Will COVID-19 Trigger More Rural Hospital Closures?

There is just one hospital in western Indiana’s Vermillion County. The slender, 37-mile long county is dotted with corn and soybean fields, and driving from one end to the other would take nearly an hour. 

Union Hospital Clinton is small, only 25 beds, but it also serves parts of two neighboring counties. The area suffers from some of Indiana’s highest rates of heart attack and stroke. 

Like many hospitals around the country, Union was shaken by the COVID-19 pandemic. Elective procedures were suspended, protective equipment was more expensive, and staff feared losing their jobs. And while Vermillion County has not seen a spike in coronavirus cases, the financial fallout is still troubling.

“Our relationships in this health care sector in our rural communities is a very vital source,” says hospital Vice President and Administrator Stephanie Laws. “To take that away, you think, what would that alternative future look like?” 

A Very Fragile Baseline 

Nationwide, more than 130 rural hospitals have closed since 2010, and the pace accelerated last year. Indiana has been largely spared, but now experts wonder if COVID-19 will push its small, rural hospitals to the point of closure. 

In rural communities that can have a domino effect, limiting access to healthcare, exacerbating chronic health problems, and furthering the economic hardship many communities already face. 

With COVID-19 still raging, some also fear more closures will undermine cooperation with local public health departments — and the state’s pandemic response. 

When the pandemic began this year, Laws was worried for small, rural hospitals. And while her hospital is part of a larger chain based in Terre Haute, many rural hospitals are on their own.

“It was a balance and a challenge before the pandemic, and the pandemic hit us hard,” she says. “We continue to roll up our sleeves and, and grit our teeth every single day about how we can come up with creative strategies and solutions to look at how we continue to remain operationally solvent with inflation of cost all around us.” 

Union Hospital Clinton has higher profits from patient care than similar hospitals in Indiana. 

Statewide, the average profit from patient at rural hospitals was less than 1 percent in 2019, according to data compiled by the Chartis Center for Rural Health. Unlike many rural hospitals, the Union Hospital Clinton’s margin was in double digits.

That provided some stability during the pandemic, Laws says. She also says staff were flexible and transitioned between different roles in the hospital, avoiding layoffs or furloughs. 

Still, the nation’s rural hospitals face fundamental financial challenges. They often have less access to the supply chain to purchase vital equipment, are dependent on reimbursements from Medicare and Medicaid that don’t cover costs, and are based in towns with an aging population. 

“I can only imagine that just figuring out how you make payroll, when a big chunk of your income suddenly goes away, and might not return anytime soon,” says Professor Nir Menachemi, who chairs IUPUI Fairbanks School of Public Health's management and health policy department.

An analysis from the Institute for Nonprofit News found that three quarters of the nation’s rural hospitals entered the pandemic actually losing money on patient care. 

“So when we then on top of that, that very fragile baseline, then had a pandemic and the resulting suspension of electives, and skyrocketing prices of supplies and so forth. It was a double whammy that, to be honest,” says Brian Tabor, president of the Indiana Hospital Association. “I really thought during the spring, that we would have several hospitals in Indiana that would not be open by the end of the summer.” 

Other states have been hit hard. Since 2010, 20 rural hospitals have closed in Texas, 12 in Tennessee, and seven in Oklahoma. 

“I was deeply concerned that we were starting to see what potentially could be the rash of closures across the country extend into Indiana,” Tabor says.

Is Financial Aid a Savior, or a Hurdle?

How did Indiana’s rural hospitals survive the COVID-19 crisis? Medical providers across the state received over $1.7 billion from the CARES Act, the main federal aid package. The chain that runs the hospital in Clinton received close to $30 million for all of its facilities.

However, some other aid — like accelerated Medicare payments — will come due. And while Congress has extended the timeline, questions remain. 

"There are some questions as to the formula of what will be considered required in the payback, versus what will legitimately be due back," says Phil Ellis, senior director of the Indiana Rural Health Association. "It's still very much fluid. 

Another type of federal aid came from Medicare Advanced Payments, but it had some complications. It was structured like a loan, and carried a high interest rate: 10 percent. For months, it was unclear when these loans would need to be repaid.

Congress recently passed a bill lowering the interest rate to 4 percent and pushing payments to next year. 

“I think the big concern is once [hospitals] start having to pay those monies back … then where are they?” Ellis says. 

Some questions also remain about CARES Act aid, which concerns some hospital administrators.

In Northern Indiana, Adams County Memorial Hospital received more than $22 million in CARES Act funding. However, the lack of guidance from Washington left hospital leaders unsure how to appropriately use the money. 

“The guidance on the reporting of that funding, the timeframe of that funding … not only changed, I think, still remains in question,” Adams County Memorial Hospital CEO Dr. Scott Smith says. 

Worse Off Than Before

Now, as the nation aims to get back on track, these rural hospitals serve as a critical part of the public health infrastructure, which for decades has been underfunded. Without rural hospitals, it’s unlikely Indiana’s small county health departments could carry the load on their own, experts say.

And that could leave vulnerable communities worse off than before. 

“As a state, we invest about $12.50 per person in public health,” IUPUI Fairbanks School of Public Health Professor Valerie Yeager says. “And nationally, it's $36.”

Yeager says hospitals often work hand-in-hand with small localities on public health measures. “The pandemic has drawn attention to systemic issues that were already there."

In Indiana, it’s common for smaller departments to be mostly staffed with part-time employees. And now that the responsibility for COVID-19 testing has fallen to Indiana’s 92 county health departments, some hospitals have stepped up to help staff testing sites.

“You're going to see, you know, rural hospitals out there on the front line side by side with the local health department or the State Department of Health, helping to execute a plan for vaccine distribution,” says Tabor of the Indiana Hospital Association.

Many questions remain for hospital leaders — a possible second wave of COVID-19, the impact of flu season, and logistics around vaccine distribution

“I'm encouraged yet despaired, you just really don't know what to expect, really,” Laws says. “Everything changes on a dime. I mean, it could be one way today, and it could be another tomorrow.”

This story was produced by Side Effects Public Media, a news collaborative covering public health.

This story was part of a multi-newsroom collaboration of IowaWatch, Wisconsin Watch, the Institute for Nonprofit News, Reveal from The Center for Investigative Reporting and Side Effects Public Media. Contributing to this report: data analysis by Frank Bass of Reveal from The Center for Investigative Reporting, and additional reporting from Lyle Muller with IowaWatch, Parker Schorr of Wisconsin Watch, Sebastián Martínez Valdivia of Side Effects Public Media.