A July 21 Center for Healthcare Quality and Payment Reform analysis found 700 rural hospitals are at risk of closing across the U.S. In almost every state, at least some rural hospitals are at risk of closing, with the exception of four.
The report did not classify a single rural hospital in Delaware, Maryland, New Jersey or Utah as “at risk of closing” or “at immediate risk.”
Becker’s connected with hospital association and state agency leaders in each of those states to discuss what they credit for this stability. Their responses point to geography, a mix of specific state payment policy and long-standing regional partnerships.
Editor’s note: Responses have been lightly edited for clarity and length.
Delaware
Brian Frazee, President and CEO of the Delaware Healthcare Association: Delaware is a small state, which gives us a lot of opportunity to partner and collaborate. There is statewide collaboration, coordinated healthcare planning, workforce initiatives and strong partnerships among hospitals, policymakers and community organizations. Cross-state coordination has also helped leverage shared resources, expertise and operational support across health systems.
We are the fifth oldest and sixth fastest-growing state in the country and are fortunate to partner with Delaware’s policymakers and the First State Health Leaders Alliance to address our unique healthcare challenges together. Even though there’s a lot to be proud of, healthcare right now is at a tipping point and major headwinds that will impact all hospitals are coming. Hospitals are being asked to do more with less at both the federal and state levels. Continued investment and supportive public policy will be essential to mitigating hospital closures and challenges.
All of Delaware’s nonprofit hospitals serve as a much-needed safety-net, treating all patients who come through their doors regardless of their ability to pay. DHA member surveys found that in Fiscal Year 2024, Delaware hospitals provided nearly $100 million in uncompensated care, including more than $47 million in charity care. At the same time, the costs of labor, drug expenses and supplies have increased significantly since the COVID-19 pandemic, driving up expenses. For instance, Rx expenses increased 54% from fiscal year 2020 to fiscal year 2024. These drivers are out of a hospital’s control and must be covered to keep doors open.
Additionally, DHA and our members remain deeply concerned that the upcoming cuts and changes to Medicaid in 2027 will lead to more Delawareans becoming uninsured, worsening health outcomes, increased reliance on hospital emergency departments, and additional strain on our healthcare workforce and hospitals. On the state side, Delaware’s healthcare needs continue to grow as a uniquely growing and aging state, requiring greater access to care and a stronger workforce to meet increasing demand. We continue to engage policymakers and stakeholders on collaborative solutions for these major issues. Our members are also engaged in the Rural Health Transformation Program, and look forward to opportunities to partner with the state to support rural healthcare and this much-needed workforce.
Maryland
William Henderson, Acting Executive Director, Health Services Cost Review Commission: Maryland’s hospital payment system is unique in the United States and has been a key driver of the financial stability seen across the state’s hospitals, including in rural communities. Unlike every other state, Maryland has operated an all-payer hospital rate-setting system for nearly five decades, meaning that every payer (Medicare, Medicaid, or commercial insurance) pays approximately the same rate for the same service at each hospital.
Building on that long-standing foundation as leaders in healthcare payment innovation, Maryland has partnered with the federal government through a series of innovative payment models designed to move beyond fee-for-service reimbursement and toward value-based care: the All-Payer Model (2014-2018) and the Total Cost of Care Model (2019-2025). The cornerstone of these models has been hospital global budgets, which provide hospitals with a predetermined annual revenue target while creating incentives to improve quality, coordinate care, and keep people healthier rather than increasing the volume of services delivered.
Under a traditional fee-for-service payment system, hospital revenue is tied directly to the volume of services provided. Hospitals are paid for each admission, procedure, or outpatient visit, so total revenue depends on how many patients they treat over the course of the year. Because patient volume can fluctuate significantly in rural communities, hospital revenue can be unpredictable.
Maryland’s global budget model operates differently. Rather than relying on service volume, each hospital begins the year with a predetermined annual revenue target based on its historical revenue. That target is then adjusted for factors such as inflation, population changes, and other approved policy adjustments. As a result, hospitals know their expected annual revenue at the beginning of the fiscal year.
