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Trends Impacting Rural Healthcare in 2023

What does 2023 have in store for rural hospitals? If you rely on recent trend reports, the outlook may appear discouraging. However, while challenges continue for rural hospitals, there is room for opportunity and even optimism. 

Trend 1: More Respect for Rural Hospitals 

CARES Act funding has dried up, but increased awareness of the important role rural hospitals played during the pandemic remains. This recognition may result in increased federal funding to ensure their continued existence. The New York Times last month acknowledged that rural hospitals are “a lifeline” for 46 million Americans, and the American Hospital Association — noting that rural hospitals and health systems make up about 35 percent of hospitals across the country — continues to advocate for Congress to extend programs that help offset financial hardships associated with geographical isolation and low patient volumes. (The Rural Hospital Support Act and the Assistance for Rural Community Hospitals Act are currently under congressional consideration.)

We may see more lobbying and support for additional federal aid, building on existing, pending and newly launched programs. Examples include the USDA’s Emergency Rural Health Care Grants and the Rural Emergency Hospital (REH) designation, developed to prevent rural hospital closures by better aligning their services with the evolving needs of their communities. An REH designation comes with a substantial cash infusion and higher Medicare payments but requires hospitals to discontinue inpatient services. While this tradeoff makes sense for some rural hospitals, the Center for Healthcare Quality and Payment Reform opposes the REH program and implores Medicare, Medicaid and private health insurance plans to adopt a Patient-Centered Payment System for rural providers.  

Regardless of federal funding, hospital leaders need to act and adapt in order to keep pace with changes in the way healthcare is delivered and compensated.

Trend 2: Bending the Curve on Labor Costs

Leading the list of challenges for 2023, is the critical shortage of healthcare workers and the high cost of labor. Although a convergence of factors created the shortage, the problem boils down to supply and demand. Too few educators are training too few healthcare workers, and those that do enter the job market can command higher pay. 

Hospitals must innovate to create staff pipelines and restructure staffing models based on skill mix optimization and role enhancement, with the goal of training all bedside staff to practice at the top of their license and scope of practice. As a result, some hospitals find they can “right size” their number of RNs without compromising patient care, while at the same time increasing job satisfaction and retention of remaining RNs. A team staffing model approach is one innovation implemented at several CHC hospitals.

Trend 3: New Care Models

The evolving healthcare environment will shape the way rural hospitals deliver care. One such force is the rise of the hospital-at-home model of care, which allows some patients who need acute-level care to receive it at home. The model transitions certain diagnostic studies, treatments and skilled nursing services to the home environment. Participating hospitals obtain a government-issued waiver and often partner with organizations that supply the technology and manage logistics. Payer resistance to this model of care remains a problem, but since the model is widespread in other countries and has been shown to reduce costs while improving outcomes, I expect hospital-at-home offerings to eventually gain acceptance, as did telemedicine and remote patient monitoring. Rather than considering this model a threat, rural hospitals would be wise to devise ways to turn it into an opportunity to serve their communities. 

Trend 4: Inflationary Pressure

Other forces take direct aim at hospitals’ finances, including higher interest rates and the popularity of Medicare Advantage plans, which underpay rural providers. For hospitals with variable-rate loans, debt obligations may become too burdensome to bear and restructuring might be necessary. An example would be shifting a bond structure over to HUD financing to secure lower interest rates, albeit for a longer term. This approach would give hospitals an opportunity to expand or add profitable services and regain their financial footing. 

Trend 5: Medicare Advantage

It will be interesting to see how the effects of Medicare Advantage play out in the coming year. As it turns out, rural patients are more than twice as likely to switch from Medicare Advantage to traditional Medicare due to dissatisfaction with access to care, according to a Health Affairs report. At the same time, government watchdogs are pressuring Congress to crack down on Medicare Advantage plans for denying treatment and delaying payments to providers. 

Current Challenges Call for Creative Leadership

Other healthcare trends affecting rural hospitals will require two things of leaders — difficult decisions and an entrepreneurial spirit. For most rural providers, doing business as usual won’t withstand the challenges ahead. The path to sustainability is different for every hospital, which is why CHC helps hospitals chart their own strategic roadmap, starting with an operational assessment to uncover opportunities for improvement and innovation. An operational assessment shows hospitals where they stand, and a strategic assessment, which is part of the process, identifies routes to set goals and a plan of action to pursue them. The process can lead to some hard decisions — for example, whether it makes sense to cut unprofitable services that the community desires or find means to offset their cost as loss leaders.

Looking Ahead

Within the context of what’s trending in healthcare, rural hospital leaders will have to evolve their business strategies. You don’t have to look far into the future to see that hospital care delivery models are going to look different. Without downplaying the challenges ahead, CHC helps hospitals view them as an opportunity for innovation and an imperative to adapt. 

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