Summary of "How America is failing its rural hospitals"

Case study: St. Mark’s Hospital (Texas)

St. Mark’s struggled with mortgage debt beginning in 2020. In February 2023 the board cut inpatient services and nearly half the staff; the hospital closed entirely in October 2023. As a result, emergency medical services must now drive patients 30–75+ minutes to reach the nearest hospitals, illustrating the immediate access impact of rural hospital closures.

After cuts in February 2023, St. Mark’s closed in October 2023, forcing EMS to transport patients 30–75+ minutes to the nearest hospitals.

Scope of the problem

Rural hospital closures are increasingly common across the U.S., and experts warn the trend could accelerate. In many rural communities the small hospital is effectively the entire local health-care system; closures create “health-care deserts,” threaten local economies, and jeopardize access to essential care. Some states (for example, Texas) face especially large risk.

Core financial cause: reimbursement shortfalls

Key financial dynamics driving closures:

Fixed-cost structure
- Rural hospitals have high fixed costs (buildings, equipment, salaried staff), so low patient volume raises per-patient cost.
- Many payers reimburse at rates similar to urban hospitals, which does not reflect rural cost realities.
Public program underpayment
- Medicare and Medicaid commonly reimburse below cost. American Hospital Association data indicate Medicare reimburses roughly $0.83 for every $1 spent on inpatient care.
Private insurer pressure
- Private insurers frequently underpay or delay payments.
- Small hospitals have limited bargaining power in annual contract renegotiations, leaving them exposed to sustained revenue shortfalls (including months-long delayed payments).
Medicare Advantage (MA) effects
- MA enrollment exceeds half of Medicare beneficiaries.
- MA plans often reimburse less reliably and more slowly than traditional Medicare (traditional Medicare: ~14 days; MA: 45–90 days or more), worsening cash-flow problems.

Consequences for services

Financial strain forces hospitals to cut services to reduce losses. Common outcomes:

Labor & delivery (OB) and cancer care are frequently among the first services eliminated.
Data examples:
- 25% of rural hospitals dropped OB services since 2011.
- In Texas, nearly half of hospitals that once offered chemotherapy stopped between 2014–2022.
- An estimated 5.6 million women live in “maternity deserts,” lacking local access to maternity care.

The loss of these services means millions of people lose local access to essential care.

Policy responses and limitations

Existing federal programs provide support but have limitations:

Critical Access Hospital (CAH) program
- Provides cost-based reimbursement at about 101% of Medicare.
- Has strict eligibility rules and does not cover all struggling hospitals.
Rural Emergency Hospital (REH) program
- Offers multi-million-dollar annual grants.
- Requires hospitals to eliminate inpatient services to qualify — a controversial trade-off because it forces loss of services to secure funding.

Observers note rural communities are heterogeneous and need more flexible, locally tailored options rather than one-size-fits-all conditions that can compel service cuts.

Proposed solution and conclusion

The most commonly stated fix is adequate reimbursement:

All payers (private insurers and public programs) should pay enough to cover the real costs of delivering care in rural settings, or adopt reimbursement models that reflect rural realities (for example, adjustments for low-volume fixed costs and more reliable, timely payments).
Without such changes — and with potential Medicare/Medicaid cuts and continuing growth in Medicare Advantage enrollment — the rural hospital crisis is likely to deepen, threatening access to care and community viability.

Additional notes

This video is the second in a three-part series about how emergency help reaches remote places.
Sponsored by T‑Mobile (the sponsor supported reporting but did not dictate content).