1 in 5 Rural Hospitals is at Risk of Closing, New Navigant Analysis Says

Dr. Daniel DeBehnke and Dave Mosley, Healthcare Finance

According to a new analysis of public data from Navigant, 1 in 5 rural hospitals in the United States are at a high risk of closing unless their financial situation improves. What makes the situation even more urgent is that their study shows 64 percent of these hospitals are considered "highly essential to the health and economic well-being of their communities."

The analysis look at the financial viability and community essentiality of more than 2,000 rural hospitals nationwide. There are multiple drivers for this concerning trend including low rural population growth, payer mix degradation, empty beds thanks to declining inpatient care, and an inability for hospitals to leverage technology because they can't afford to acquire the tech, the study said.

The Impact

Navigant said 21 percent are at high risk of closing based on their total operating margin, days cash on hand, and debt-to-capitalization ratio. That percentage boils down to 430 hospitals across 43 states and 150,000 employees that would lose their jobs if all these hospitals closed their doors.

Southern and Midwestern states, including Mississippi, Alabama, Kansas, Georgia, and Minnesota, would be impacted the most, the data showed.

The Trend

According to the GAO, from 2013 to 2017, 64 rural hospitals closed which more than doubles the figure from the previous five-year period. That means that more than 100 rural hospitals have closed over the last decade, creating care access challenges and potentially risking patient harm and outcomes.

The South's rural for-profit hospitals were disproportionately affected as well as Medicare Dependent Hospitals, which are small rural hospitals with Medicare beneficiaries accounting for a certain percentage of their business, the GAO said.

Advancing legislation around telehealth reimbursement as well as rural hospitals partnering with academic and regional health systems are solutions that could help keep doors open. Areas where partnerships are plausible include telehealth, revenue cycle, human capital, electronic health record use, physician training, and clinical optimization, Navigant said.

On the Record

"Ensuring rural access demands that we embrace collaboration and technology," said Dr. Bruce Siegel, CEO of America's Essential Hospitals. "Telehealth and partnerships between rural hospitals and tertiary centers will be key to ensuring the right care is delivered at the right time."

"Collaborating with academic and large health systems allows rural hospitals to leverage the resources of these better funded peers and develop a hub and spoke network of clinical care that augments rural services," said Navigant Managing Director and co-author Dr. Daniel DeBehnke, a former academic health system CEO.

"Our analysis shines a new light on a rural hospital crisis that must be addressed and could significantly worsen with any downturn in the economy," said co-author David Mosley, managing director at Navigant. "Local, state, and federal politicians, as well as health system administrators, need to act."

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