Research Update: Rural Hospital Closures Eclipse the Century Mark

by Michael Topchik
National Leader, The Chartis Center for Rural Health
March 19, 2019

Over the course of the last nine years, The Chartis Center for Rural Health has explored the stability of the rural health safety net. A key component of our research – whether through the lens of the Hospital Strength INDEX and the Rural Relevance Study, downward pressures on rural operating margins or declining access to OB services – has been the loss of rural hospitals across the nation.

On March 12, three rural providers announced plans to close their doors pushing the number of rural hospital closures since 2010 to 101¹. Less than a week later, the number now stands at 102². Despite a slowdown in the number of closures in 2017 (8), closures jumped 88 percent in 2018 when 15 hospitals closed. Thus far in 2019, there have been 5 closure announcements in 11 weeks³.

As our research has shown, there are a number of factors converging to place downward pressure on rural hospital operating margins. These factors include government policies such as Sequestration and Bad Debt, health disparities (rural populations are older, sicker and less affluent), low patient volumes, the shifting nature of patient care, population migration and staff recruitment and retention.

According to our research, the median rural hospital operating margin is 0.7 percent⁴. Today nearly half (47%) of all rural hospitals have a negative operating margin⁵. At a local level, the loss of a hospital has a significant impact on a community. Analysis of the 102 closures by The Chartis Center for Rural Health reveals a loss of ~10,000 hospital-related jobs and more than 3,000 additional jobs within the community⁶.

Longer Drive Times to Receive Care

In addition to the economic impact of the loss of a hospital, there is the impact on the ability of residents to receive care. In studying each of the 102 closures, our analysis reveals that citizens living in 41 communities must now drive up to 20 mins longer to receive care, another 47 communities face up drive times of up to 30 mins more and for those in 14 communities the drive to the nearest hospital is now an additional 30 or more mins⁷.

Closures State-by-State

Since 2010, the states with the most rural hospital closures are Texas (17), Tennessee (10) and Georgia (7)⁸. Three states – Alabama, North Carolina and Oklahoma – have lost six each and three states – Kansas, Mississippi and Missouri – have each lost five hospitals⁹. If we again look back to just the start of 2014, 14 of the 17 Texas closures, nine of the 10 Tennessee closures, and five of the six closures in North Carolina and Oklahoma have occurred within this period¹⁰.

If we apply the lens of Medicaid Expansion to rural provider performance, our analysis indicates that providers in expansion states – while not immune to the challenges outlined above – do perform better than counterparts in non-expansion states. In expansion states, the median rural hospital operating margin is 1.5 percent¹¹, while in non-expansion states the median operating margin is -0.2 percent¹². The percentage of rural hospitals in expansion states with a negative operating margin is 41 percent¹³, while in non-expansion states the figure is 51 percent¹⁴.

We also see disparity in performance between expansion and non-expansion states within the Hospital Strength INDEX benchmarks. Across the INDEX, rural providers in expansion states outperform peers in non-expansion states in categories such as Overall Strength, Inpatient Market Share, Outpatient Market Share, Cost, Charge and Financial Stability. Of the 102 rural hospital closures since 2010, 80 (or 80 percent) were located in non-expansion states¹⁵.

We will continue to monitor rural closures as the year progresses. Please don’t hesitate to reach out to me directly with any questions or comments at mtopchik@chartis.com or 207-518-6705.

Research Citations: [1,2,3] Sheps Center, University of North Carolina (data as of March 18, 2019), [4,5,6] The Chartis Center for Rural Health, 2019 [7] iVantage Health Analytics, [8,9,10,11,12,13,14,15] The Chartis Center for Rural Health, 2019.