New AHA Report Shows Growing Pressure of Medicare Advantage on Rural Hospitals’ Ability to Care for Communities

Contact:      Sharon Cohen, scohen@aha.org
                   Colin Milligan, cmilligan@aha.org 

WASHINGTON (February 20, 2025) — The American Hospital Association (AHA) today released a report that found rural hospitals face mounting challenges related to certain Medicare Advantage (MA) insurance plans that are affecting patient care and their sustainability as a critical health care provider.

Over 100 rural hospitals have closed or converted to other provider types in the last decade, and according to Dobson DaVanzo & Associates, 429 rural hospitals are at a high financial risk. One of the emerging pressures has been increased enrollment in MA plans, many of which reimburse hospitals below cost, delay or deny crucial payments, and impose onerous and unnecessary administrative burdens that prevent or delay patients from receiving needed care or being discharged to appropriate post-acute care settings.

“With MA plans accounting for more than half of total Medicare enrollment and growing, it’s more important than ever that the program works for patients and the providers who care for them,” said AHA President and CEO Rick Pollack. “It is critical for policymakers to address the harmful impact of Medicare Advantage’s low reimbursements and excessive administrative burdens to help ensure rural hospitals can continue to provide care to their patients and communities.”

The AHA report, “The Growing Impact of Medicare Advantage on Rural Hospitals Across America,” found that the program impacts rural hospitals in three significant ways: reimbursement; access to care and quality; and administrative and care costs.

• MA plans reimburse rural providers on average 10% less than Traditional Medicare, relative to costs. Rural hospitals with special designations, such as Medicare Dependent Hospitals and Low-Volume Hospitals, receive 15% less. Even critical access hospitals (CAHs), which are reimbursed by Traditional Medicare based on the cost of care, received only 95% of Traditional Medicare rates from MA plans, according to industry benchmark data provided by Strata Decision Technology, LLC. This can result in effectively undermining the intent of the CAH program.
• MA patients stay nearly 10% longer in rural hospitals before discharge to medically necessary post-acute care settings compared to clinically similar Traditional Medicare patients because of policies or inadequate networks that delay discharge to appropriate settings of care.
• Nearly 4 in 5 rural clinicians report significant increases in administrative tasks, such as prior authorizations, over the past five years, with 86% reporting negative patient impacts. The 24% growth in MA prior authorization requests from 2019 to 2023 is delaying and in some cases denying patients the medically necessary, timely care their providers prescribed.

In response to the findings, the AHA report identifies six ways to improve MA: (1) streamline the prior authorization process, (2) require MA plans to offer cost-based reimbursement to critical access hospitals, (3) deliver prompt payment, (4) provide transparency in coverage denials, (5) improve data collection to ensure adequate oversight, and (6) ensure health plans have enough care providers participating in their networks to meet the needs of their communities. Read the full report on AHA’s website. 

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About the American Hospital Association (AHA)
The American Hospital Association (AHA) is a not-for-profit association of health care provider organizations and individuals that are committed to the health improvement of their communities. The AHA advocates on behalf of our nearly 5,000 member hospitals, health systems and other health care organizations, our clinician partners – including more than 270,000 affiliated physicians, 2 million nurses and other caregivers – and the 43,000 health care leaders who belong to our professional membership groups. Founded in 1898, the AHA provides insight and education for health care leaders and is a source of information on health care issues and trends. For more information, visit the AHA website at www.aha.org.