States Work to Support Rural Hospitals Despite Pandemic Challenges

April 07, 2021|11:01 a.m.| ASTHO Staff

Since 2010, 180 rural hospitals have closed and an additional 25% of rural hospitals—a total of 354 facilities—are at high risk of closure. On top of that, 81% of those hospitals are considered essential to their communities—a designation made based on a hospital’s trauma center status, its service to vulnerable populations, its distance from other hospitals, and the economic impact it has on a region.

When rural hospitals close, it increases the distance people must travel for essential healthcare services. A study by the U.S. Government Accountability Office found that the median distance to access general inpatient services increased by 20.5 miles between 2012 and 2018. The COVID-19 pandemic has highlighted and magnified the factors leading to rural hospital closures across the country. Many healthcare facilities suspended elective procedures to conserve critically needed personal protective equipment and reduce the risk of exposure to COVID-19 by patients and hospital staff. For many rural hospitals, however, the suspension of elective procedures with the reduced the use of non-urgent services by apprehensive patients meant a loss of revenue and the furloughed healthcare staff. Since the onset of the COVID-19 pandemic, approximately half of all rural hospitals (46%) are experiencing negative operating margins due to reduced outpatient revenue. The rate increases to 50% in states that have not expanded Medicaid. Unfortunately, these kinds of challenges are not new to rural hospitals. States are using a variety of measures to address and prevent rural hospital closures, including:

  • Establishing and providing technical assistance to rural hospitals.
  • Expanding and revising payment and funding mechanisms.
  • Reducing regulatory barriers to access to care in rural areas.
  • Expanding the rural healthcare workforce.

Several states are initiating legislation to provide technical assistance to and conduct research on rural hospitals. A Kansas bill proposes the creation and funding of a rural hospital innovation grant program, designed to improve and increase access to healthcare services in eligible counties and provide assistance to maintain optimal health. This assistance includes conducting a market study of healthcare services needed and provided in the community; acquiring and implementing new technological tools and infrastructure such as telemedicine delivery methods; and acquiring personnel, including additional medical residents or other healthcare professionals.

States are also looking at alternative payment methodologies and funding opportunities for rural hospitals. Kentucky proposed legislation making donations to qualified rural hospitals by individuals and organizations eligible for an income tax credit, with the intent to create a revenue source for rural hospitals to assist with costs not covered by Medicaid. Proposed legislation in Oklahoma would create a revolving fund for rural hospitals designed to improve access to health care, and directs the state department of health to promulgate rules for implementation.

States are also attempting to improve access to healthcare services by reducing barriers for clinics that serve under-resourced rural populations. For example, Utah’s 2021 appropriations bill creates the Utah Education and Telehealth Network. One of their priorities is the exploration and encouragement of the development of telehealth services, with emphasis on assisting rural health care providers. An Arizona bill would allow hospitals with fewer than 50 beds in a county with less than 500,000 people would be permitted to operate a dispensing site pharmacy under the remote supervision of a pharmacist.

States are exploring legislation that would recruit and retain a rural health workforce. Hawaii is considering legislation that would provide loan repayment for medical professionals committed to working in underserved areas of the state. A proposed California bill would give medical professionals specializing in geriatric care access to existing state loan repayment programs. Maryland passed legislation requiring that the University of Maryland School of Medicine assign faculty who specialize in essential areas to provide clinical care in rural hospitals operated by the university medical system and appropriates funding for implementation.

Although states have initiated a variety of legislative responses to the issue, a wide range of factors contributing to rural hospital closures such as new technology, shifting demographic patterns, workforce shortages, a lowering of inpatient rates, and COVID-19’s magnification of these factors, points to the need for a multi-faceted approach to addressing rural hospital closures. In the meantime, ASTHO will continue to monitor state legislation and trends related to rural hospital closures.


Beth Giambrone, MPP, is the senior analyst of state health policy at ASTHO