Why Rural Hospitals Close

To the editor:

Over the last 15 years, about 150 rural hospitals of the 1,500 in the U.S. closed. Since 2014, 16 rural hospitals in Texas closed (including St. Mark’s). When St. Mark’s closed in October 2023, the Board gave as reasons its inability to pay monthly payments of $160,000 on its $13 million mortgage “and other ongoing expenses.” (FCR 10-5-23). Each hospital is in a unique situation. Reasons for closures vary. It’s complicated.

Rural hospitals serve relatively small populations but their services are increasingly complex, technology-dependent and costly. They need personnel and equipment in place which will not be used often enough to generate the income needed to cover costs (South Dakota Searchlight News, 1-14-24).

The Texas Organization of Rural & Community Hospitals (TORCH) and the Texas Medical Association (TMA) cite low payments to providers due to cuts in Medicare by Congress and limitations on the state’s share of Medicaid payments by the Texas Legislature. Low payments cause doctors to stop treating patients covered by Medicare (for people over 65) and Medicaid (for low income people who are over 65, or are disabled or blind, or those who are low income and care for children). Medicare covers about 2 in 10 people in the U.S, as does Medicaid.

The Center for Healthcare Quality and Payment Reform in Pittsburgh told Fortune (111-24) that a major problem for rural hospitals is that private insurance companies pay the hospitals less than it costs to deliver services to patients. Medicare Advantage, a program under which Medicare pays private health insurance companies to provide coverage for seniors, is a part of this problem. Rural hospitals also must staff their emergency rooms with physicians 24/7 but get paid only if someone comes in. Costs for personnel and supplies have increased post-pandemic.

Each Rural Emergency Hospital (REH) receives $3.2 million per year and a 5% increase in Medicare payments from the federal government for certain outpatient services but are required to end inpatient services. This results in loss of income from Medicare for non-emergency illnesses / inpatient care. Expanding Medicaid eligibility by the Texas legislature (like 40 states have) would let more rural residents afford healthcare services and reduce losses for uninsured patient care.

TMA has reported that, compared to urban hospitals, rural hospitals serve a larger proportion of older, uninsured, and publicly insured patients. The U. S. Census Bureau data shows about 20% of Fayette County residents did not have health insurance in 2021. Texas has the highest rate of uninsured persons in the U.S. - 17% of Texans or 4.9 million people.

Medicare (enacted by Congress in 1965) covers anyone age 65 and older, no matter their income, medical history, or health status and now covers about 65.7 million Americans, including 4.5 million Texans. Of those Texas seniors, 55% get their Medicare benefits through a Medicare Advantage (MA) plan -- managed care plans run by big health insurance companies, like UnitedHealthcare and Humana. Axios reported in 2023 that about 31 million Americans were enrolled in MA plans.

Congress authorized MA plans in 2003 as a privatesector alternative to Medicare and to increase efficiency. The number of seniors in MA plans has increased each year because of lower premiums and co-pays of MA plans. They are often cheaper than a Medicare supplement insurance policy (also private insurance you can buy to pay out-of-pocket costs with Medicare).

Medicare pays providers more because its reimbursement is tied to actual cost of services. TORCH says that the federal government should apply Medicare’s rules to MA plans so that they pay hospitals 100% of allowable costs. There are nearly 4,000 different MA plans. Hospitals must contract with each MA plan separately. Rural hospital staffs spend large amounts of time dealing with different MA processes for claims submission and care authorization requests.

In October, 2023, NBC News reported that although MA plans are, by law, required to base reimbursements on Medicare rules, the U.S. Department of Health and Human Services found that MA plans use their own criteria to decide whether to pay for care, denied payment for 18% of claims that met Medicare coverage and billing rules and reimburse providers far less than traditional Medicare. (This is not true for all MA plans.) Cuero Regional Hospital told NBC that MA plans often deny care, overruling patients’doctors. Dr. Kenneth Williams, MD, Board Chairman of Progressive Health Group (which tried to buy St. Mark’s) has said that MA plans “are taking over Medicare and they are taking advantage of elderly patients.”

Big health insurance companies want to hold as much of the market as they can to ensure profitability. To keep premiums low (competitive and attractive), they cut payouts. Rural hospitals have greater difficulty with MA plan bureaucracy.

Texas still has about 147 rural hospitals. The Texas Legislature appropriated $25 million per year for rural hospitals beginning in 2023 – only about $170,000 each. Texas Farm Bureau notes that of the 38 Texas congressional districts, eight are considered “rural” districts, of the 31 Texas Senate districts, four are rural, and of the 150 Texas House districts, 30 are rural.

When St. Mark’s converted to a REH in February 2023 (ending inpatient services), it cut about 64 staff jobs. (FCR 10-6-23) Reasons given by St. Mark’s for conversion were: mortgage payments on the facility ($160,000/ mo.), increased labor costs for staff and contract labor, increased costs of supplies and medicine, “reduced patient volumes” when residents “bypass” local inpatient and surgical services (go to big cities) and “uncompensated care.” When it closed in October, the remaining 62 jobs were lost. A&M’s Rural and Community Health Institute estimates, on average, a rural hospital closure costs 170 jobs and an annual payroll of $22 million.

Without meaningful health insurance reform, adequate Medicare and Medicaid payments to providers, direct financial support from the local, state and federal levels, reduction of the number of uninsured persons, determination of actual health care needs of communities served and advocacy and involvement by local officials and citizens, rural hospitals will continue to struggle (and cut services), the availability and quality of health care for rural people will decline and local economies will suffer.

Russ Friemel Fort Worth and Ellinger