A Comparison of 2017-2019 Uncompensated Care of Rural and Urban Hospitals and a First Look at Uncompensated Care in 2020 and 2021

Lead researcher:
Project funded:
September 2022
Project completed:
March 2024

Rural residents are less likely than urban residents to have health insurance through their employer and more likely to be low-income and unable to afford coverage on their own. For hospitals that serve rural residents, this often means higher rates of uncompensated care compared to urban hospitals. This is a concern because uncompensated care may contribute to smaller operating margins and rural hospital closures. Currently, this concern is heightened because scheduled cuts to Medicaid Disproportionate Share Hospital (DSH) payments between 2024 and 2027 totaling $32 billion may disproportionately impact rural hospitals. These payments were included as part of the Patient Protection and Affordable Care Act to assist hospital uncompensated care burden.

The first purpose of this study was to better understand patterns of uncompensated care by extending the analysis of our previous study of geographic variation in uncompensated care between rural and urban hospitals by investigating the association of uncompensated care with:

  • Net patient revenue: Between 2015 and 2016, it increased for hospitals with less than $20 million in net patient revenue and decreased for hospitals with more than $20 million in net patient revenue.
  • System affiliation: Rural hospitals with a system affiliation and in financial distress face lower risk of closure.
  • Ownership: Non-profit hospitals report similar or less uncompensated care costs or community benefit compared to for-profit hospitals.

The second purpose of this study was to take a first look at 2020 and 2021 uncompensated care reported by rural and urban hospitals to identify potential data problems that could result in misleading results.

The overall study objective was to identify rural hospitals that experience the highest burden of uncompensated care and potentially those that may be more vulnerable to financial distress.

With higher rates of uncompensated care, small rural hospitals are at higher risk of unprofitability, financial distress, and closure. Understanding uncompensated care and how it is affected by size, system affiliation, and ownership will continue to be important for hospitals to stay in business and successfully meet the needs of their community. Knowledge from this study allows rural advocates to use this information when developing policy interventions and uncompensated care strategies.