Maryland first tested global budgets in several rural hospitals in 2010 under what was referred to as Total Patient Revenue. Following the launch of the All-Payer Model in 2014, the approach was expanded statewide and continued under the Total Cost of Care Model. The model has provided hospitals with greater financial predictability while supporting investments in care transformation and preserving access to care, particularly in rural communities.
The predictable revenue structure inherent to the global budget model has been especially important for rural hospitals. Because their financial stability is not dependent on maintaining or increasing patient volumes, they are better positioned to withstand fluctuations in demand, invest in needed services, and plan for the future. The stability provided through global budgets has been a key factor in helping Maryland’s rural hospitals avoid the financial distress and closures experienced by many rural hospitals in other states. Beginning in 2028, the financial mechanics of the model will evolve under CMS’ Achieving Healthcare Efficiency through Accountability Model. However, the core principles of Maryland’s hospital rate-setting system will remain in place.
New Jersey
Cathy Bennett, President and CEO, New Jersey Hospital Association: New Jersey’s result is encouraging, but it requires context. CHQPR classifies only two of our hospitals as rural, and neither is a small rural hospital facing the most severe volume and fixed-cost pressures. Our dense geography and stronger patient volumes matter, as do Medicaid expansion, state supplemental support, and hospitals’ strategic use of regional partnerships and shared capabilities.
For leaders in higher-risk states, the lesson is to preserve coverage, build regional scale and referral relationships, and insist that every payer, including Medicare Advantage and commercial insurers, reimburse essential services at levels that reflect their true cost.
Rural hospitals need predictable payments for maintaining 24/7 standby capacity, not a model that pays only when a patient walks through the door. Every state and payer should commit to a funding model that can sustain capacity before it’s tested by a closure
Utah
Matt McCullough, PhD, Rural Hospital Improvement Director, Rural 9 Network Director, Utah Hospital Association: This is a complicated question and has multiple reasons. I get asked this question all the time and people are often looking for a simple answer. State-level policies like Medicaid reimbursement are a BIG part of the equation! Medicaid reimbursement is lower in Southern states and higher in Utah. Utah also has the lowest percent of the population in the country on Medicaid. Other things like the Medicare UPL program, county sales tax benefits, State Directed Payment (SDP) programs, all contribute to a hospital being financially sustainable.
Some states have a small rural hospital in every county and there just isn’t enough volume to support that many hospitals. Utah is lucky that ours are spread out a bit more and have their own population base to support their volume. We also have had very little turnover in CEOs and CFOs and that goes a long way to keep a hospital running with good financial consistency.
Small rural hospitals also can’t do it all on their own. They need support and resources and specialty care access from larger systems and academic medical centers. We have been lucky here in Utah with Intermountain Health and the University of Utah which provide a lot of support and telehealth specialty services to our rural hospitals. We also utilize the Medicare Rural Hospital Flexibility Program to support financial and operational improvement at rural hospitals. It isn’t a lot of money but over 15 years the impact can add up.
In addition, our nine independent rural hospitals (which are often the most vulnerable) are part of a non-profit Rural Hospital Network, called the Rural 9. The network was established to improve the quality and viability of rural independent hospitals in Utah. The network helps identify and prioritize shared needs related to quality and financial stability and then implement projects to address those needs. In addition, the network provides communication and networking opportunities for nine peer groups to share common issues, solutions, and best practices. The network has existed since 2014 and has made a substantial impact in shared services, savings and volume discounts, etc.
At the Becker's 11th Annual IT + Revenue Cycle Conference: The Future of AI & Digital Health, taking place September 14–17 in Chicago, healthcare executives and digital leaders from across the country will come together to explore how AI, interoperability, cybersecurity, and revenue cycle innovation are transforming care delivery, strengthening financial performance, and driving the next era of digital health. Apply for complimentary registration now.
