Increasing enrollment in Medicare Advantage has taken a toll on revenue reimbursement for hospitals in those areas, with 50% now operating in the red across the U.S. and more than 400 on the verge of closing.

Those figures were recorded by healthcare advisory firm Chartis in its latest research report, “Unrelenting Pressure Pushes Rural Safety Net Crisis into Uncharted Territory,” which was presented this month before members of Congress, rural healthcare advocates, and state offices of rural health at the National Rural Health Association’s (NRHA) 35th annual Rural Health Policy Institute Conference in Washington, D.C.

While not the only headwind tightening hospital margins, net MA reimbursement is often lower compared to traditional Medicare for similar services due to MA plans not following cost-based reimbursement. It also does not cover certain strong revenue-generating services as Medicare does, and has different administrative requirements and data reporting processes that rural providers may not be sufficiently equipped to manage, potentially leading to increased care denials and impeding the ability of hospitals to understand the needs of their patient populations.

According to the report, MA enrollment soared 48% between 2019 and 2023, increasing from 6.3 million to 9.2 million patients. In Alabama, Connecticut, Georgia, Hawaii, Kentucky, Maine, and Michigan, penetration was more than 50%. Greater attraction to MA plans may be due to them covering prescription drugs and extra benefits not covered by traditional Medicare.

“To learn the percentage of rural hospitals in the red has shifted 7% and now includes half of all rural hospitals is startling and should serve as an urgent call to action for everyone invested in rural healthcare,” said Michael Topchik, national leader for the Chartis Center for Rural Health, in a statement.

Among those operating in the red, 55% are independent providers, and 42% are system-affiliated hospitals. In total, 418 hospitals are vulnerable to closing, raising concerns about potential consequences, including loss of services.

A record 28 rural communities in the last year have lost access to inpatient care because of rural hospital closures or conversions to models that exclude inpatient care. Between 2011 and 2021, 267 rural hospitals (nearly 25% of America’s rural OB units) dropped OB services, and 382 stopped providing chemotherapy services between 2014 and 2022.

“Within many rural communities, the hospital is often among the largest employers and thus a major contributor to the local economy. Our analysis shows that when a rural hospital closes its doors, the loss of hospital jobs is nearly 220 at the median. The loss of non-hospital jobs in the community is 73 at the median,” said Chartis in its report.

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