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Rural Health Information Hub
Rural Health Information Hub

Rural Hospitals

Rural hospitals are an integral part of the healthcare system. Because of their significant contributions to overall community well-being, they are a critical component of communities across rural America. Rural hospitals provide services across the continuum of care from primary care to long-term care.

Recent years, however, have presented challenges for rural hospitals. Factors such as low reimbursement rates, increased regulation, reduced patient volumes, and uncompensated care have caused many rural hospitals to struggle financially. Consequently, as outlined in The 21st Century Rural Hospital [not currently available online], rural hospitals have adapted by modifying their services and structure.

This guide provides information on the following topics related to rural hospitals:

  • Federal designations for rural hospitals
  • Economic impact of rural hospitals
  • Rural emergency department visits
  • Measuring quality of care at rural hospitals
  • Rural health networks and hospital systems
  • Impact of technology on healthcare services provided by rural hospitals
  • Availability of funding for rural hospitals
  • Prominent challenges faced by rural hospitals
  • Rural hospital closures
  • Alternative hospital models

Frequently Asked Questions

What are the various rural hospital designations/provider types?

Due to greater reliance on federal and state payers, low volume, and complexity of services provided, many rural hospitals struggle to remain financially viable under the traditional Medicare Hospital Inpatient Prospective Payment System (IPPS) and Medicare Hospital Outpatient Prospective Payment System (OPPS). As a solution, several payment programs, established by Congress and designated by the Centers for Medicare and Medicaid Services (CMS), provide consideration for special circumstances including the following:

  • Critical Access Hospital (CAH)
    Rural hospitals maintaining no more than 25 acute care beds. CAHs must be located more than 35 miles, or 15 miles by mountainous terrain or secondary roads, from the nearest hospital – unless designated by a state as a Necessary Provider prior to 2006. Unlike hospitals paid prospectively using IPPS and OPPS, CAHs are reimbursed based on the hospital's Medicare allowable costs. Each CAH receives 101% of the Medicare share of its allowed costs for outpatient, inpatient, laboratory, therapy services, and post-acute swing bed services. However, this payment is subject to sequestration reductions. See the Critical Access Hospitals topic guide for more about this facility type.
  • Rural Emergency Hospital (REH)
    Rural hospitals intended to preserve emergency department services, observation care, and other outpatient services in rural areas. An REH cannot have inpatient beds, except those furnished in a distinct part unit licensed as a skilled nursing facility. The REH designation was established in December 2020 in Section 125 of the Consolidated Appropriations Act, 2021 (Public Law 116-260). CAHs and small rural hospitals with no more than 50 beds that were open on December 27, 2020, are allowed to apply for REH status. Each REH is paid under the Outpatient Prospective Payment System (OPPS) rate plus 5% for all outpatient department services provided to Medicare patients and an additional monthly facility payment. See the Rural Emergency Hospitals topic guide for more about this facility type.
  • Rural Referral Center (RRC)
    Rural or urban tertiary hospitals that generally receive referrals from surrounding rural acute care hospitals. Any acute care hospital can be classified for Medicare purposes as an RRC if it meets one of several qualifying criteria based on location, bed size, and/or referral patterns. Some RRCs may also be Sole Community Hospitals or Medicare-Dependent Hospitals. See “Payment Adjustments” under the Acute Care Hospital Inpatient Prospective Payment System section of the Medicare Learning Network: Medicare Payment Systems website for more information about this designation.
  • Sole Community Hospital (SCH)
    A designation based on a hospital's distance in relation to other hospitals, indicating that the facility is the only short-term, acute care hospital serving a community. Distance requirements vary depending on whether a facility is rural and how inaccessible a region is due to weather, topography, and other factors. See “Payment Adjustments” under the Acute Care Hospital Inpatient Prospective Payment System section of the Medicare Learning Network: Medicare Payment Systems website for more information about this designation.
  • Low-Volume Hospital (LVH)
    A designation for hospitals with fewer than 3,800 patient discharges in the previous year which are more than 15 miles from the nearest IPPS acute care hospital. These requirements are not permanent and are subject to Congressional action. Qualifying hospitals receive a payment adjustment up to an additional 25% for every Medicare patient discharge. See “Payment Adjustments” under the Acute Care Hospital Inpatient Prospective Payment System section of the Medicare Learning Network: Medicare Payment Systems website for more information about this designation.
  • Medicare-Dependent Hospital (MDH)
    A designation that provides enhanced payment to support small rural hospitals with 100 or fewer beds for which Medicare patients make up at least 60% of the hospital's inpatient days or discharges. This designation is not available to rural hospitals already classified as a SCH. The MDH designation was established in 1989 for an initial three-year period and continues to require periodic extensions through Congressional action. See “Payment Adjustments” under the Acute Care Hospital Inpatient Prospective Payment System section of the Medicare Learning Network: Medicare Payment Systems website for more information about this designation.
  • Disproportionate Share Hospital (DSH)
    A special reimbursement designation under Medicare and Medicaid designed to support hospitals that provide care to a disproportionate number of low-income patients. Although not a rural-specific designation, the DSH designation allows some rural facilities to remain financially viable.

