Analysis Shows One-in-Five U.S. Rural Hospitals at High Risk of Closing Unless Financial Situation Improves

Navigant study also suggests potential closures would have significant negative impact on community health and economic well-being.

CHICAGO – One-in-five U.S. rural hospitals are at a high risk of closing unless their financial situation improves, according to a new Navigant (NYSE: NCI) analysis of publicly available data. The study also shows that 64% of these at-risk rural hospitals are considered highly essential to the health and economic well-being of their communities.

The analysis, which examines the financial viability and community essentiality of more than 2,000 rural hospitals nationwide, suggests 21% are at high risk of closing based on their total operating margin, days cash on hand, and debt-to-capitalization ratio. This equates to 430 hospitals across 43 states that employ 150,000 people. 

Further review of the community essentiality (trauma status, service to vulnerable populations, geographic isolation, economic impact) of rural hospitals at high financial risk suggests 64% or 277 of these hospitals are considered highly essential to their community’s health and economic well-being. In 31 states, at least half of these financially distressed rural hospitals are considered essential.

Southern and Midwestern states, including Mississippi, Alabama, Kansas, Georgia, and Minnesota, are projected to be impacted the most, the data shows. Click here for detailed state-based data. 

“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.”

Legislative action, health system partnerships needed 
Multiple factors have contributed to this crisis, the study suggests. They include low rural population growth, payer mix degradation, excess hospital capacity due to declining inpatient care, and an inability for hospitals to leverage technology due to a lack of capital. 

Potential solutions presented by the authors include advancing legislation around telehealth reimbursement and such bills as the bipartisan Rural Emergency Acute Care Hospital (REACH) Act. Reintroduced in 2017 by Sens. Chuck Grassley, R-Iowa, Amy Klobuchar, D-Minn., and Cory Gardner, R-Colo., the REACH Act would create a new Medicare classification under which rural hospitals would offer emergency and outpatient services but no longer have inpatient beds. 

Rural hospital collaboration with academic and regional health systems offers another possible solution to the rural hospital crisis. Partnership areas include telehealth, revenue cycle, human capital, electronic health record use, physician training, and clinical optimization. 

“Ensuring rural access demands that we embrace collaboration and technology,” said Bruce Siegel MD, MPH, 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 Daniel DeBehnke, MD, MBA, a former academic health system CEO. 

About Navigant 
Navigant Consulting, Inc. (NYSE: NCI) is a specialized, global professional services firm that helps clients take control of their future. Navigant’s professionals apply deep industry knowledge, substantive technical expertise, and an enterprising approach to help clients build, manage, and/or protect their business interests. With a focus on markets and clients facing transformational change and significant regulatory or legal pressures, the firm primarily serves clients in the healthcare, energy, and financial services industries. Across a range of advisory, consulting, outsourcing, and technology/analytics services, Navigant’s practitioners bring sharp insight that pinpoints opportunities and delivers powerful results.

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