The Intersection of Rural Hospital Closures and Medicare Value-Based Care

Ben H.

Hatched by Ben H.

Sep 03, 2023

4 min read


The Intersection of Rural Hospital Closures and Medicare Value-Based Care


Rural hospitals across the United States are facing a dire situation, with over 600 medical centers at risk of closure. This accounts for approximately 30% of all rural hospitals, posing a significant threat to the healthcare access of rural populations. The primary reason behind these closures is the financial strain caused by private insurance plans paying hospitals less than the cost of delivering services to patients. This issue exacerbates healthcare disparities, particularly in underserved rural areas. In the midst of this crisis, the Medicare Shared Savings Program (MSSP) stands as a potential solution, demonstrating the value-based care (VBC) model's effectiveness in reducing healthcare expenditures. This article delves into the connection between rural hospital closures and Medicare VBC, shedding light on the challenges and potential solutions in the healthcare landscape.

The Financial Struggles of Rural Hospitals:

Rural hospitals across states like Connecticut, Hawaii, Kansas, and Vermont are teetering on the brink of closure due to operating at a loss. Nearly half of these hospitals lack the financial reserves to sustain more than two or three years of losses. The root cause of this predicament lies in private insurance plans paying hospitals less than the actual cost of providing services to patients. While uninsured patients and Medicaid patients contribute to the financial strain, it is the losses incurred from private insurance patients that have the most significant impact on the hospitals' overall financial stability. The consequence of this trend is a widening healthcare disparity for vulnerable rural populations.

The Impending Healthcare Disparities:

The imminent closure of rural hospitals poses a severe threat to healthcare access for rural populations. It is important to note that no other first-world country would allow such a situation to occur for its citizens. The closure of these medical centers will leave communities without vital healthcare services, forcing residents to travel longer distances to receive essential medical care. This not only adds financial burdens but also limits timely access to healthcare, potentially worsening health outcomes for those in need. The urgency of addressing this crisis calls for a concerted effort akin to the Manhattan Project, urging healthcare stakeholders to collaborate and find sustainable solutions.

The Role of Medicare Value-Based Care:

Amidst the challenges faced by rural hospitals, the Medicare Shared Savings Program (MSSP) emerges as a beacon of hope. As the largest VBC system in the nation, the MSSP has been operational since 2012, yielding significant cost savings in healthcare expenditures. In 2021 alone, the program covered 10.7 million beneficiaries and reported savings of $2.0 billion. The upcoming release of the 2022 performance year results will shed further light on the program's effectiveness. The MSSP offers various contract options, including "One-Sided" and "Two-Sided" contracts, allowing participating accountable care organizations (ACOs) to share in savings and losses. Additionally, the program employs different methods for assigning beneficiaries to risk pools, such as "Prospective" or "Retrospective" assignment.

Connecting Rural Hospital Closures with Medicare VBC:

The intersection between rural hospital closures and Medicare VBC lies in the potential for VBC models to address the financial struggles of these medical centers. By incentivizing efficient and cost-effective care delivery, VBC models can help rural hospitals overcome their financial challenges. Participating in VBC programs like the MSSP can provide rural hospitals with an opportunity to align their revenue streams with the actual cost of care, ensuring financial sustainability and continued provision of healthcare services. The success of VBC programs in reducing healthcare expenditures presents a compelling argument for integrating similar approaches to safeguard the future of rural hospitals.

Actionable Advice for Addressing the Crisis:

  • 1. Increase Medicaid reimbursement rates: To alleviate the financial burden on rural hospitals, government initiatives should focus on increasing Medicaid reimbursement rates. By ensuring that hospitals are adequately compensated for providing care to Medicaid patients, the strain on their finances can be reduced, increasing their chances of survival.
  • 2. Foster partnerships between rural hospitals and urban medical centers: Collaboration between rural hospitals and urban medical centers can help distribute resources, expertise, and financial support. By forging strategic partnerships, rural hospitals can access specialized care, share best practices, and develop innovative solutions to address their financial challenges.
  • 3. Advocate for policy reforms: It is crucial for healthcare stakeholders, policymakers, and advocacy groups to join forces in advocating for policy reforms that prioritize the sustainability of rural hospitals. This includes addressing discrepancies in private insurance payment rates and implementing measures to ensure fair compensation for services rendered.


The impending closure of rural hospitals due to financial strain demands immediate attention and action. By recognizing the connection between rural hospital closures and Medicare VBC, healthcare stakeholders can explore innovative solutions to ensure the financial sustainability of these vital institutions. Increasing Medicaid reimbursement rates, fostering partnerships between rural and urban medical centers, and advocating for policy reforms are actionable steps that can contribute to preserving access to healthcare for rural populations. It is imperative that the healthcare landscape embraces the potential of VBC models and works towards a future where no rural hospital is left behind.

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