In addition, there is one long-term CMS demonstration:

What effect do rural hospitals have on the local economy?

Healthcare spending in a community has a significant impact on the local economy. Rural hospitals impact communities through their capacity to attract new businesses and through wages generated by employment. As detailed in the Economic Impact of Rural Health Care, rural hospitals impact their local communities in the following ways:

  • Quality rural health services, including emergency services, help rural communities attract business and industry, as well as retirees.
  • On average, the health sector constitutes 14% of total employment in rural communities, with rural hospitals typically being one of the largest employers in the area.
  • On average, a Critical Access Hospital maintained a payroll of $6.0 million in 2016, and employed 127 people. In 2015, a 26-50 bed rural hospital employed 185 individuals and spent $11.8 million in wages, salaries and benefits on average, and hospitals holding 51-100 beds employed an average of 287 people and spent $19.9 million directly on those employees.

Hospital closures often have a negative impact on the local economy. The Impact of Rural General Hospital Closures on Communities — A Systematic Review of the Literature notes that prior research found that per capita income declined between 2.7-4% and unemployment rates increased between 1.6-3.1% after the closure of a hospital in a rural community.

For more information on the economic impact of healthcare on rural communities, see the Community Vitality and Rural Healthcare topic guide.

What impact does hospital community benefit spending have on rural communities?

The IRS requires tax-exempt, nonprofit hospitals to conduct community benefit activities, beginning with a Community Health Needs Assessment (CHNA) every three years. A 2023 report from the American Hospital Association, shows that rural hospitals spent 10.2% of total expenses on community benefits in fiscal year 2020, including 5% of total expenses on financial assistance and unreimbursed costs from Medicaid and other government programs. Community Impact and Benefit Activities of Critical Access, Other Rural, and Urban Hospitals, 2022 [not currently available online] compares the percentage of Critical Access Hospitals, other rural hospitals, and urban hospitals that offer community benefits such as enrollment assistance services, health fairs, and health screenings. Community Benefit Insight, a website developed by RTI International, allows users to access community benefit spending information from tax-exempt hospitals nationwide and compare the data for up to five hospitals.

For information on CHNAs, see What are the requirements for nonprofit hospitals to conduct Community Health Needs Assessments (CHNAs)? on the Conducting Rural Health Research, Needs Assessments, and Program Evaluations topic guide.

What services are provided at rural hospitals versus urban hospitals?

Community Impact and Benefit Activities of Critical Access, Other Rural, and Urban Hospitals, 2022 [not currently available online] compares services available at Critical Access Hospitals, rural hospitals, and urban hospitals. As might be expected, most services are more frequently available in urban hospitals than rural hospitals. There are a few exceptions for services such as long-term care, home health services, and health fairs, which may be more frequently offered by a rural hospital because they would not otherwise be available in the community. Rural Hospital Service Lines: Changes Over Time and Impacts on Profitability explores the increase and decrease of 37 service line offerings in rural hospitals between 2010 and 2021. Additionally, Obstetric Care Access at Rural and Urban Hospitals in the United States shows that in 2022, 52.4% of rural short-term acute care hospitals did not offer obstetric care compared to 35.7% of urban hospitals.

Changes in Provision of Selected Services by Rural and Urban Hospitals between 2009 and 2017 [not currently available online] examines the trends in the provision of hospital-based services over time. While the percentage of urban hospitals offering labor and delivery, obstetrics, home health, and skilled nursing facilities (SNF) services increased between 2009 and 2017, the percentage of rural hospitals offering these services declined during this period.

The Centers for Medicare & Medicaid Services approves Critical Access Hospitals and rural prospective payment system (PPS) hospitals with fewer than 100 beds to furnish swing bed services. A swing bed is a bed that can be used for either acute care or post-acute care that is equivalent to SNF care and provides participating hospitals with the flexibility to meet unpredictable demands for acute and SNF care. For more information about swing beds, see What is a swing bed?

How does rural emergency department volume and visit type differ from urban areas?

