Operating in the Red: Half of Rural Hospitals Lose Money, as Many Cut Services

In a little more than two years as CEO of a small hospital in Wyoming, Dave Ryerse has witnessed firsthand the worsening financial problems eroding rural hospitals nationwide.

In 2022, Ryerse’s South Lincoln Medical Center was forced to shutter its operating room because it didn’t have the staff to run it 24 hours a day. Soon after, the obstetrics unit closed.

Ryerse said the publicly owned facility’s revenue from providing care has fallen short of operating expenses for at least the past eight years, driving tough decisions to cut services in hopes of keeping the facility open in Kemmerer, a town of about 2,400 in southwestern Wyoming.

South Lincoln’s financial woes aren’t unique, and the risk of hospital closures is an immediate threat to many small communities. “Those cities dry out,” Ryerse said. “There’s a huge sense of urgency to make sure that we can maintain and really eventually thrive in this area.”

A recently released report from the health analytics and consulting firm Chartis paints a clear picture of the grim reality Ryerse and other small-hospital managers face. In its financial analysis, the firm concluded that half of rural hospitals lost money in the past year, up from 43% the previous year. It also identified 418 rural hospitals across the U.S. that are “vulnerable to closure.”

Mark Holmes, director of the Cecil G. Sheps Center for Health Services Research at the University of North Carolina, said the report’s findings weren’t a surprise, since the financial nosedive it depicted has been a concern of researchers and rural health advocates for decades.

The report noted that small-town hospitals in states that expanded Medicaid eligibility have fared better financially than those in states that didn’t.

Leaders in Montana, whose population is nearly half rural, credit Medicaid expansion as the reason their hospitals have largely avoided the financial crisis depicted by the report despite escalating costs, workforce shortages, and growing administrative burden.

“Montana’s expansion of Medicaid coverage to low-income adults nearly 10 years ago has cut in half the percentage of Montanans without insurance, increased access to care and preserved services in rural communities, and reduced the burden of uncompensated care shouldered by hospitals by nearly 50%,” said Katy Mack, vice president of communications for the Montana Hospital Association.

Not one hospital has closed in the state since 2015, she added.

Hospitals elsewhere haven’t fared so well.

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