These hospitals serve smaller, spread-out populations, keeping emergency departments open 24/7 and maintaining specialists on-call, all while facing unpredictable patient volumes and few commercial patients. The financial strain is immense, but instead of supporting these vital providers, insurers consistently underpay, delay reimbursements, and drown them in red tape. It’s no wonder financial ruin is the fate of so many rural systems.
Insurers Are Gutting Rural Healthcare
- Payors typically reimburse rural hospitals at lower rates than urban ones for the same care, regardless of the financial implications for the system (e.g., forcing them closer to closure). Since 2020, patient service margins at rural hospitals have decreased even more, with higher losses on patients with private health plans, including Medicare Advantage (MA).
- When hospitals push back, insurers retaliate. Small facilities are left with a difficult choice: accept unsustainable payments or risk being dropped from networks altogether.
Leaders at Arkansas-based Ozarks Community Hospital recently found the system was losing the most money on commercial payers.
“The truth is the more we do for patients covered by commercial payers (including Medicare Advantage plans) the more money we lose,” wrote Paul Taylor, CEO of Ozarks Community Hospital, in an open letter.
And Ozarks isn’t alone.
Medicare Advantage Is Making It Worse
MA was marketed as a way to improve patient outcomes and lower costs, but in rural America, it’s doing the opposite.
- Hospitals lose money on nearly every MA patient they treat. Insurers refuse to even match the rates of traditional Medicare.
- MA plans limit patient access. Narrow networks force patients to drive even further for covered care, bypassing local hospitals that should be their first stop.
- Network adequacy laws aren’t enforced. Insurers manipulate the system to meet federal requirements while still underpaying rural providers.
This isn’t just recklessness. It’s a calculated strategy to squeeze rural hospitals out of existence.
Rural Hospitals Must Fight Back
Health systems can’t wait for insurers to act in good faith. They never will. It’s time to get loud and push for real change. Here’s how:
- Regulate Payor Behavior – Lawmakers must enforce stronger network adequacy standards for MA plans and penalize insurers for chronic underpayment. If insurers want access to rural patients, they must pay rural providers fairly.
- Demand Fair Reimbursement – Health systems must renegotiate bad contracts and challenge payment models that devalue rural care. If insurers won’t step up, hospitals must be willing to use termination as leverage.
- Expose Payor Tactics – The public needs to understand that hospitals aren’t shutting down because they’re inefficient, they’re being starved out. Health systems must control the narrative and hold insurers accountable for prioritizing profits over patient access.
Bottom Line:
Insurers aren’t just part of the rural healthcare crisis—they’re leading it. If rural hospitals go down, entire communities will be left without care. The time to fight back isn’t someday—it’s right now.
