Hospital Survival In Rural Markets: Closures, Mergers, And Profitability

Financial distress among rural hospitals in the US has increased in recent years. Using national hospital data, we investigated how the decline in profitability has affected hospital survival, either independently or with a merger. The answer has direct implications for access to care and competition in rural markets. We assessed the rate of hospital closures and mergers in predominantly rural markets during the period 2010-18, focusing on hospitals that were unprofitable at baseline. A minority of unprofitable hospitals (7 percent) closed. A larger share (17 percent) merged, most commonly with organizations from outside of their local geographic market. Most unprofitable hospitals (77 percent) continued to operate through 2018 without closure or merger. About half of these hospitals returned to profitability. At the market level, 22 percent of markets served by unprofitable hospitals lost a competitor to closure or within-market merger. Out-of-market mergers affected 33 percent of markets with an unprofitable hospital. Overall, our results suggest that rural markets are experiencing meaningful rates of hospital closures and mergers, yet many hospitals have survived despite poor financial performance. Policies targeting access to care will continue to be important. Similar attention will be needed to address the competitive effects of hospital closures and mergers on prices and quality.