Critical access hospital closures on the rise

Critical access hospitals aren’t faring well in the current healthcare environment with a rising rate of closures.

In a study published in Health Affairs, researchers examined more than 1,700 rural hospitals, of which 1,111 were critical access hospitals and 595 were other types of rural centers. Of the critical access hospitals, 54 percent were located in states that chose not to expand Medicaid, and of the other rural hospitals, 62 percent were located in nonexpansion states.

The coverage provisions in the Affordable Care Act were predicted to have relatively greater benefits for rural residents, who are more likely than urban residents to work for small businesses, earn lower wages and lack insurance, according to the authors Kristin L. Reiter of the University of North Carolina at Chapel Hill; Marissa Noles of Deloitte Consulting; and George H. Pink of the North Carolina Rural Health Research Center. "Yet we found that the decision of many states to not expand Medicaid could widen rural-urban coverage disparities and, in turn, threaten the financial viability of many rural hospitals.”

Operating margins at critical access hospitals in nonexpansion states were lower than those in states that have expanded Medicaid. In fact, critical access hospitals in nonexpansion states had negative operating margins on average, according to the report.

Hospitals in nonexpansion states are in more sparsely populated regions which translates to a smaller pool of patients to draw from, driving up per patient costs in nonexpansion state hospitals compared to expansion state hospitals.

After more than a decade of relative stability, the rate of closure for critical access and other rural hospitals is rising again. Between January 2010 and August 2015, 57 rural hospitals closed or converted to alternative provider types. “The rising rate of closures suggests that existing policy supports may no longer be sufficient to maintain the financial health of rural hospitals. Proposed cost cutting under health reform, combined with the lack of Medicaid expansion in some states, may pose a serious threat to financially vulnerable providers,” the authors concluded.