HHS Administers Multiple Payment Policies and Programs That Support Rural Hospitals and Funds Research Centers to Monitor Closures and Access

		HHS Administers Payment Polices and Programs That Provide Financial Support to Rural Hospitals, Including Medicare Rural Hospital Payment Designations

HHS officials identified several rural-specific HHS payment policies and  programs as providing key financial support to rural hospitals, and in turn,  rural residents’ access to hospital services. CMS administers  five rural hospital payment designations, in which rural or isolated  hospitals that meet specified eligibility criteria receive higher  reimbursement for hospital services than they otherwise would have  received under Medicare’s standard payment methodology. HHS Funds Research Centers That Monitor Rural Hospital Closures and Study Access

HHS monitors rural hospitals’ financial viability and rural residents’ access  to hospital services, primarily by funding rural health research centers that  track rural hospital closures and study rural residents’ access to hospital  services. HHS Uses the Results of Its Monitoring Activities to Inform Future Research and Grant Awards, and Disseminates This Information

HHS uses the results of its monitoring activities on rural hospitals’  financial viability and rural residents’ access to inform related research,  primarily conducted by HHS-funded research centers, and to determine  future areas of research. Recent Increases in Rural Hospital Closures Have Disproportionately Occurred in the South, With Multiple Factors Likely Contributing to These Closures

		From 2013 through 2017, More than Twice as Many Rural Hospitals Closed than in the Prior 5 Years

Our analysis of data from the North Carolina rural health research center  and CMS shows that, from 2013 through 2017, 64 of the approximately  2400 rural hospitals in the United States closed. 1). More than the number of rural hospitals that opened. 2). Specifically,  Medicare Dependent Hospitals represented 9 percent of the rural  hospitals in 2013, but accounted for 25 percent of the rural hospital  closures from 2013 through 2017. 3). Fewer Patients Seeking Inpatient Care and Reductions in Medicare Payments Have Likely Contributed to Rural Hospital Closures

According to literature we reviewed and stakeholders we interviewed,  rural hospital closures were generally preceded and caused by financial  distress. In particular, rural hospitals that closed typically had negative  margins which made it difficult to cover their fixed costs. Another factor highlighted by literature we reviewed and stakeholders we  interviewed as contributing to rural hospitals’ increased financial distress  was across-the-board Medicare payment reductions. The literature we reviewed and stakeholders we interviewed also  identified factors that likely strengthened the financial viability of rural  hospitals. Chief among these factors was the increased Medicaid  eligibility and enrollment under the Patient Protection and Affordable Care  Act. Agency Comments

We provided a draft of this report to HHS for comment. The Department  provided technical comments, which we incorporated as appropriate. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report.
Why GAO Did This Study

Research has shown that hospital closures can affect rural residents' access to health care services and that certain rural residents—particularly those who are elderly and low income—may be especially affected by rural hospital closures.
This report describes (1) how HHS supports and monitors rural hospitals' financial viability and rural residents' access to hospital services and (2) the number and characteristics of rural hospitals that have closed in recent years and what is known about the factors that have contributed to those closures.
GAO reviewed documents and interviewed officials from HHS and HHS-funded research centers; analyzed data compiled by HHS and an HHS-funded research center, with a focus on 2013 through 2017—the most recent year with complete data; reviewed relevant literature; and interviewed experts and stakeholders. GAO identified hospitals as rural if they met the Federal Office of Rural Health Policy's definition of rural.
GAO provided a draft of this report to HHS for comment. The Department provided technical comments, which GAO incorporated as appropriate.

What GAO Found

The Department of Health and Human Services (HHS) administers multiple payment policies and programs that provide financial support for rural hospitals and funds research centers to monitor closures and study access. Among the payment policies administered by HHS are special payment designations for rural hospitals in which rural hospitals that meet certain criteria receive higher reimbursements for hospital services than they otherwise would receive under Medicare's standard payment methodology. HHS-funded research centers monitor rural hospitals' profitability and other financial indicators, and study access to facilities and specific services. HHS uses the results of monitoring activities to inform future areas of research and disseminate information.
GAO's analysis of data from HHS and an HHS-funded research center shows that 64 rural hospitals closed from 2013 through 2017. This represents approximately 3 percent of all the rural hospitals in 2013 and more than twice the number of closures of the prior 5-year period. GAO's analysis further shows that rural hospital closures disproportionately occurred in the South, among for-profit hospitals, and among hospitals that received the Medicare Dependent Hospital payment designation, one of the special Medicare payment designations for rural hospitals.
According to literature GAO reviewed and stakeholders GAO interviewed, rural hospital closures were generally preceded and caused by financial distress. In particular, rural hospitals that closed typically had negative margins that made it difficult to cover their fixed costs. According to these sources, financial distress has been exacerbated in recent years by multiple factors, including the decrease in patients seeking inpatient care and across-the-board Medicare payment reductions. In contrast, according to the literature GAO reviewed and stakeholders GAO interviewed, rural hospitals located in states that increased Medicaid eligibility and enrollment experienced fewer closures.