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The Simple Reason Why Rural Hospitals Close

Blog | 
Economics | 
System Dynamics | 

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 or listen to our April 2 4sight Friday Roundup podcast, “What To Do With Rural Healthcare.”

Thanks for reading.  

About the 4sight Health Author
David Burda News Editor & Columnist

Dave is 4sight Health’s biggest news junkie, resident journalist and healthcare historian. He began covering healthcare in 1983 and hasn’t stopped since. Dave writes his own column, “Burda on Health,” for us, contributes weekly blog posts, and manages our weekly e-newsletter and weekly podcast, 4sight Friday and 4sight Roundup. 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. Follow Burda on Twitter @DavidRBurda and on LinkedIn.