In 2025 that 46% of rural hospitals operate at a loss. Experts believe situation will worsen
By Deborah Jeanne Sergeant
With low insurance reimbursement rates, soaring operating costs and increased labor costs, most healthcare organizations are struggling.
For rural hospitals, add the factor of lower patient volumes and it’s easy to see why small, community hospitals are struggling.
According to Health Care Quality and Payment Reform, more than 700 rural hospitals lost money in 2024 and nearly 400 experienced losses of 5% or more. The Sheps Center for Health Services Research reported in 2025 that 46% of rural hospitals operate in the red and 432 are vulnerable to closure.
Chartis, a Chicago-based healthcare advisory organization, notes that among the most troubled states are Connecticut (all three rural hospitals operating with a negative budget), Kansas (87% in the red), Washington (75%), Oklahoma (70%) and Wyoming (70%). As of July 2025, 58% of New York’s rural hospitals were at risk of closing for financial reasons.
These shifts in healthcare accessibility are important as they affect the 20% of Americans who live in rural areas. In times of crisis may face an ambulance ride of 45 minutes or longer. In addition, patients in rural areas face more barriers to seeking out-patient care such as routine check-ups, monitoring chronic health conditions and acute care for injuries and illnesses. Specialists typically do not practice at rural hospitals. However, some will hold office hours at rural sites on a few days of the week to accommodate rural patients. If these locations close, patients may be more inclined to delay or skip visits. Forgoing care in these instances can negatively impact long-term health.
Shifts in hospital reimbursement may exacerbate the financial woes for rural hospitals. President Trump’s One Big Beautiful Bill Act of July 4, 2025, includes a 15% cut to Medicaid spending, amounting to nearly $1 trillion over 10 years. UC Berkley’s health policy and management expert Kimberly MacPherson said in late 2025, stated that this OBBB cut will disproportionately affect rural residents who more heavily rely on subsidized plans for paying for healthcare costs.
Locally, 93.6% of Oswego County adult residents (ages 18-64) have health insurance as of 2019, the most recent statistics available from Community Health Assessment/Community Health Improvement Plan 2022-2024. It’s 95% in Madison, 93.8% in Oneida and 94.4% in Cayuga.
Generally, insurance coverage helps ensure hospitals receive payment for services through reimbursement. Dramatically reducing subsidized insurance will likely affect the number of people insured. However, only 221,534 New York residents are insured through healthcare plans subsidized by the Affordable Care Act.
Although the OBBB’s provision of $50 billion in funding for states through the Rural Health Transformation Fund (distributed in $10 billion allotments over 10 years), MacPherson fears that this will not be enough to counteract the existing rural hospital budget shortfalls and the shortfalls to come with further Medicaid cuts. She estimates that the $50 billion accounts for only 37% of rural Medicaid spending for the next decade.
Brian Blase, president of Paragon Health Institute, a non-partisan, nonprofit policy research institute, believes that the Affordable Care Act (“Obamacare”) is over subsidized and that it worsens the problem of rural hospitals’ budgets.
As fewer people will be ensured through cuts to subsidized insurance plans, MacPherson believes that rural areas in New York will be among the areas hardest hit.
In mid-December, the Lower Health Care Premiums for All Americans Act passed, which will prove a positive influence in healthcare according to Blase.
The new legislation “addresses some of the flaws in the Affordable Care Act,” he stated. “Most importantly, the House bill does not extend the damaging COVID-era subsidy boosts set to expire in December. The ACA is already massively over-subsidized, and pouring new subsidies on this market will accelerate cost increases, exacerbate waste and fraud in the program, harm people who receive coverage through an employer and lead more employers to drop coverage.”
He said that the legislation includes lowering silver plan premiums by 12% and reducing federal spending through more efficient operations and expanding employers’ ability to provide coverage through association health plans, which can help small businesses cover more employees. With more coverage, rural hospitals have a greater chance of receiving reimbursement for care provided.
Physician Michael Rulffes is president and chief operating officer at Clifton Springs Hospital and Clinic & Newark-Wayne Community Hospital, past of Rochester Regional Health. He said:
“Affiliations while helpful, are not a cure for all rural hospitals. Affiliations provide rural hospitals with stability with access to capital, centralization of back-office functions such as IT, supply chain and billing and revenue operations. They also provide valuable support for physician recruitment, specialty coverage and offer opportunity for quality improvement through care pathways and referral integrations.
“However, there are several items affiliations do not address that rural hospitals, whether affiliated or remaining independent, need to focus on how to ensure their sustainment for the communities they serve. These include payer challenges, especially for those communities with disproportionate Medicare and Medicaid populations that result in structural underpayment of the services provided in rural settings. In addition, population demographics such as aging populations/high acuity populations, declining birth rates and inpatient volumes are all challenges rural hospitals need to contend with and develop strategies to address.
“Lastly, local workforce shortages can remain a complex issue for rural hospitals to address. Affiliations can provide some relief. However, regional strategies for healthcare work forces must be considered in order to ensure consistent high-quality care is delivered.
“The Rochester Regional Rural Health strategy has a relentless focus on access improvement, especially in primary care within rural communities. Increased efforts in provider recruitment and utilization of advanced practice providers are examples of how this is being accomplished.
“Additionally, right-sizing services and aligning services to be co-located as within the Geneva Destination Campus, allow for more seamless care delivery. It also allows rural patients to access primary care, specialty, imaging and infusion services closer to their home and eliminating the need to travel to multiple locations to receive comprehensive care. Rural hospitals need to evaluate and address the services they offer and identify where duplication or redundancy may exist. Survivors reduce duplication but not access.
“Lastly, rural hospitals need to be prepared for value-based care delivery. With declining inpatient volumes and challenging payer mix circumstances, rural hospitals need to be prepared to be compensated based on quality of services provided rather than volume of services provided.”