Emergency room.

Hospitals in Poor Rural Counties Face the Greatest Financial Threat from COVID

By Robert I. Field and Anthony W. Orlando

The latest wave of COVID cases and hospitalizations has raised concerns about the financial resilience of many hospitals in the United States. Throughout the pandemic, we have witnessed shortages of medical supplies, exhaustion of frontline workers, and the overflow of patients beyond the physical capacity of hospital beds and buildings. Now, after nearly two years of repeated COVID surges, there is a real danger that some institutions might run so low on funding that they will need to downsize or close altogether.

Large hospitals in metropolitan areas have, for the most part, weathered the storm. Ample financial resources enabled them to survive with fewer lucrative elective procedures and sudden overwhelming demand for less profitable intensive care for COVID patients. But in many parts of the country, especially rural regions, smaller hospitals lack such financial cushions. For them, COVID could be an existential threat.

Rural hospital financial stress and resulting closures are nothing new. They have been occurring at an accelerating rate for decades as the health care system consolidates and smaller facilities find themselves at a growing competitive disadvantage. However, COVID has presented a new and more formidable challenge.

Pandemic relief under the Coronavirus Aid, Relief, and Economic Security (CARES) Act certainly helped. It has kept the wolf at the door at bay for many of them. But is that relief reaching the hospitals where it will be most needed in the long run? There is little systematic analysis of where the wolves are most likely to return in the pandemic’s aftermath.

To help understand the post-COVID hospital industry, we analyzed hospital markets across the United States to identify those at the highest risk for closures. Preexisting financial vulnerability is clearly important, but it is now magnified by the regional burden of caring for COVID patients, which varies considerably across regions. To account for this, we combined measures of COVID severity and financial vulnerability at the county level to calculate a “Danger Index” that identifies communities where the economic burden of treating COVID patients has put hospitals in the greatest financial danger.

The Index revealed the greatest peril for hospitals in counties with high rates of poverty, low population density, and high shares of foreign-born and non-White residents. While these factors would stress hospitals under any circumstances, our analysis showed that they are exacerbated by the pandemic.

Poor rural areas face a double-whammy. Not only do they serve patient populations that are most likely to lack insurance or other means for pay for care, but they also serve communities where the burden of COVID care is greatest. And for many of these counties, the whammy is triple. The highest scores on the Index tended to cluster in states in the South and West that have not accepted the Medicaid expansion under the Affordable Care Act. Their hospitals serve a greater share of uninsured patients than those in the rest of country.

For patients in poorer rural areas, the risk of hospital closures presents an especially serious threat. Many of them must already travel long distances to receive care. Fewer facilities could mean that barriers to accessing health care services, especially in emergencies, become insurmountable. Moreover, rural zip codes with high Black or Native American representation have been found to be farther from many essential health care services than those with high white representation. High scores on our Index are significantly associated with counties that have more rural hospital closures. In the months and years to come, it can serve as a useful warning signal to identify areas where access to health care is especially threatened.

As we care for individuals who are stricken with COVID, we need to consider measures to care for the health care system that serves them. The first step is to understand where COVD is likely to produce the greatest need. We would compound the pandemic’s tragedy if we squandered resources where they are not needed the most.

The CARES Act Provider Relief Fund may be a cautionary tale in this regard. While it appears that the funds were distributed to counties that rated higher on the Danger Index on average, there were several outliers that either received high levels of funding per capita even though the danger was low or received lower levels of funding even though the danger was high.

This will not be the last time the United States needs to target aid to hospitals in need. As we move beyond this latest COVID surge, it would be wise to design a system that is better attuned to hospitals’ financial needs and can respond quickly and proportionally, especially where residents are most vulnerable.

Robert I. Field is professor of law and professor of health management and policy at Drexel University.

Anthony W. Orlando is the author of “Keeping Races in Their Places: The Dividing Lines That Shaped the American City” and an assistant professor of finance, real estate, and law at Cal Poly Pomona.

Robert Field

Robert I. Field is professor of law at the Kline School of Law and professor of health management and policy at the Dornsife School of Public Health at Drexel University. He is also a senior fellow of the Leonard Davis Institute of Health Economics at the University of Pennsylvania.

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