By: Claudia Young, Associate Professor, Jack C. Massey College of Business
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Many local communities are concerned about the growing issues arising from rural hospital closures in Tennessee. Rural hospitals provide essential care to patients in remote areas, where access to other medical facilities is very limited. Still, many struggle to meet the demands of providing quality care to patients in remote, rural areas and remain financially stable. With 16 closures since 2005, Tennessee has experienced the second-highest number of closures in the nation, following only the state of Texas. Yet, from a per capita perspective, Tennessee has the absolute record, according to my research.
Why is this happening?
The primary reason for rural hospital closures is a lack of financial sustainability. Many hospitals struggle to stay afloat due to increasingly expensive operating costs and inadequate reimbursement rates. The cost of running a rural hospital often exceeds the revenue generated in the local community, resulting in a need for government subsidies or other forms of financial support. With decreased federal and state funding, these hospitals are often forced to cut services and operate with limited staff.
In addition to financial issues, rural hospitals also struggle with recruiting and retaining skilled medical personnel. In many cases, rural hospitals are unable to offer competitive salaries, benefits and opportunities for professional growth, making it difficult to attract and retain better qualified staff. Moreover, the shift of health care services to larger cities has decreased the demand for care in rural areas, further exacerbating the financial instability of rural hospitals.
What are the consequences?
Rural hospital closures in Tennessee have significantly impacted local communities’ health in terms of access to care, health care outcomes and the overall economic health of the community.
When local hospitals in rural areas close, many rural communities are left without access to vital medical services, including emergency rooms and other critical and specialized services, such as maternity and mental health care. Thus, many rural residents end up traveling long distances to receive care, while others may forego treatment altogether.
Without access to services, residents of these communities are at an increased risk for poor health outcomes, including a lack of preventive care, delays in diagnosis and treatment and higher mortality rates. Additionally, the closures put a strain on the state’s remaining rural hospitals, which often have to take on additional patients, not to mention the direct and indirect financial impacts to state Medicaid programs.
The closures have also been detrimental to the economic health of the communities they serve. A lack of access to medical care can lead to increased out-of-pocket medical expenses, as people must travel further beyond their community for care and may experience increased wait times. These closures can also lead to decreased business productivity, as employees are forced to take time off for medical appointments. Closures can result in the loss of jobs and decrease local businesses and tax revenue.
What has been done?
At the federal level, Medicare Special programs have been developed to preserve the financial viability of rural hospitals in several ways, including providing higher reimbursement rates than Medicare.
Although these programs have been valuable resources for rural providers, given the dramatic decrease in the number of rural hospitals nationwide, the benefits provided may not be sufficient to enable rural hospitals’ to remain open and serve their communities.
The state government has implemented a number of initiatives, including the 2018 Rural Hospital Transformation Program, which provides grants to rural hospitals for strategic planning and other consulting assistance. Additionally, the state has implemented several initiatives to increase access to telemedicine and the number of Medicaid providers in rural areas. During the pandemic, relief funds were also allocated for small and rural hospitals.
Despite these efforts, rural hospital closures in Tennessee remain a major issue, as many communities affected by these closures still struggle.
What else can we do?
Since the primary reason for rural hospital closures is financial sustainability, we must keep working on solutions that enable rural hospitals to maintain financial viability. It is essential to address rural hospitals’ profitability with policies that can reduce costs and increase revenues, while supporting programs and services needed in the community.
In terms of cost reduction, initiatives that increase hospitals’ efficiency and technological readiness help provide an advantage through the benefits of telehealth, and avoid costly unnecessary testing. Revising current reimbursement rates, especially from Medicare and Medicaid, also appear crucial to rural hospital revenues.
At the same time, as Tennessee continues to grapple with the effects of these closures, ensuring that the state’s rural communities have access to the care they need will continue to be essential to all Tennesseans.
For more information, contact Professor Claudia Young at claudia.young@belmont.edu.
Massey Graduate School of Business offers MBA, MAcc and MSAA programs to help students grow professionally and personally, connecting students to Nashville’s thriving business community. Small class sizes and student-faculty ratio allow students to develop their unique strengths, with faculty selected for both academic and industry accomplishments.
Claudia Young serves as Associate Professor at Jack C. Massey College of Business.
