Rural Hospitals:

Federal Efforts Should Target Areas Where Closures Would Threaten Access to Care

HRD-91-41: Published: Feb 15, 1991. Publicly Released: Feb 15, 1991.

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Pursuant to a congressional request, GAO examined the causes and consequences of rural hospital closures, focusing on the: (1) major factors associated with a higher risk of closure; (2) impact of hospital closure on rural communities and health care costs; and (3) role of Medicare in closures.

GAO found that: (1) between 1980 and 1988, 408 community hospitals closed in the United States; (2) between 1985 and 1988, the closure rate for rural hospitals was 29 percent higher than that for urban hospitals; (3) about one-third of the rural closures between 1980 and 1988 occurred in the southwest central region, with the largest number occurring in Texas; (4) both rural and urban hospitals that closed had substantial and increasing financial losses on patient care during the 3 years before closure; (5) a combination of such hospital characteristics as small size and low occupancy rate and such environmental characteristics as a weak economy and competition from other hospitals was associated with a higher closure risk; (6) physician recruitment and retention problems, failed management strategies, and uncompensated care were other important factors that contributed to financial distress and closure; (7) low Medicare payments did not increase closure risk for most rural and urban hospitals; (8) most rural hospital closures did not significantly reduce access to inpatient care, but some closures adversely affected access to care for vulnerable populations; (9) rural hospital closures did not significantly affect local economies, primarily due to the hospitals' small size and minimal monetary effects; and (10) despite federal initiatives to provide some relief for rural hospitals, generalized solutions may not adequately address the major problems facing individual hospitals.

Matters for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: No congressional action is anticipated.

    Matter: To assist rural communities in maintaining access to essential hospital services in an efficient and effective manner, Congress should consider making any future transition grant funding for this purpose available contingent upon a determination that: (1) the hospital is providing inpatient or emergency services essential for the community as a whole or for vulnerable populations; (2) the continued provision of essential services is threatened by the hospital's financial problems; and (3) the total amount of funding, including proposed federal and other funding sources, would be sufficient to give the hospital a reasonable chance for survival.

  2. Status: Closed - Not Implemented

    Comments: Congress has taken no action on this recommendation. The rural hospital issue has been subsumed in a broader debate on health care reform. It is unlikely that the rural issues will be dealt with separately.

    Matter: To assist rural communities in maintaining access to essential hospital services in an effective and efficient manner, Congress should consider making any future transition grant funding for this purpose available contingent upon a determination that where continued provision of essential services is threatened, but the hospital is not a viable entity, Congress should consider making any future transition grant funding available to state or local governments to support other initiatives to strengthen access to inpatient or emergency health care (for example, by improving transportation systems or training emergency personnel).

Recommendation for Executive Action

  1. Status: Closed - Not Implemented

    Comments: ORHP does not have the resources to do primary research from which to develop guidelines. It will be conducting a literature review of key indicators to share with state offices of rural health policy. It does not intend to proceed further at this time.

    Recommendation: To identify areas threatened with loss of access to essential hospital services, when hospital closure might still be avoided, the Secretary of Health and Human Services should direct the Office of Rural Health Policy (ORHP) to develop guidelines for states to identify and monitor rural areas in which hospitals are at a risk of closure and vulnerable populations, such as low-income residents, or the community as a whole would face substantial problems in obtaining essential inpatient or emergency care if the hospital closed.

    Agency Affected: Department of Health and Human Services

 

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