Community Hospitals at Risk Due to ACA, Medicare Cuts

Since 2010, 82 community hospitals closed and dozens more are in distress with healthcare funding cuts. The Pennsylvania Rural Health Model provides a lifeline.


Under the Affordable Care Act (ACA), community hospitals in rural areas — particularly in states that did not expand Medicaid — have been hard pressed to stay afloat due in large part to the under-insured and elderly patients that utilize their services.

Through a study of community hospital closures conducted at the University of North Carolina at Chapel Hill, researchers were able to create a model to determine the financial stability of rural facilities. It found that nine percent of community hospitals across the country were at high risk of financial distress. Facilities in the south were disproportionately affected, with 16 percent at high risk of financial distress.

With dozens of hospitals closing their doors over the last seven years, and hundreds more in danger of following suit, the question is, what will happen to the patients those hospitals currently serve?

Budget, Program Cuts Whittle Away at Services

In New York, two programs aimed at subsidizing rural hospitals in the state expired at the end of September, and are in danger of not being renewed, according to Senate Majority Leader Chuck Schumer.

The Low-Volume Hospital and Medicare-Dependent Hospital programs provide millions in funds to rural facilities, and without those subsidies, services could suffer.

The hospitals in rural and small communities across New York that benefit from the Medicare-Dependent Hospital program and Medicare Low-Volume payments are vital to the well-being of their communities as providers of quality healthcare and the largest employers in their towns,” Bea Grause, president of the Healthcare Association of New York State, said.

Cuts to Medicare and Medicaid reimbursements have also contributed to the financial distress of community hospitals. In states that didn’t expand Medicaid under the ACA, rural areas have significantly higher numbers of uninsured citizens, leaving hospitals to treat patients who don’t have the ability to pay for services in full.

Under the Middle Class Tax Relief and Job Creation Act of 2012, hospital reimbursements for bad debt was reduced by 35 percent from 2012 to 2015, making rural facilities vulnerable to financial distress.

Rural Citizens Become Victims of Community Hospital Closures

Certainly the biggest casualty of the mass closing of community hospitals are the rural residents that are served by the facilities. Some patients may have to travel hundreds of miles to the next medical facility, leaving them vulnerable in emergency situations.

In addition, when community hospitals close, they take with them jobs and other specialities, as well.

When rural hospitals close, they almost always close for good,” Maggie Elehwany, vice president of government affairs for the National Rural Health Association, said. “And we’re really seeing some of these medical deserts forming because almost always the doctors are hospital based in rural hospitals, so if the hospital closes, the doctors leave, the nurses leave, the pharmacists leave. And that’s really, again, a death spiral for the rural community.”

For many areas, community hospitals are one of the largest employers in town, so closures affect not only the patients it once served, but the economy of the community itself.

Why Pennsylvania’s Community Hospitals Might Stay Open

Recognizing the importance of rural facilities, some states are looking for new ways to help keep the lights on and the doors open. In Pennsylvania, lawmakers are using $25 million in funding from the U.S. Centers for Medicare and Medicaid on new payment plan for rural hospitals.

Facilities that qualify will receive a monthly payment from the Pennsylvania Rural Health Model, instead of retroactively receiving funds for services rendered.

Today we reward rural hospitals for inpatient admissions, in a world where inpatient admissions are declining and hospitals are struggling to stay afloat,” Stephen Cha, a physician and director of the state innovations group at the federal Center for Medicare and Medicaid Innovation.

The plan will launch in 2018 with six hospitals, with plans to expand to 24 hospitals in the state within three years.

Andrea Fox is Editor of and Senior Editor at Lexipol. She is based in Massachusetts.

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