Many community hospitals in rural areas have reached a tipping point: They must anticipate and respond to the challenges of an ever-evolving healthcare landscape.
As we move into 2025, it’s important for hospital leaders to create and execute innovative and well-crafted strategies to provide quality care without sacrificing their institution’s bottom-line.
Rural Healthcare’s Fragile Condition
A CHC survey of community hospital executives on financial resilience provided more evidence of rural healthcare’s fragile condition. The survey, released in 2024, found that only about 30 percent of the respondents reported excellent or good financial health, while the rest ranked average or poor. Among chief concerns were workforce-related issues, revenue cycle and reimbursement issues, and the growth of Medicare Advantage plans.
Another area of concern is the risk of losing tax-supported funding despite their value to their communities. More and more, financially stretched rural taxpayers have voted against approving public funding for their hospitals, and often, they are the community’s only hospital.
Small-town hospitals require community support to help them navigate the challenges that lie ahead. Their value is essential to a community’s health and well-being, especially during catastrophic public health emergencies like the coronavirus pandemic. A case in point: Due to overcrowded conditions, some metropolitan hospitals didn’t have enough beds to treat COVID-19 patients during the pandemic.
Lately, there has been speculation over how the outcome of federal elections will affect rural hospitals. During times of transition, it’s more important than ever for hospital leaders to communicate to all their stakeholders about how policies impact their ability to provide care and remain financially resilient.
Strategies for Financial, Operational Improvement
Hospital leaders constantly seek expense-reduction and revenue-generation strategies to overcome potential financial and operational challenges. Here are a few strategies they should include:
Stay Informed: Hospital leadership and its board must increase operational scrutiny, especially if the hospital is experiencing financial turmoil. That allows them to take the proper actions to embark on a turnaround, if necessary. A hospital with a strong balance sheet may have time to correct its financial troubles. But it may be too late for a turnaround for a poorly performing hospital with a weak balance sheet.
Educate Business Owners and Government Officials: It is important to meet and educate local businesses and legislative officials about hospital operations’ complexities, such as the reimbursement rate process and other activities affecting performance. Their understanding of healthcare delivery and its intrinsic value to the community is necessary to garner their funding support.
Seek Alignment: Running a hospital is extremely costly, particularly for a small independent one. Hospitals can minimize performance-related issues by aligning to share resources, such as creating relationships with neighboring hospitals, regional health systems, and business partners.
Establish and Maintain Tax-Funded Support: Manyrural hospitals have achieved financial stability because a local tax entity provides funding, a lifesaver for hospitals facing rising expenses and declining payments.
Implement Strategies for Resilience and Growth: Other strategies that offer rural hospitals greater resilience and growth opportunities include:
- Seeking state and federal grants to help fund operations, exploring loan restructuring to reduce debt obligations.
- Responding quickly to avoid increasing the risk of bond covenant violations.
- Monetizing hospital services to create new revenue streams.
- Launching training initiatives to broaden the knowledge and expertise of clinical staff and find better ways to attract and retain workers.
- Conducting a comprehensive operational assessment to increase financial and operational efficiencies.
- Embracing new and innovative tools and practices. AI-enabled remote patient monitoring, point-of-care diagnostics, Hospital-at-Home models, and other modern approaches improve patient outcomes, experiences, and access to healthcare while reducing costs.
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Jim Kendrick
Jim Kendrick is the Chief Executive Officer of Community Hospital Corporation (CHC) and serves as Board Chair for the Texas Hospital Association. With 30 years in non-profit and for-profit healthcare environments, and positively influenced by family members in clinical and administrative roles, he shares valuable insights for rural and community hospitals in the year ahead.
