Studies by KHN, Navigant, and Others Report That Independent and Rural Hospitals Are Closing at Record Rates, Leaving Patients Without Critical Nearby Healthcare Services
Negative financials, low population growth, and excess inpatient capacity cited as reasons communities—especially rural areas—may lose their independent hospitals, including access to nearby clinical laboratory testing and anatomic pathology services
Could America’s independent rural hospitals actually disappear altogether? Metrics compiled by multiple healthcare monitoring organizations suggest that, with the increase in mergers and acquisitions of health networks, it’s a distinct possibility.
If so, what would happen to all the clinical laboratories affiliated with and servicing those hospitals? And how might hospital-based medical laboratories that are absorbed into larger healthcare networks be required to alter their workflows? For almost three decades, the clinical laboratory profession has seen similar hospital acquisitions lead to consolidation, standardization, and regionalization of the medical laboratories inside these hospitals. Often these organizational restructurings mean layoffs of lab managers and medical technologists.
Probably the more serious challenge is what will happen to all the rural patients who cannot get to larger health networks located in urban settings.
Hospital Closings Create Risks for Rural Communities
Experts say rural hospitals—especially providers serving small populations in southern and midwestern states—are in precarious positions going forward.
Kaiser Health News (KHN) reported in August that more than 100 rural hospitals closed since 2010, and these closures have serious implications for patients, such as a lengthy transport to another hospital’s emergency department.
430 Rural Hospitals Likely to Close!
Rural hospitals usually do not have many nearby competitors. So, what brings so many of them to the brink of closure? According to a Navigant (NYSE:NCI)) analysis of more than 2,000 rural hospitals, “21% are at high risk of closing based on their total operating margin, days cash-on-hand, and debt-to-capitalization ratio. This equates to 430 hospitals across 43 states that employ 150,000 people!”
Navigant identifies the following as factors in the decline of these struggling rural hospitals:
- “Low rural population growth;
- “Payer mix degradation;
- “Excess hospital capacity due to declining inpatient care; and
- “An inability for hospitals to leverage technology due to lack of capital.”
Also, a lack of Medicaid expansion has led to rural hospital closures as well, as Dark Daily reported earlier this year in “Rural, For-Profit Hospitals Closing at an Alarming Rate Putting Some Independent Clinical Laboratories and Pathology Groups at Risk,” February 8, 2019.
Navigant goes on to state, “Further review of the community essentiality (trauma status, service to vulnerable populations, geographic isolation, economic impact) of rural hospitals at high financial risk suggests 64% or 277 of these hospitals are considered highly essential to their community’s health and economic well-being. In 31 states, at least half of these financially distressed rural hospitals are considered essential.”
After reviewing the 2,000 rural hospitals Navigant’s analysts concluded that, unless trends reverse, one-in-five rural hospitals (21%) risk closing, a news release stated. And these hospitals are “essential” to the area’s residents.
“We show that two in three of these hospitals are considered highly essential to their communities: that’s 277 hospitals nationwide,” wrote David Mosley, Navigant’s Managing Director, in a STAT blog post. “Furthermore, if these hospitals close, already fragile rural economies will crumble while residents will be forced to travel long distances for emergency and inpatient care.”
Fierce Healthcare noted that “Of Montana’s 12 at-risk rural hospitals, all of them are considered essential to their communities. Kansas has 29 total at-risk rural hospitals with 25 of them—or 86%—considered essential to their communities. Georgia and Mississippi have seen 77% and 61% of their essential rural hospitals at financial risk, respectively.”
Navigant’s list of states with the highest percentage of rural hospitals at risk of closing includes:
- Alabama: 21 hospitals (50%)
- Mississippi: 31 hospitals (48%)
- Georgia: 26 hospitals (41%)
- Maine: eight hospitals (40%)
- Alaska: six hospitals (40%)
- Arkansas: 18 hospitals (37%)
- Oklahoma: 17 hospitals (29%)
- Kansas: 29 hospitals (29%)
- Michigan:18 hospitals (25%)
- Kentucky: 16 hospitals (25%)
- Minnesota: 19 hospitals (21%)
Comparing Independent Hospitals to Health Networks
But it’s not just rural independent hospitals that are struggling. Modern Healthcare Metrics reports that 53% of all stand-alone hospitals in the US have suffered operating losses during each of the last five years (2012 to 2017). Conversely, about half (26%) of health system-affiliated providers have lost money.
Statistics compiled by the American Hospital Association (AHA) show there are approximately 5,000 non-federal acute care community hospitals in the US. In 2017, about 75% of them were part of multi-hospital systems, an increase from 70.4% in 2012, Modern Healthcare Metrics data indicated.
Modern Healthcare reported that during the period 2012 to 2017:
- Average length of stay increased 6.4% at independent hospitals, while it decreased at health system hospitals by 23.5%;
- Occupancy rates fell to 43.6% from 53.9% at independent providers, compared to rates falling to 53.7% from 61% at system-owned hospitals;
- Independent hospitals seem to rely on patients having longer lengths of stay;
- Hospices and skilled nursing facilities compete with stand-alone hospitals.
Change is coming to parts of the nation that depend on independent hospitals, and it’s not good. Medical laboratory leaders are advised to prepare for serving patients who may lose access to nearby tests and diagnostic services. On a positive note, medical laboratories in independent hospitals that consolidate with healthcare systems could bring expertise, adding value to their new networks.
—Donna Marie Pocius