New analysis warns that Medicaid cuts, expiring premium tax credits, and Medicare Advantage pressures are accelerating service reductions and closures across rural America.
Access to care in rural America is increasingly at risk as workforce shortages, financial strain, and policy changes threaten the ability of rural hospitals to maintain essential services, according to a new report from the American Hospital Association (AHA).
The report finds that more than 46 million Americans rely on rural hospitals, many of which are operating on increasingly fragile financial footing. Longstanding challenges—including low patient volumes, workforce shortages, geographic isolation, and inadequate reimbursement—are being compounded by Medicaid reductions, the expiration of enhanced premium tax credits (EPTCs), and the rapid growth of Medicare Advantage.
“Rural hospitals are precious pillars of community life, delivering essential care, rewarding jobs and economic stability for millions of Americans,” says Steve Walsh, AHA president and CEO, in a release. “The pressures on rural providers are only intensifying and the warning signs have become impossible to ignore. Through urgent and collaborative policy action, we can protect patients in rural communities and ensure they continue to get the care they need close to home, when and where they need it most.”
Financial Instability and Service Losses
More than 40% of rural hospitals operate at a financial loss, and hundreds are at high financial risk, according to the AHA. Since 2010, more than 150 rural hospitals have closed or converted, 331 have eliminated obstetric services, and 448 have stopped offering chemotherapy services, forcing many patients to travel farther for treatment.
Medicare and Medicaid cover roughly 72% of rural hospital discharges, and both programs pay below the cost of care. In 2024, rural hospitals incurred more than $7 billion in Medicare underpayments alone—a 26% increase from 2020—and provided more than $5 billion in uncompensated care.
Workforce shortages are deepening the strain. Rural areas average only 30 physicians or specialists per 100,000 people, compared to 263 in urban areas, and the rural physician workforce is projected to decline by more than 20% by 2030 due to retirements. Roughly 4 in 10 rural hospitals also operate aging facilities in need of infrastructure and technology upgrades.
Policy Pressures Intensify
The One Big Beautiful Bill Act includes roughly $1 trillion in Medicaid cuts, a program that covers about 16 million rural Americans and nearly 50% of rural births. The AHA estimates One Big Beautiful Bill Act will cut nearly $140 billion in federal Medicaid spending from rural areas, increase rural hospital uncompensated care costs by nearly $20 billion, and put more than 300 rural hospitals at risk of closure, conversion, or service reductions.
One Big Beautiful Bill Act also created the Rural Health Transformation Program, providing $50 billion over five years. However, the Centers for Medicare & Medicaid Services has required that only 15% of Rural Health Transformation Program funding can be used for provider payments, which the AHA says limits its ability to offset Medicaid reductions.
The expiration of the EPTCs is projected to cause a $1.6 billion revenue reduction and a more than 10% increase in uncompensated care costs for rural hospitals in 2026 alone. Rural states are projected to see a 30% decrease in Marketplace coverage and a 36% increase in their uninsured populations.
Medicare Advantage is also exerting pressure on rural facilities, according to the report. An AHA analysis found that in 2024, Medicare Advantage plans paid rural hospitals just 91% of Traditional Medicare on a cost basis, and even cost-based critical access hospitals collected only 95%. The AHA estimates this lack of payment parity cost rural hospitals more than $1 billion in 2024. Prior authorization requests from Medicare Advantage plans reached nearly 53 million in 2024, and Medicare Advantage patients experience hospital lengths of stay 9.6% longer before discharge to post-acute care than clinically similar Traditional Medicare patients.
Rural hospital closures are associated with roughly a 50% increase in emergency transport time and a significant rise in mortality for time-sensitive conditions. Closures have also been linked to up to a 4% decrease in per capita income and a significant reduction in the local labor force.
Policy Priorities
To strengthen the viability of rural hospitals, the AHA report recommends policymakers:
- Reverse harmful Medicaid cuts.
- Direct Rural Health Transformation Program funds to rural hospitals.
- Modernize and strengthen rural payment models.
- Preserve and expand telehealth access.
- Address harmful corporate insurer practices.
- Invest in the rural workforce.
- Protect access to the 340B Drug Pricing Program.
The report concludes that while rural hospitals continue to adapt through telehealth partnerships, clinically integrated networks, and care redesign, innovation alone cannot overcome the financial and structural challenges facing rural healthcare, and that sustained policy action is needed to preserve access to care.
