Hospitals in rural America are in crisis. Even before the additional strains the COVID-19 pandemic has wrought across the healthcare industry, hospitals in rural areas of the U.S. were closing at alarming rates. More than 500 rural hospitals – more than one-fourth of the rural hospitals in the country – are at immediate risk of closure because of continuing financial losses and lack of financial reserves to sustain operations, according to a study from the Center for Healthcare Quality and Payment Reform (CHQPR).

Overall, rural residents face more significant barriers to healthcare than those in urban areas, most notably a lack of providers, increased risk factors, higher rates of underinsured and uninsured residents, older and sicker populations, and a lack of specialty services.

The American Hospital Association (AHA) published a report about the challenges of rural healthcare and said nearly 20 percent of Americans live in rural areas and depend on their hospitals as important – and often only – sources of care in their communities. Furthermore, rural hospitals struggle to address the persistent challenges of providing health care in rural America, such as low patient volumes and geographic isolation.

Rural hospitals are more likely to serve a population that relies on Medicare and Medicaid, but these programs reimburse less than the cost of providing care – in 2017, Medicare and Medicaid made up 56 percent of rural hospitals’ net revenue, according to the AHA.

What’s the solution?

Solving the multiple, nuanced challenges that face rural American hospitals will take a multi-pronged approach. Embracing innovation through decreased regulation would go a long way toward addressing the healthcare challenges facing rural populations.

There are 342 mandatory regulatory requirements that hospitals and health systems must follow, according to the AHA. Reducing the regulatory burden would help protect access to healthcare in rural areas and ensure equal access to healthcare for all Americans regardless of where they live.

Another innovation in health care payments would be establishing an emergency medical center designation under Medicare for rural hospitals, which the AHA says would “allow existing facilities to meet a community’s need for emergency and outpatient services without having to provide inpatient services. In addition to having emergency services provided 24 hours a day, 365 days a year, communities would have the flexibility to align additional outpatient and post-acute services with local needs, and receive enhanced reimbursement.”

Eligible rural hospitals that discontinue inpatient care could convert to the new designation and services could include 24/7 emergency services, ambulance and transportation to acute facilities, and skilled nursing and outpatient services.

Finally, funding is a persistent problem for rural healthcare centers as the financial model is unpredictable and lacks an adequate margin to maintain fiscal margins.

“Given the persistent, recent and emergent challenges faced by rural hospitals, it is increasingly difficult to cover the high fixed costs of operating a hospital and maintain access to services while also pursuing new pathways to improve quality and value,” the AHA says.