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June 23, 2021
David Burda
Consumerism Economics System Dynamics
4-Minute 4sight Blogs Dispatches

The Simple Reason Why Rural Hospitals Close

It’s said that the simplest explanation often is the correct explanation. It’s usually the spouse. It’s probably indigestion. I’m sure they just forgot. 

When it comes to why rural hospitals close, people come up with all kinds of complex reasons and then all kinds of complex solutions to those reasons in the hopes of preventing future rural hospital closures.

The fact is rural hospitals close because they don’t treat enough patients to keep them open.

That simple and correct explanation is brought to you by the Medicare Payment Advisory Commission’s annual June report to Congress. You can download MedPAC’s 403-page report here.  

MedPAC devoted one chapter in the voluminous report to Medicare beneficiaries’ access to care in rural areas. One section in that one chapter detailed MedPAC’s investigation into why rural hospitals close.

For its investigation, MedPAC studied utilization trends at 40 rural hospitals that closed over a five-year period from 2015 through 2019. MedPAC also interviewed stakeholders in three rural communities that lost their hospital. Stakeholders included hospital executives, clinician leaders and community members.

In the 10 years preceding the closures of the 40 hospitals, the annual number of all-payer admissions at those hospitals dropped to a mean of 488 per hospital in 2014 from 1,045 in 2005. That’s a decline of 53 percent. That’s about 1.3 admissions by each hospital per day by the end of 2014.

The decline in admissions wasn’t caused by a decline in the population in those communities, according to MedPAC. Over the same 10-year period, the number of people in those the communities dropped by an average of just 1 percent. 

So, what happened? In two words, market competition.

“Most of this decline was attributable to patients bypassing their local hospital in favor of other hospitals,” MedPAC said.

In the interviews, the stakeholders told MedPAC that the residents in their communities preferred to go to bigger regional hospitals within an hour’s drive because, in the opinion of the residents, the hospitals though farther away provided better care. The nearest hospitals in those three communities were 25 to 35 miles away.   

Ultimately, rural hospitals close for the same reason businesses close, especially small businesses. They lose their customers. That makes sense to me as rural hospitals are businesses just like businesses in any other industry. 

It’s that simple.

If you’d like to learn more on this topic, please read “We Have an Immediate Opening for Someone Who Can Re-Invent Rural Healthcare on 4sighthealth.com or listen to our April 2 4sight Friday Roundup podcast, “What To Do With Rural Healthcare.”

Thanks for reading.  

About the Author

David Burda

David Burda began covering healthcare in 1983 and hasn’t stopped since. Dave writes this monthly column “Burda on Healthcare,” contributes weekly blog posts, manages our weekly newsletter 4sight Friday, and hosts our weekly Roundup podcast. Dave believes that healthcare is a business like any other business, and customers — patients — are king. If you do what’s right for patients, good business results will follow.

Dave’s personnel experiences with the healthcare system both as a patient and family caregiver have shaped his point of view. It’s also been shaped by covering the industry for 40 years as a reporter and editor. He worked at Modern Healthcare for 25 years, the last 11 as editor.

Prior to Modern Healthcare, he did stints at the American Medical Record Association (now AHIMA) and the American Hospital Association. After Modern Healthcare, he wrote a monthly column for Twin Cities Business explaining healthcare trends to a business audience, and he developed and executed content marketing plans for leading healthcare corporations as the editorial director for healthcare strategies at MSP Communications.

When he’s not reading and writing about healthcare, Dave spends his time riding the trails of DuPage County, IL, on his bike, tending his vegetable garden and daydreaming about being a lobster fisherman in Maine. He lives in Wheaton, IL, with his lovely wife of 40 years and his three children, none of whom want to be journalists or lobster fishermen.

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