'Big Beautiful Bill' puts rural hospitals at even greater risk

Already on the brink of closure, the House-passed budget reconciliation bill could push more rural hospitals to shutter their doors.

New data from the Cecil G. Sheps Center for Health Services Research at the University of North Carolina at Chapel Hill shows that hundreds of hospitals located in rural areas would be at risk of closing under proposed Medicaid and Medicare cuts in the so-called "Big Beautiful Bill."

The data was compiled by the Sheps Center upon request from Senate Democrats who wrote to GOP leaders, including President Donald Trump, reporting the potential impact the bill would have on rural hospitals and patients.

In total, 338 hospitals are at risk of closing, converting or stopping some services based on financial data, including having three consecutive years of negative total margins, being in the top 10% Medicaid payer mix of rural hospitals across the country or both.

Additionally, 83 rural hospitals are the "highest relative risk of financial distress" based on the researchers' model that uses hospital financial performance, organization trains and market characteristics to predict financial distress in the future.

Rural hospitals in all states except New Jersey, Rhode Island, Vermont and Maryland are considered at risk financially, according to the data.

"Substantial cuts to Medicaid or Medicare payments could increase the number of unprofitable rural hospitals and elevate their risk of financial distress. In response, hospitals may be forced to reduce service lines, convert to a different type of health care facility, or close altogether," said Mark Holmes, PhD, director of the Sheps Center, and other researchers, told Senate Democrats.

The House-passed reconciliation bill would cut funding for Medicaid and the Affordable Care Act (ACA) by more than $1 trillion and trigger over $500 billion in Medicare cuts, Senate Democrats said.

"Enacting these drastic health care cuts that will kick millions of people off their health insurance coverage, rural hospitals will not get paid for the services they are required by law to provide to patients. In turn, rural hospitals will face deeper financial strain that could lead to negative health outcomes for the communities they serve," they wrote to GOP leaders.

The Congressional Budget Office recently reported that 16.0 million people would lose their health insurance as a result of ACA, Medicaid and Medicare cuts in the bill. Uncompensated care from uninsured patients would increase by $283 billion over the next decade as a result, according to new data from the Robert Wood Johnson Foundation and Urban Institute.

Rural hospitals could shutter their doors under higher levels of uncompensated care or limit services through a conversion to a Rural Emergency Hospital (REH). REH is a designation passed by Congress in 2020 that allows rural hospitals to provide only emergency outpatient hospital services in communities without a critical access hospital or small rural hospital.

According to Shep Center researchers, 40 hospitals have converted to REHs since January 2023, when the designation became effective.

Jacqueline LaPointe is a graduate of Brandeis University and King's College London. She has been writing about healthcare finance and revenue cycle management since 2016.