Trends in Risk of Financial Distress Among Rural Hospitals


From January 2005 to July 2016, 118 rural hospitals have closed permanently, not including seven others that closed and subsequently reopened. The number of closures has increased each year since 2010, and in the first half of 2016, the closure rate surpassed two closures per month. Hospital closures impact millions of rural residents in communities that are typically older, more dependent on public insurance programs, and in worse health than residents in urban communities. Identifying hospitals at high risk of closure and assessing the trends over time may inform strategies to prevent or mitigate the effects of closures.

In a previous Findings Brief the NC Rural Health Research Program described the Financial Distress Index (FDI) model, which assigns hospitals to high, mid-high, mid-low or low risk levels for 2016 using 2014 Medicare cost report and Neilsen-Claritas data summed to market areas. We also showed the probability of closure and reduction of services is significantly greater for rural hospitals at high risk of financial distress. Using data from 2011-2014, this brief, Trends in Risk of Financial Distress among Rural Hospitals, updates and describes the distribution and trends in the risk of financial distress among rural hospitals for the 2013-2016 period by state and census region.

The proportion of hospitals at high risk of financial distress varies greatly by state, with the highest rates observed in Alabama, Hawaii, and Tennessee where one in four hospitals is at increased risk of closure. The risk distribution also varies by census region and CMS payment type, with the South and Northeast census regions having the greatest proportion of hospitals at high risk. Nationally, the proportion of hospitals at high risk of financial distress has been increasing over the last two years, which suggests that the current trend of increasing rural hospital closures is likely to continue. The proportion of MDH hospitals at high risk of financial distress has increased by more than 50% since 2013. Because MDH hospitals are more reliant on Medicare revenue, recent Medicare reimbursement policies may have had a larger impact on these hospitals than other payment types.

North Carolina Rural Health Research and Policy Analysis Center
Brystana Kaufman, Randy Randolph, George Pink, Mark Holmes