Financial losses may force 600 US hospitals to shut down

More than 600 rural hospitals in the United States are either at immediate or high risk of closure as a result of persistent financial losses on patient services or low financial reserves, a study found.

Almost every state is home to hospitals with these characteristics, according to the report by the Center for Healthcare Quality and Payment Reform, based in Pittsburgh. In more than half of the states, 25% or more of the rural hospitals are at risk of closing, and in 12 states, 40% or more are at risk.

“Costs have been increasing significantly and payments, particularly from commercial insurance plans, have not increased correspondingly with that,” Harold Miller, president and CEO of the Center for Healthcare Quality and Payment Reform, told U.S. News. “And the small hospitals don’t have the kinds of financial reserves to be able to cover the losses.”

And in many cases, loss of the hospital would mean a loss of access to comprehensive medical care in the communities.

The study, released in January, identified 631 rural hospitals — more than 29 percent nationwide — that are either at immediate or high risk of closure.

Two hundred of those facilities are in the highest risk category, facing immediate shutdowns. These hospitals were already losing money on patient services before the Covid-19 pandemic and their losses are likely to increase due to higher costs, the report said.

Many of these hospitals have more debts than assets, or the hospitals’ net assets (including pandemic-related funding but excluding buildings and equipment) could offset their losses for at most two to three years.

Most of the at-risk hospitals are in isolated communities where closure of the hospital would mean the community residents would have to travel a long distance for emergency or inpatient care, the study said.

“In many of the smallest rural communities, the only thing there is the hospital,” Miller said. “The hospital is the only source. Not only is it the only emergency department and the only source of inpatient care, it’s the only source of laboratory services, the only place to get an X-ray or radiology. It may even be the only place where there is primary care.”

A lot of these small hospitals run health clinics.

“There literally wouldn’t be any physicians in the community at all if it wasn’t for the rural hospital running that rural health clinic,” Miller said. “So if the hospital closes, you’re literally eliminating all health care services in the community.”

Madera Community Hospital in Madera, California, is an example.

Financial records kept by the state show the hospital was unstable years prior to the pandemic. Its recent losses were tied to increases in day-to-day costs, which are difficult to cover for long periods, especially for hospitals with limited reserves, an analysis prepared by health economists for the attorney general said.

Labor and delivery services ended Dec. 28. The ER closed two days later. All other outpatient services and surgery closed by Jan. 3, and the rural clinics followed, KVPR reported.

This week the hospital filed for Chapter 11 bankruptcy protection.

Miller, in a recent interview with the online site healthleaders, said there needs to be a fundamental change in how hospitals are paid for.

“The problem that hospitals have faced though, is that they do two fundamentally different things — but they are only paid for one of them,” Miller said then. “Hospitals deliver services to patients when they are sick, and they are paid for that. But the other thing that hospitals do, which is essential for a community, is that they are available when somebody needs them — that standby capacity is critical for a community. But hospitals aren’t paid for that.” Cleveland