Affordability Starts Close to Home: Why Rural Hospitals Are Essential to Lowering Healthcare Costs
Healthcare affordability discussions often focus on premiums, deductibles and drug prices. Those costs matter. But for the more than 46 million Americans who live in rural communities, affordability begins with something even more fundamental: whether care is available close to home.
Local access to care is one of the most powerful — and often overlooked — drivers of affordability in our healthcare system. The presence of a hospital nearby helps patients avoid unnecessary travel expenses, reduces delays in care, makes available timely treatment for emergencies, and connects communities to essential services ranging from primary care to cancer treatment and behavioral health. Yet, these options are slowly vanishing in rural communities. When hospitals struggle or disappear, the consequences extend beyond individual patients to affect the health, stability and economic well-being of entire communities.
Maintaining Local Access Is Not Only Good for Health Outcomes — It’s Also Good for Affordability
For the 1 in 5 Americans who live in rural areas, the local hospital is often much more than a healthcare facility. It is a critical community institution that supports local jobs, economic development, emergency preparedness and the overall vitality of rural communities. At the same time, it provides 24/7 emergency services, care for heart attacks and strokes, obstetric services, trauma response, and routine care that keeps people healthy and productive. Increasingly, it is the hub that connects patients to telehealth and regional systems of care.
When care disappears from a community, costs do not disappear with it. Instead, they shift to patients and families. Longer trips to receive services mean additional transportation costs, missed work, added childcare expenses and delays in obtaining care, often resulting in conditions that become more expensive to address. Research cited in recent rural hospital analyses shows that rural hospital closures are associated with approximately a 50% increase in emergency department transport times and higher mortality for time-sensitive conditions.1
Not only do rural hospitals allow patients to receive appropriate care locally, but they also reduce overcrowding at larger facilities, improve care coordination and serve as critical access points during natural disasters, infectious disease outbreaks and other emergencies. Maintaining these local capabilities is often far less costly than replacing them after they are lost.
Despite Their Importance, Rural Hospitals Are Under Extraordinary Pressure
Many rural hospitals operate with low patient volumes, an older and sicker patient population, workforce shortages and aging infrastructure. Medicare and Medicaid — the dominant payers in rural communities — often do not cover the full cost of providing care. For instance, according to recent AHA data, Medicare pays only 83 cents for every dollar spent caring for patients.2
In rural communities, where these public programs account for approximately 72% of hospital discharges, such shortfalls threaten access to care itself.3 Rural hospitals incurred more than $7 billion in Medicare and Medicaid underpayments in 2020.4 At the same time, they provided nearly $5 billion in uncompensated care.5 In addition, they are under increasing pressure from Medicare Advantage plans that frequently reimburse at rates below traditional Medicare while also imposing burdensome prior-authorization and administrative requirements. As a result of these pressures, more than 150 rural hospitals have closed or converted since 2010.6
The Result Is a Growing Affordability Paradox
Rural hospitals are among the strongest tools available to keep care affordable for patients, yet many of these same hospitals struggle to remain financially sustainable. The consequences for affordability are significant. Patients frequently face longer travel distances, delayed care, greater out-of-pocket costs and worse health outcomes. What may appear to be a reduction in local healthcare spending often translates into higher overall costs for patients and the healthcare system alike.
That is why preserving local access must be viewed as an affordability strategy. Policies that support flexible payment models, strengthen rural hospital financing, expand telehealth, invest in infrastructure and ensure fair reimbursement are not simply about helping hospitals; they are also investments in patients’ ability to receive timely, affordable care in their own communities.
The challenges faced by rural hospitals are driven by structural realities that policymakers must recognize. The AHA has long advocated for policies that preserve local access to care while creating a more sustainable and affordable rural healthcare system. In addition, the AHA recently released the report “Making Health Care More Affordable: A Blueprint to Lower Costs, Improve Access and Enhance Quality,” outlining several practical steps that can help address the underlying drivers of health spending rather than continuing to simply shift costs.
For rural America, healthcare affordability means recognizing a simple but essential truth: The most affordable care is often the care that remains available close to home.
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1 “Impact of Rural and Urban Hospital Closures on Inpatient Mortality.” NBER August 2019. https://www.nber.org/papers/w26182; “Do Hospital Closures Affect Patient Time in an Ambulance?” Rural & Underserved Health Research Center February 2019. https://uknowledge.uky.edu/ruhrc_reports/8/
2 https://www.aha.org/costsofcaring
4 https://www.aha.org/2022-09-07-rural-hospital-closures-threaten-access
5 https://www.definitivehc.com/blog/analyzing-uncompensated-care-by-hospital-location
6 https://www.shepscenter.unc.edu/programs-projects/rural-health/rural-hospital-closures/