More than half of all rural hospitals in Mississippi, South Carolina, Georgia and Oklahoma lost money from 2011 through 2017.
In Kansas, the bloodletting was even more widespread.
Two out of three rural hospitals in the state operated in the red during the seven year period.
What these states also have in common is that legislators voted against expanding Medicaid under the Affordable Care Act, which would have provided coverage for hundreds of thousands of uninsured residents and bolstered rural hospital bottom lines.
Fiercely conservative and inherently distrustful of the federal government, state politicians balked at picking up 10 percent of the Medicaid expansion tab and repeatedly expressed fears that Washington bureaucrats would renege on generous Obamacare funding, leaving states to cover an ever increasing share of the healthcare burden.
That hasn’t happened yet.
In the meantime, residents of deep red rural America — farmers and farm workers, small business owners and their employees, the old and irfirmed — are seeing their hospitals founder and close.
“The irony to me,” said John Henderson, who heads The Texas Organization of Rural & Community Hospitals and supports Medicaid expansion, “is that we’re paying federal income taxes to expand coverage in other states. We’re exporting our coverage and leaving billions of dollars on the table.”
While experts agree embracing Obamacare is not a cure-all for rural hospitals and would not have saved many of those that closed, few believe it was wise to turn the money down.
The crisis facing rural America has been raging for decades and the carnage is not expected to end any time soon.
High rates of poverty in rural areas, combined with higher than average unemployment, aging populations, lack of health insurance and competition from other struggling institutions will make it difficult for some rural hospitals to survive regardless of what government policies are implemented.
For some, there’s no point in trying. They believe the widespread closures are the result of the free market economy doing its job and a continued shakeout would be helpful. But no rural community wants that shakeout to happen in its backyard.
“A hospital closure is a frightening thing for a small town,” said Patti Davis, president of the Oklahoma Hospital Association. “It places lives in jeopardy and has a domino effect on the community. Healthcare professionals leave, pharmacies can’t stay open, nursing homes have to close and residents are forced to rely on ambulances to take them to the next closest facility in their most vulnerable hours.”
Origins of the crisis
The nation’s current system of rural hospitals dates back to the 1940s and the belief that every town deserves a modern facility.
But with the rapid development of healthcare technology, the supply and demand for healthcare services shifted to urban areas.
“Most of what we knew how to do in the 1970s and 1980s could be done reasonably well in small towns,” said Dr. Nancy Dickey, president of the Rural and Community Health Institute at Texas A&M. “But scientific developments and advances in neurosurgery, microscopic surgery and the like required a great deal more technology and a bigger population to support the array of technology specialists.”
The number of services rural hospitals could provide consequently shrunk, and hospitals didn’t need as many beds, Dickey said. At the same time, rural populations began to decline as jobs dried up and younger folks moved away.
That left rural communities with older, poorer populations and a greater number of uninsured — financially challenging demographics that forced more than 180 rural hospitals to shut down in the 1990s alone.
Alarmed by the closures, politicians responded by passing legislation that included the creation of the Critical Access Hospital designation, ensuring that a select group of rural hospitals would have all of their costs covered for Medicare patients.
The new laws contributed to a significant drop in closures during the first decade of the 21st century. But when the Great Recession hit, many rural hospitals found themselves in another deep financial hole. Closures began rising again — a trend that has not relented despite the economic rebound.
“If you don’t take the expansion,” said Dickey, the Texas A&M professor, “it’s a challenge to make sure you have enough paying patients coming through the door.”
Lack of coherent policies
Looking at the data, it’s hard not to conclude that hospitals in non-expansion states are suffering far worse that those that embraced Obamacare.
They account for 77 of the 106 closures over the past decade. They also are home to a greater percentage of money losing facilities and lower profit margins.
But for most of these states, refusing Medicaid is not their only problem.
Most have higher poverty rates and more hospitals concentrated in adjacent geographical areas. Many also lack coherent statewide policies to address the crisis.
Texas, for instance, experienced 17 closures since 2010 — the most in the country, according to the Sheps Center for Health Services Research at the University of North Carolina in Chapel Hill. But practically all of them were located in the eastern and southeastern parts of the state.
These are small agricultural communities, explained Henderson, who heads The Texas Organization of Rural & Community Hospitals. The population is generally poorer and the hospitals are closer to each other.
By comparison, hospitals in West Texas are further apart. They have less competition, and they are often supported by property taxes connected to the oil and gas industry. When oil prices are up, hospitals in these communities have access to more resources, Henderson said.
Like Texas, the fate of rural hospitals in Kansas often depends on what local resources they have to draw on.
“Because many of our hospitals are affiliated with local governments, each locality might take a different approach,” said Kari Bruffett, the Kansas Health Institute’s vice president for policy.
It’s clear those approaches aren’t working.
Not only have five Kansas hospitals shut down since 2010, but seven more are counted among the 20 worst performing rural hospitals in the country. They include Kiowa County Memorial Hospital in Greensburg and Morton County Hospital in Elkhart, which both lost more than $17 million between 2011 and 2017.
For some academic researchers and politicians in conservative states, there are good reasons for the failure of rural hospitals and the free market should be left to decide the winners and losers.
Navigant, a Chicago-based healthcare consulting firm, recently published a report stating that 153 of the 430 unstable rural hospitals in the United States are “not essential.” If they went down, their communities would find other ways of meeting residents’ needs.
That conclusion is supported by a 2015 Harvard University study that looked at 195 hospital closures between 2003 and 2011 and found that, while patients had to travel further after a shutdown, death rates and other key indicators of quality healthcare did not worsen.
But George Pink, deputy director of the North Carolina Rural Health Research Program, isn’t convinced the free market is the best model for rural America.
“Healthcare has shown itself many times over to be a market that regularly fails,” Pink said. “If you think of a small, rural community, miles from anywhere else, you wouldn’t expect the market to jump in and provide solutions. Think about the high percentages of poor, chronically ill, elderly, and disabled in these towns. These are not people with a lot of political power.”.
Urban and rural working together
While hospitals in most states that declined to expand Medicaid are struggling, Utah provides a notable exception.
“Twenty years ago, we instituted a policy where we would take a little money from urban hospitals and give it to rural hospitals,” said Dave Gessel, executive vice president of the Utah Hospital Association. “That’s provided a base for all our hospitals.”
Utah also has a diversified and growing economy, a low poverty rate and a tradition of donating generously to charity, Gessel said, and rural hospitals have been successful in attracting experienced executives from bigger markets.
He added that the Mormon church provides a unifying influence.
“Rural Utah is pretty heavily Mormon,” Gessel said. “Because of those connections, those ties, local residents realized if they didn’t come together, things could get really bad.”
As a result, only three rural hospitals in Utah reported losses from 2011 through 2017, and collectively its 21 hospitals logged the highest profit margin in the country.
Pink, the professor at UNC’s Sheps Center, said several other states have taken novel approaches to addressing the crisis. Louisiana recently passed the Rural Hospital Preservation Act that supports rural hospitals with wrap around funding, and North Carolina is about to follow its lead.
“These are useful initiatives,” Pink said. “But I don’t know of any hospital that’s opposed to Medicaid expansion. It’s good from a financial standpoint. But more importantly, it provides access to healthcare for vulnerable people.”