While the disparities in care have been widely observed and studied, few viable options have emerged to help improve care and outcomes for rural residents. People who live in these areas are still more likely to experience poor physical and mental health, to die prematurely as a result of chronic disease, and to experience disabilities that impact daily living activities, such as dressing, bathing, walking, or running errands.
In a February 2024 article, Chief Healthcare Executive reported that half of rural hospitals are losing money, and many are at risk of shutting down imminently. The situation is more dire for independent or unaffiliated facilities (55% in the red) versus those affiliated with a health system (42% in the red). The numbers are bad across the board, from Kansas where 89% of hospitals are operating in the red, to New York (83%).
Some of the driving factors behind the financial struggles include:
All of this has led hospitals to simply cut off services. Almost half of rural hospitals in West Virginia cut off obstetrics care between 2011 and 2021, and 382 rural hospitals across the U.S. stopped offering chemotherapy between 2014 and 2022.
Clinicians operating in rural communities also face significant financial challenges. Patients may have to travel more than a hundred miles to see a provider in person, particularly for specialty services. Millions of patients in these communities struggle with transportation and may be unable to travel those distances, and simply forego care.
The challenge central to all of these hospitals revolves around our broken fee-for-service system. If hospitals and clinics cannot drive enough volume through their doors to fill up appointment slots or fill hospital beds, they can’t collect enough revenue to stay afloat.
Many rural communities and care providers are looking for creative solutions to offer needed services in these areas. Solutions like telehealth offer promise to increase access to specialists, and even primary care providers. But it requires infrastructure in the form of high-speed internet, something many rural residents don’t have.
Many experts also advocate for increased use of technology to streamline clinical workflows, mitigate administrative burdens for physicians and care teams, and allow providers to work at the top of their license. Multiple states have passed laws that allow advanced practice clinicians, such as nurse practitioners (NP) and physician assistants (PA), to provide primary care services without requiring that they work in the same physical location as a supervising physician.
These things certainly won’t hurt our quest to increase access to care in rural communities, but they are not enough. They still leave providers and hospitals operating under a fee-for-service system that prioritizes volume over everything (and its regulatory hurdles that can make reimbursement slow and uneven). In this system, facilities and providers must make decisions to optimize profits, rather than making the decisions that improve outcomes for vulnerable and underserved populations. That inevitably leads to cutting services that don’t produce enough revenue or volume, closing underperforming facilities, and further exacerbating already limited access to care.
As the proliferation of value-based care increases, it offers an opportunity for rural healthcare providers and facilities to reexamine care delivery and financial models. Rural hospitals generally have lower patient volume, but they serve a higher number of uninsured, Medicare, and Medicaid patients. They also have to address health issues for patients that are generally older, sicker, and poorer compared to the national average.
Value-based care alternative payment models – including primary care attribution, prospective bundles, and capitation – can help account for these unique patient needs while providing adequate and steady revenue for clinicians managing patient health and hospitals treating more advanced health needs.
A key reason these VBC alternative payment models can work in rural communities is risk adjustment. Reimbursements are not flat across the board, as they are in fee-for-service; instead they are based on patients’ unique health situation and care needs. In capitated payment models, payments also come as per-member-per-month fixed reimbursements, offering a steady and reliable income stream to struggling rural clinics and providers.
The Centers for Medicare and Medicaid Services (CMS) Innovation Center is currently testing or operating several models aimed at improving reimbursement and payment structures while simultaneously improving outcomes and care quality in rural hospitals. Many of these emphasize more coordinated care. In Vermont, for example, they launched the Vermont All-Payer ACO Model, which lowered total cost of care for Medicare beneficiaries by more than 6%, reduced avoidable hospital readmission and acute care stays, and increased primary care visits (despite an ongoing primary care workforce shortage) in five years between 2018 and 2022.
New CMS models, such as the Primary Care Flex Model, aim to help low-revenue ACOs participate in and succeed in shared savings programs, which could significantly benefit. The ACO Realizing Equity, Access, and Community Health (ACO REACH) model targets underserved communities with risk-adjusted capitation payments to help providers better coordinate to manage patient health.
Other models, such as prospective bundles, could help improve care coordination among specialists in rural communities who offer common procedures, such as orthopedic or cardiovascular surgeries. Under these programs, specialists and primary care providers get a fixed, risk-adjusted reimbursement rate for the procedure and all the accompanying services (such as pre-operative visits or post-operative rehab). It incentivizes participating providers and facilities to optimize care quality and minimize avoidable complications that result in costly care, such as a hospital readmission or ER visit. Starting in 2026, CMS is mandating participation in prospective bundled payments for common procedures as part of the Transforming Episode Accountability Model (TEAM).
Living in a rural community should not deprive patients of great care. But in our current fee-for-service system the disparities between rural and urban or suburban patients are clear. As more rural hospitals and providers encounter the realities of a financially nonviable model, they face unthinkable decisions on whether to continue to operate in the red, or close up shop and leave patients with even fewer options for care. Value-based care offers a new path to improve care and specifically address the needs and unique challenges for these populations. It’s time to march forward and close these significant gaps for our rural communities.
