beds

According to a report from Center for Healthcare Quality and Payment Reform, nearly 900 rural hospitals are at risk of closing.

In Tennessee, that means 26 hospitals — 55 percent of all rural hospitals in the state — could be on the verge of closing.

CHQPR President and CEO Harold Miller said the organization does not release the names of the specific hospitals, partly because the data is a year-and-a-half old when it comes out — though he said the number remains pretty consistent year to year.

To be considered at “immediate risk of closure,” the hospital must have a negative total margin over the most recent three years of financial data, and low-to-nonexistent financial reserves. For those at “high risk of closure,” financial reserves are only enough to sustain it for a few years, or there’s a high dependence on outside funding — funding that does not come from providing services to patients. In Tennessee, 21 facilities fall into the former category and five fall into the latter category.

Andrea Ewin Turner, a spokesperson for the Tennessee Hospital Association, said the organization does not completely agree with the findings.

"While we would agree that virtually all rural hospitals in Tennessee face financial challenges, THA would not consider all these hospitals at risk of closure in the foreseeable future," she said.

According to data from the University of North Carolina, Tennessee has seen 16 rural hospitals close since 2012, including four in 2020 alone.

In contrast to other states, Tennessee operators have relied more on private pay to make up for losses in Medicaid payments and from the uninsured to keep small rural hospitals running. CHQPR uses Alabama as an example for comparison.

“In Tennessee, the private health plans, by and large, are paying more than the hospital costs, and [the hospitals] are losing money more on Medicaid,” Miller said. “Whereas if you go to Alabama, it's exactly the opposite. Hospitals are losing money on their private insurance plan and actually doing OK on Medicaid because Medicaid rates vary state to state.”

That’s in part because Tennessee is one of the 12 states that have not expanded Medicaid under the Obama-era Affordable Care Act, Miller said. But there is also a lot of charity care and “bad debt,” meaning insured patients who still cannot afford the cost of services, or those who cannot afford insurance but do not qualify for charity care.  

Something that gets small rural hospitals into financial trouble is paying to staff the emergency department 24/7, regardless of whether there are any emergencies, CHQPR has found. They also buy expensive equipment that may not get regular use. The cost is there, but there are fewer patients to recover the cost from. Many rural hospitals also offer primary care, and primary care does not bring in as much money as surgeries or more specialized care.

“If you want good health care in a rural community, you want to have good primary care with primary care physicians and nurse practitioners there to take care of people,” Miller said. “You have to pay adequately for that. And then you still want to have an emergency department there to take care of people who do have emergencies, but you don't want the emergency department dependent on how many people come to stay afloat. We pay lots of money for orthopedic surgery in big hospitals; we don't pay enough for the services that patients need in a rural community.”

Turner from the THA ticked off several crucial problems that often follow rural hospital closures.

"Rural patients are often negatively affected when a hospital closes," she said. "They must drive farther for care, and accessing reliable transportation may be a challenge. Emergency medical services often become overburdened and wait times for emergency services frequently increase while successful outcomes for issues like heart attack and stroke decrease. Maternal and infant mortality may increase as labor and delivery services are further away and prenatal care is more difficult to access."