Rural Hospitals with Long-Term Unprofitability

Date
04/2020
Description

To remain open, businesses generally need to be profitable. Hospitals are no different. Hospitals use profits to pay for new and upgraded buildings, equipment, technology, programs, and other patient care needs. To assess hospital profitability, we often look at total margin. Total margin measures the control of expenses relative to revenues and expresses the profit a hospital makes as a proportion of revenue brought in. The purpose of this study is to examine characteristics of rural hospitals that had a negative total margin in 2016, 2017, and 2018. We examined net patient revenue, Medicare payment classification, region, and state for rural hospitals that had negative total margins for three years in a row. We found 311 hospitals out of 2,453 rural hospitals had negative total margins in 2016, 2017, and 2018. Among these hospitals, the majority had $0‐25 million in net patient revenue; were Critical Access Hospitals (CAHs); and were in the South and Midwest census regions. In addition, the states with the greatest number of rural hospitals that had negative total margins in 2016, 2017, and 2018 were Kansas (39), Mississippi (22), Alabama (17), Oklahoma (17), and Texas (15). Rural hospitals with long-term unprofitability are at higher risk for financial distress and potential closure.

Center
North Carolina Rural Health Research and Policy Analysis Center, Rapid Response to Requests for Rural Data Analysis
Authors
Andrew Maxwell, H. Ann Howard, George Pink