Many in the healthcare industry assume rural hospitals are inherently worse off financially than urban hospitals. It's easy to see why.
Rural hospitals often serve a sprawling and unique patient population. Some rural communities are seeing population declines, and patient volume drops along with it. Other areas, especially among farming communities, have largely uninsured or underinsured populations, and hospitals may struggle to collect for services rendered. Rural areas also tend to have a reputation of struggling economically compared to urban areas where higher income individuals traditionally have decided to live and work.
But a February Kaufman Hall report refutes the financial divide between rural and urban hospitals.
When comparing rural and urban hospitals as a collective, the firm found no statistically significant difference in average operating margin. Rural and urban hospitals on average have similar operating margins and financial performance. So why do we often associate more dire financial struggles with rural hospitals over urban ones?
Because the news is flush with rural hospital closures, service cuts and warnings about hospitals on the brink of collapse. And rightfully so. Kaufman Hall's data did show the bottom 20% of rural hospitals have "much lower" margins than the bottom performing urban hospitals over the last year.
"It is at this lowest level of rural hospital performance where the real damage is being done," noted report authors Kenneth Kaufman, chair and managing director, and Erik Swanson, senior vice president, of Kaufman Hall.
Overall, around 40% of hospitals lost money in the first two months of the year, according to the report, which was released before Change Healthcare's data breach affected claims processing. But there are also positive examples of rural hospitals making great financial improvements in the last 18 months.
Northern Inyo Healthcare District in Bishop, Calif., is one example. The system's board promoted Stephen DelRossi as interim, and then permanent, CEO and saw an immediate impact. Mr. DelRossi implemented a turnaround group with 25 members and subcommittees focused on labor, revenue, services and operations, materials and special items such as government funding and regulations. So far, the results are impressive:
- Hospital revenue spiked 14%
- Patient volume jumped 10%
- Operational expenses dropped 8%
- Contract labor dropped 20%+ full-time employees
- Targeted efforts cut costs by 8%
For the next year, Mr. DelRossi has his focus set on reimbursement trends.
"A hospital's lifeline is cash, and insurers are making reimbursements extremely difficult; lower reimbursements, higher denials, longer waits for reimbursements," he told Becker's. "I am bringing in experts to fully analyze denials and to appeal wrong decisions."
A March 22 Syntellis report found days cash on hand has dropped since 2022 by 25%, and health systems continue to struggle with financial uncertainties. Lower cash reserves across the board leave hospitals, both rural and urban, less prepared for emergencies and market changes.