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Rural Hospitals’ Success Under ACA Marred by Delays, Supreme Court Ruling

In the aftermath of the Affordable Care Act’s passage, some stakeholders expressed concern that rural hospitals would struggle to meet the law’s requirements and would be forced to shut down or merge with larger health systems. However, nearly four years later, the jury is still out on how rural hospitals have been affected by the law.  

This edition of “Road to Reform” takes a look at the challenges facing rural hospitals and how the ACA might address them. 

Here’s a quick overview of the current rural hospital landscape.

Numbers: According to data compiled by the American Hospital Association, there are 1,980 rural community hospitals in the U.S. As of June 30, the Flex Monitoring Team estimated that there were 1,326 critical access hospitals — which are defined as hospitals located in a rural area, more than 35 miles from another hospital, that typically have a 24/7 emergency department and no more than 25 inpatient beds. Critical access facilities, a subset of rural hospitals, receive an additional 1% payment from Medicare.

Mergers and acquisitions: Data from Irving Levin & Associates show the overall number of hospital mergers and acquisitions declined by 21.5% between 2013 and 2012. Among rural hospitals, the annual number of mergers and acquisitions declined between 2010 and 2012, a data brief by the North Carolina Health Research Program shows.

Closures: Meanwhile, the number of rural hospital that closured has increased since the ACA was signed into law, from three closures in 2010 to 13 closures in 2013 and 13 so far this year, according to the NC Health Research Program.

In an interview with California Healthline, Mark Holmes, director of the NC Health Research Program, said, “The ACA is getting a lot of credit and blame, but a lot else has happened.” Factors such as the economic recovery also have affected rural hospitals.

The ACA Provisions Directly Affecting Rural Hospitals

Although the health care reform law was not tailored to suit the specific needs of rural and critical access hospitals, such providers are poised to benefit from the law. Here are a few examples of provisions covering rural hospitals.

340B program expansion: Critical access hospitals now can participate in the federal government’s 340B drug discount program, meaning they can receive certain outpatient prescription drugs at a lower price.

Accountable care organizations: Just like other hospitals, rural facilities can create ACOs, which are designed to help coordinate services and improve efficiency and offer the possibility of shared savings.

Health insurance exchanges: The ACA’s health insurance exchanges were touted as a way to help achieve universal coverage and reduce the amount of uncompensated care provided. Rural areas generally have higher numbers of uninsured residents, meaning providers in those areas could benefit from an increase in health coverage.

Pilot projects to test new care models: The ACA established several demonstration projects, including the frontier community health integration project demonstration, which aims to develop and test new care models in rural areas to improve health outcomes and reduce Medicare costs.

Value-based purchasing program: Critical access hospitals must be included in the program’s quality reporting requirements and measurements by 2012, which would increase transparency of hospital practices.   

The ACA Provisions That Missed Expectations 

Not all of the ACA’s promised improvements for rural hospitals have become reality.

According to Kaiser Health News, fewer than one in 20 critical access hospitals are part of an ACO. Leah Binder of the Leapfrog Group said that many rural hospitals do not have a large enough patient base to form ACOs and, therefore, struggle to take part.

Meanwhile, the frontier community health integration pilot has been limited to five states — Alaska, Montana, Nevada, North Dakota and Wyoming — and no critical access hospital participants have been announced yet.

Further, Congress has yet to provide funding for critical access hospitals to receive bonuses or penalties based on quality.

Priya Bathija, senior associate director of policy at the American Hospital Association, told California Healthline that “there is a sentiment from critical access hospitals that they want to participate in those programs, and some are publicly reporting their quality data.” She noted that critical access hospitals could benefit from such a program that takes into account the hospitals’ lower patient volume.

Another challenge for rural hospitals is that the Supreme Court’s ruling to allow states to opt out of the law’s Medicaid expansion has created a greater financial burden on hospitals in non-expansion states, Bathija said. A findings brief from the NC Rural Health Research Program notes that of the 11 states not expanding Medicaid at the time of its research, six — Arkansas, Maine, Mississippi, Montana, South Dakota and Wyoming — had more than 20% of their populations residing in rural areas.

Holmes, also an associate professor of health policy and management at the University of North Carolina-Chapel Hill, said, “Rural areas were generally more uninsured and although a lot of [ACA] provisions were designed to mitigate that gap in some states,” it has gotten worse because some states with large rural populations declined to expand their Medicaid programs. According to Holmes, it’s “not a design or implementation issue, that is just how things transpired.”

The Road Ahead

Despite the current atmosphere, Holmes said he expects the ACA will eventually benefit rural hospitals, but it will take a few years before those benefits are tangible.

However, some industry experts say that rural hospitals have had to resort to mergers to continue to survive. And “the jury is still out on how [mergers] will play out for rural communities,” Binder said.

In the meantime, CMS appears to be addressing some of the ACA provisions that rural hospitals struggled to meet. Just this month, CMS announced the ACO Investment Model, which aims to help small and rural providers develop the infrastructure necessary to thrive in Medicare’s ACO program.

Around the nation imposter: The Washington Post‘s “Wonkblog” takes a look at a private website called and how it could cause confusion among consumers who are trying to reach the federal government’s health insurance exchange.

Partisan discord: Modern Healthcare reports that a political standoff could be brewing as Republicans continue to criticize the ACA’s risk corridor program as a “bailout” for insurers, while Democrats say it is designed to encourage participation in the law’s insurance exchanges. 

KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. Together with Policy Analysis and Polling, KHN is one of the three major operating programs at KFF (Kaiser Family Foundation). KFF is an endowed nonprofit organization providing information on health issues to the nation.

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