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Rural Hospitals Struggling to Stay Open

New Realities Causing Bankruptcies and Closures

Hospitals located in rural areas throughout the nation are finding it harder than ever to keep themselves open and in financially healthy situations.

Lynn Butler, a lawyer based out of Austin, Texas who has worked on hospital bankruptcy cases, commented on trends in healthcare in remote parts of the country. She said the situation in the near future didn’t look hopeful.

“We’ve all seen the crash that’s coming in the next five years,” said Butler.

Legislators Don’t Want to Pay for Rural Hospitals

Rural areas in general have been seeing a slow mass migration to big cities. With dwindling populations, hospitals are struggling to keep their doors open due to lack of revenue from the decreased volume of patients.  This makes them even less attractive locations to receive
government spending.

“State Legislatures are more interested in cutting revenue and cutting services than providing the basic services for these rural communities,” noted Butler.  “This is a perfect storm of events that’s going to hit states hard.”

At a certain point, any given county’s local hospital could declare bankruptcy protection or even close its doors if it’s not receiving enough money to stay out of debt.

Smaller Hospitals Can’t Handle Uninsured Patients

There’s an additional problem that rural hospitals are facing in their battle to avoid bankruptcy and closure. This is the phenomenon of patient overflow from a recently bankrupt or closed hospital in a neighboring town or county. With many of these patients being uninsured, the proportion of patients who help to bring in a profit for the hospital is lowered. This hit to hospital revenue is sometimes fatal, and can cause the hospital in question to file for bankruptcy or close. There have already been several hospital bankruptcies in 2015.

“Hospital operating margins are very small, if not negative,” said John Henderson, chief executive of the Childress Regional Medical Center in Childress, Texas.  “This is probably true of both the big guys and the small guys.”

Additionally, hospitals have to deal with patient bankruptcies even among those who are insured. This takes its toll on hospital revenues.

Hospital Closures Have Dangerous Results

With the closing of rural hospitals in any given area throughout the country, the county and its populace are put in the dangerous situation of being isolated and sometimes 60-90 miles away from the closest medical center.

This has already lead to several deaths, especially among the elderly. As rural hospitals continue to file for bankruptcy or close, the situation could worsen.

Federal Spending Cuts Hurting Hospitals

One cause upon which many rural hospital administrators agree, are complications under the Affordable Care Act, otherwise known as
Obamacare.  One of the healthcare laws enacted was an agreement between hospitals and the government in which hospitals would agree to
take cuts in Medicare payments, while having to spend less on charity care patients in exchange.  Many hospital officials feel they’re getting the worse end of the deal.  This is especially so of those rural hospitals located in areas where there are many low income or uninsured patients.

Though some legislators have suggested to raise taxes to help maintain their local hospital’s finances, many of these small rural towns contain residents who can’t afford a proposed tax hike.