Dive Brief:
Cuts to Medicaid under consideration in Congress could push already struggling rural hospitals further into the red, according to an analysis from the Chartis Center for Rural Health.
If revenue from the safety-net program were cut by 15%, rural hospitals would lose more than $1.8 billion, according to the healthcare consultancy. That figure rises to over $2.4 billion if Medicaid revenues are cut by 20%.
Obstetrics would be hit hard by Medicaid cuts, according to Chartis. Nearly 50% of rural births are currently covered by the program, and cuts could grow obstetrics care deserts.
Dive Insight
Lawmakers are targeting cuts to Medicaid and other programs to fund President Donald Trump’s tax cuts and curb what they say is “waste, fraud and abuse” in the federal government.
The House narrowly passed its reconciliation bill in late May, which called for significant cuts to Medicaid and mandated beneficiaries to meet work requirements to maintain coverage. It also increased the frequency of eligibility checks.
Last week, Senate Republicans released their own version of the reconciliation bill, which included even deeper cuts to Medicaid. The bill expands work requirements and imposes more restrictions on provider taxes. Lawmakers will debate changes to the bill in the coming weeks, with the goal of getting the bill to Trump’s desk by July 4.
Cuts to Medicaid could hurt rural hospitals, many of which rely more heavily on revenues from the safety-net program, according to Chartis, which analyzed cost report data from more than 2,000 facilities.
Rural hospitals are already struggling: Nearly 50% of rural hospitals are operating at a loss, with over 400 vulnerable to closure. Staffing shortages, hospital consolidation and unfavorable payer mix and reimbursement have hit rural hospitals’ bottom lines in recent years and contributed to an uptick in closures.
At the median, revenues from Medicaid provide $3.9 million to rural hospitals’ bottom lines, or approximately 9% of total hospital net revenue, according to Chartis. In some states, Medicaid provides an even greater median amount of revenue: For rural hospitals in Louisiana, New Mexico, Kentucky, Alaska, Arizona and Washington, Medicaid represents more than 15% of total net revenue.
Cutting those funds could significantly impact rural hospitals, especially considering that the median rural hospital operating margin is less than 1%, according to Chartis.
Decreased funds from Medicaid could force rural hospitals to close. It could also impact access to obstetrics services, already at risk in rural communities.
Medicaid only reimburses about 50% of what private insurers pay for childbirth-related care, and obstetrics is also among the most expensive services for hospitals to provide, according to the report. The disparity decreased access to rural obstetrics care. Nearly 300 rural hospitals stopped offering obstetrics services between 2011 to 2023.
“Without local access to OB, expecting mothers must travel greater distances for prenatal care, labor, and delivery—invariably increasing the risk to mother and baby,” the report said. “Access to prenatal and postnatal care are contributing factors to this crisis, and cuts to Medicaid would likely intensify the financial pressures on services such as OB and further restrict access.”
