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COVID-19 and Rural Hospitals: The Perfect Storm

Updated: Sep 25, 2020

New York. Los Angeles. Chicago. Big cities and their hospitals have dominated the COVID-19 discussion; often undiscussed are rural hospitals, which have faced years of financial and political hardship even before the pandemic.

To better understand the unique struggles of rural healthcare, Paul Douglas Institute researchers sat down with Dr. Adrian Diaz, M.D., M.P.H., and IHPI National Clinician Scholar over Zoom to discuss the issues faced by rural hospitals and the communities they serve. Below, they have synthesized Dr. Diaz’s insight on how COVID-19 created the “perfect storm” for already struggling rural hospitals.


The State of Rural Hospitals Before COVID-19

The policy debate surrounding rural hospitals does not begin with the coronavirus pandemic. Long before the virus began wreaking havoc on the American healthcare system, rural hospitals were dealing with a slew of financial and political threats to their survival. A vast majority of hospital closures in the United States occur in rural areas: between 2010 and 2019, more than 100 rural hospitals had closed in the United States and another 430 were at serious risk of closing. The primary cause of these closures was the structural inability of rural hospitals to bolster their bottom line. Even before the pandemic, several factors contributed to this intense financial distress.

Most of these hospital closures are concentrated in the South and Midwest. Hospitals in the South have been particularly vulnerable to financial pressures. There are a few hypotheses as to why this is the case. Perhaps the most popular explanation that distinguishes financially-distressed rural hospitals is their state’s refusal to expand Medicaid. Rural hospitals in states that have expanded Medicaid, such as Virginia, Arkansas, and Louisiana, are at a financial advantage compared to hospitals in states that have chosen not to do so. This is because uninsured patients—who may have otherwise been on Medicaid—are less likely to seek costly elective procedures. Pre-planned elective procedures like cardiac operations and colonoscopies are usually covered by Medicaid, and make up a substantial portion of revenue for hospitals that primarily serve insured patients. If a rural hospital primarily cares for uninsured patients, which is more likely in a state with less Medicaid coverage, then they do not have access to this revenue.

This factor is compounded by the demographics of rural areas. Since 2010, according to the U.S. Department of Agriculture, the increase in rural population from natural change (270,000 more births than deaths) has not matched the decrease in population from net migration (462,000 more people moved out than moved in). This trend has significantly decreased the pool of patients rural hospitals service year after year, limiting their capacity to create enough revenue to meet their expenses. Communities around rural hospitals also tend to be older and proportionally request more care for chronic ailments, which do not reimburse as well as elective procedures and other acute events.

The type of patients received by a hospital, like insured or uninsured, is called payer mix. The payer mix of rural hospitals leans heavily towards less affluent, uninsured patients with chronic conditions—a combination that makes it extremely difficult for hospitals to cover their expenses, liabilities, and fixed costs. Ideal payers are affluent, insured, and have room in their budget for elective procedures that can boost hospital revenues. However, these ideal payers are concentrated in urban or suburban areas and are much more likely to go to well-serviced urban and academic hospitals. This trend in payer mixes increases the disparity between the financial conditions of hospitals in urban and rural areas.

As a result of rural hospitals struggling financially and closing down, less affluent, uninsured, older patients with chronic conditions have to travel absurd distances to the nearest urban hospital. This could be the difference between life-and-death in emergencies.

The Impact of COVID-19 on Rural Communities

“Most hospital closures have been occurring in rural areas around the country, and then when the pandemic started to evolve for a number of reasons we anticipated that rural hospitals were going to be hit particularly hard financially and were going to be at a greater risk of closing on top of the baseline risk that they were at.” - Adrian Diaz

COVID-19 has caused two waves of crisis for rural hospitals and populations, both of which stem from the financial issues that have hampered rural hospitals across the U.S. for the past few decades. The first wave consists of the foregone or canceled health procedures that would have taken place, had non-essential care in rural hospitals not been shut down due to the pandemic. The effects of this are two-fold. First, it could further deteriorate the health of rural communities and strain under-resourced health systems. Since rural populations tend to be older, less affluent, and suffer more from chronic and elusive health problems like addiction or mental health issues, postponing non-essential care could worsen patients’ health outcomes or compound stress on rural health systems in the future. For example, many patients who experience chest pain wait to go to the hospital until it is an emergency because of the travel time or out of fear of contracting COVID-19, despite their chest pain being a risk factor for heart issues in the future and hence important to proactively address. Due to COVID-19, many elective healthcare procedures—including life-saving surgeries—have been postponed or canceled, leading to patients disengaging from their local hospital systems. Hospitals now must re-engage patients to make sure their health issues do not become emergencies in the future and find ways to alleviate the local disease burden.

