TrendWatch: The Opportunities and Challenges for Rural Hospitals

The Opportunities and Challenges for Rural Hospitals in an Era of Health Reform

Seventy-two million Americans live in rural areas¹ and depend upon the hospital serving their community as an important, and often only, source of care. The nation’s nearly 2,000 rural community hospitals² frequently serve as an anchor for their region’s health-related services, providing the structural and financial backbone for physician practice groups, health clinics and post-acute and long-term care services. In addition, these hospitals often provide essential, related services such as social work and other types of community outreach.³

Rural communities rely on their hospitals as critical components of the region’s economic and social fabric. These hospitals are typically the largest or second largest employer in the community, and often stand alone in their ability to offer highly-skilled jobs.⁴ For every job in a rural community, between 0.32 and 0.77 more jobs are created in the local economy, spurred by the spending of either hospitals or their employees.⁵ A strong health care network also adds to the attractiveness of a community as a place to settle, locate a business or retire.

Rural hospitals provide their patients with the highest quality of care while simultaneously tackling challenges due to their often remote geographic location, small size, limited workforce, and constrained financial resources. Rural hospitals’ low-patient volumes make it difficult for these organizations to manage the high fixed costs associated with operating a hospital. This in turn makes them particularly vulnerable to policy and market changes, and to Medicare and Medicaid payment cuts. The recent economic downturn put additional pressure on rural hospitals as they already operate with modest balance sheets and have more difficulty than larger organizations accessing capital to invest in modern equipment or renovate aged facilities. Compounding these challenges, rural Americans are more likely to be uninsured and to have lower incomes, and they are, on average, older and less healthy than Americans living in metropolitan areas.⁶

The Patient Protection and Affordable Care Act of 2010 (ACA) begins to address some of the urgent issues facing the nation’s health care system, such as lack of access to health insurance coverage, and includes provisions that recognize rural hospitals’ unique circumstances. However, limited financial and workforce resources present significant ACA implementation challenges for rural hospitals. As more rural Americans gain access to health coverage through Medicaid and the commercial markets, rural hospitals will experience greater patient demand that may strain already limited staff and capital resources. Furthermore, additional accommodations must be made so that rural hospitals can benefit fully from ACA programs, demonstrations and pilots.

1. U .S. Census Bureau. (2009). American Community Survey. Access at http://www.census.gov/acs/www/.

2. Avalere Health analysis of the American Hospital Association Annual Survey data, 2009, for community hospitals.

3. I bid.

4. Doeksen, G.A., and Schott, V. (2003). Economic Importance of the Health Care Sector in a Rural Economy. Rural and Remote Health, 3. Access at http://www.rrh.org.au.

5. O klahoma State Department of Health, Office of Rural Health. (2009). The Economic Impact of the Health Sector. Access at http://www.okruralhealthworks.org/ publications_results.asp.

6. Gamm, L.D., et al. (2010). Rural Healthy People 2010: A Companion Document to Healthy People 2010, Volume 1. College Station, TX: The Texas A&M University System Health Science Center, School of Rural Public Health, Southwest Rural Health Research Center.