare bad debt payments that only exacerbated hospitals' financial distress.

Strangely, a large number of the closures involved hospitals with 26 to 49 beds. Critical access hospitals with 25 beds or less comprise most rural hospitals, but they were less likely to close.

THE TREND

The GAO report sheds new light on an old problem. Healthcare services are more concentrated among major health systems and large providers.

In July, a study from Chartis Group and iVantage Health Analytics found that about 41 percent of rural hospitals faced negative operating margins in 2016, hurt by a high rate of uninsured patients, and a payer mix heavy on public insurers with lower claims reimbursement rates. 

More patients are seeking care outside of rural areas, which isn't helping, and many areas see a dearth of employer-sponsored health coverage, due to lower employment rates. Many markets are also besieged by a shortage of primary care providers, and tighter payer-negotiated reimbursement rates.

Two measures in the works that would help ease the financial pressure for rural hospitals are reimbursement for digital health and an expected rule on health information blocking that would help them more easily share data, according to information given during a recent Senate subcommittee hearing.

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com