Cancelled and postponed procedures have added to the financial toll on rural hospitals. Many governors’ “stay-at-home” orders extended to the prohibition of elective procedures. Doing so has closed off a large pool of revenue that rural hospitals have typically accessed, leaving cash-strapped hospitals in even greater financial distress. However, none of this is to say that postponing and canceling nonessential health services was a mistake. Although it freed up crucial capacity for COVID-19 cases and mitigated the risk of COVID-19 spread in hospitals, it did exacerbate many of the financial and healthcare issues rural hospitals have been facing for years.

The second wave has been the strain that patients with COVID-19 put on these resource-strapped hospitals. The typical hospital in a rural community has 25-30 beds for a population of 15-20,000 people. 5 to 7 of these beds are intensive care unit beds, which would be used for COVID-19 patients to minimize their risk of exposure to other patients or staff in the hospital. The hospital may also have 1 to 2 ventilators. Generally, rural hospitals have persistent capacity issues as lots of their facilities are old, need maintenance, and require further investment to remain up-to-date. Many do not have state-of-the-art technologies, which makes dealing with complex or novel health issues—like COVID-19—all the more difficult. There is also somewhat of a knowledge gap between larger urban hospitals, where many doctors are dealing with COVID patients, and smaller rural hospitals, where doctors have had very little experience dealing with COVID cases. To invest in facilities that better serve patients, rural hospitals must take on a lot of debt. Given that many rural areas are also experiencing population decline and aging from younger people moving to urban areas with more job prospects and economic growth, the increasingly unfavorable payer mix of rural areas makes it much more difficult for these hospitals to repay their debt. The pandemic has emphasized how rural hospitals are already stretched for resources and capacity, which is only becoming a bigger issue as more rural areas and states begin to open up and their populations see spikes in COVID-19 cases.

To try and mitigate these issues, many rural hospitals have tried to use whatever excess capacity they have. They have tried to ramp up services and offload excess capacity—like unused beds or equipment—to neighboring hospitals as necessary. The reality, though, is that rural hospitals are being pushed to great lengths to try and revive any revenue streams for the year. Many hospitals that are independent (not within any common larger hospital system) are incentivized to keep as many patients as possible to maximize their revenue. This exacerbates the already-existing issue of resource availability in rural hospitals. If a rural hospital does not have the capacity to serve a patient due to a lack of resource availability, that patient must be transferred elsewhere to receive care. Doing so eliminates the revenue that would have been directed toward increasing capacity in the first place. It is a vicious cycle of financial distress and limited resources that causes a loss of future revenue streams, which would help resolve the original two issues. Both the actual impact of COVID-19, as well as the cancellation of elective procedures, have hit rural hospitals very hard financially and pose problems for the present as well as the future.

Planning Past COVID-19

The financial concerns of rural hospitals, which have been exacerbated but not caused by COVID-19, will certainly remain after COVID-19 has passed. Still, there are steps that can be taken to deal with these concerns. First, Medicaid should be expanded in states that previously refused to do so. Medicaid expansion would help state budgets, providers, and rural hospitals in the long-term as well by getting more federal funds to states and decreasing uncompensated care. Second, there are several smaller measures to aid rural hospitals financially such as earmarking federal relief funds for hospitals in rural areas. Funds designated for medical centers have generally gone to large urban hospitals or academic medical centers, likely due to their greater volume of patients, leaving few funds for rural hospitals. There should be a pool of funds accessible only to rural hospitals.

Hospitals must be prepared for the consequences of postponed procedures after the pandemic. Patients have postponed non-urgent procedures due to difficulty scheduling appointments and the perceived increased infection risk in hospitals. There are already studies suggesting this, showing a decrease in the hospitalization of heart attack patients, potentially due to patients’ fear of hospitals rather than changes in heart attack incidence, which is likely stable. When rural areas open back up and patients return to non-COVID care, they may find themselves waiting months for non-urgent procedures due to the inevitable backlog. When patients are eventually seen, their conditions will likely have advanced further than usual. For example, early-stage cancers that might have been caught with colonoscopies might instead require more invasive interventions. All hospitals, but especially rural hospitals, need to proactively re-engage patients who cancelled their screenings, such as colonoscopies or mammograms, in order to work to diagnose conditions as quickly as possible. Some health systems might be able to coordinate care and revenue by integrating multiple hospitals in different areas such that, if a patient gets care at any of those facilities, the revenue stays within the health system and can be distributed across hospitals. That way, hospitals can share patients and patients can be seen faster.

The mental health impacts of COVID-19, too, are likely to be disproportionately severe in rural areas. Much research has linked social isolation and loneliness to poor mental health, which is worrisome in light of quarantines. The negative mental health effects from isolation may be particularly worse among adolescents and seniors, as they already have a higher risk of depression or suicidal ideation. Additionally, the pandemic has dramatically increased unemployment, which is associated with “increased depression, anxiety, distress, and low self-esteem and may lead to higher rates of substance use disorder and suicide.” There is a very real risk of a mental health epidemic in America, which would likely hit rural regions the hardest due to the shortage of mental health professionals in rural areas. Rural hospitals must do everything they can to proactively identify and address mental health concerns and accompanying diseases of despair.

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