According to the National Hospital Ambulatory Medical Care Survey: 2021 Emergency Department Summary Tables , 77.2% of all emergency department (ED) visits were in metropolitan areas, with 17.4% of ED visits in nonmetropolitan areas. Estimates of Emergency Department Visits in the United States, 2016-2022, shows that nonmetropolitan emergency departments experienced a higher visit rate per capita than metropolitan emergency departments for the ten leading primary diagnoses between 2016 and 2019. A 2024 analysis from the Maine Rural Health Research Center found that, after adjusting for health and sociodemographic characteristics, rural and urban working age adults had similar odds of visiting an emergency department for a non-urgent concern between 2014-2017. See the Healthcare Access in Rural Communities topic guide for information on the importance of primary care and barriers to healthcare access in rural areas.

Despite the higher per capita rates of emergency department use in rural areas, rural EDs typically have lower volumes due to the lower population density of their service areas. These lower volumes mean that rural EDs are less likely to have specialized staffing; a 2018 Annals of Emergency Medicine article concludes that rural EDs are less likely to be staffed by emergency medicine physicians and more likely to be staffed by non-emergency medicine physicians, such as family medicine or internal medicine physicians. Rural EDs were also slightly more likely to be staffed by advanced practice providers. National Study of the Emergency Physician Workforce, 2020 states that large and small rural areas had fewer emergency medicine physicians per capita than urban areas in 2020.

For details on emergency services provided by Critical Access Hospitals, see the Critical Access Hospital topic guide.

For additional information on rural emergency medical services, including statistics and data on trauma-related deaths and nonfatal injuries treated in emergency departments, see the Rural Emergency Medical Services (EMS) and Trauma topic guide.

What do we know about quality of care at rural hospitals?

The quality of care provided at hospitals, both urban and rural, is monitored by state and federal agencies to ensure the safe delivery of care. Although many quality measures are standardized, there are several ways to define and measure quality such as patient experience, cost effectiveness, patient outcomes, and following evidence-based guidelines for care.

Performance Measurement for Rural Low-Volume Providers, a 2015 report from the National Quality Forum (NQF), and a September 2024 Medicare Payment Advisory Committee presentation, highlight some challenges to healthcare quality in rural areas including fewer providers, lack of information technology, and many demands falling on fewer people. Furthermore, it can be difficult to compare rural and urban quality measures due to low volume of a given type of case or procedure in rural settings and differences in the populations being served. Oftentimes rural hospitals don't have a sufficient volume of patients for certain quality measurements to allow for meaningful comparisons.

A June 2017 brief from the North Carolina Rural Health Research Program, CMS Hospital Quality Star Rating: for 762 Rural Hospitals, No Stars Is the Problem, reports that a majority of the hospitals excluded from the April 2017 Center for Medicare & Medicaid Services (CMS) Hospital Quality Star Rating list were rural. Hospitals that don't meet the minimum number of cases to report are not given a star rating. The brief points out that a consumer looking at the ratings may not realize that lack of a star rating does not indicate low quality and may simply be due to a lack of sufficient data.

Addressing Low Case-Volume in Healthcare Performance Measurement in Rural Providers: Recommendations from the MAP Rural Health Technical Expert Panel, a 2019 NQF report, describes healthcare quality measures and data collection and analysis techniques that address the challenges posed by small rural hospitals and other low case-volume providers. The 2020 report Rural-Relevant Quality Measures for Testing of Statistical Approaches to Address Low Case-Volume identifies 15 rural-relevant quality measures that could be used to test approaches to address this problem.

For more information on issues related to quality of care in rural hospitals, see the Rural Healthcare Quality topic guide. For more information about quality at Critical Access Hospitals, see What are the quality assurance and quality improvement options for CAHs? on the Critical Access Hospitals topic guide.

How are rural hospitals utilizing health networks and hospital systems to benefit rural communities?

Affiliations between rural hospitals and other healthcare providers or community organizations can be informal short-term collaborations around a specific need, formal long-lasting partnerships, or somewhere in between. The National Cooperative of Health Networks Association (NCHN) defines a health network as “a collaboration of at least three like-minded entities that join together to improve health outcomes for rural communities and advance a common mission.” A multihospital health system is defined by the American Hospital Association's Fast Facts on U.S. Hospitals, 2024, as “two or more hospitals owned, leased, sponsored, or contract-managed by a central organization.” According to the AHA, a single freestanding hospital may also be considered a hospital system by “bringing into membership three or more, and at least 25%, of their owned or leased non-hospital pre-acute or post-acute health care organizations.” The Rural Hospital and Health System Affiliation Landscape – A Brief Review [not currently available online] provides an overview of different types of network and system affiliations.

According to Changes in Service Offerings Post-System Affiliation in Rural Hospitals [not currently available online], 61% of rural prospective payment system (PPS) hospitals were affiliated with healthcare systems in 2020, up from 46.8% in 2009. Critical Access Hospital affiliation with hospital systems increased from 38.7% in 2009 to 45.9% in 2020. Health System Affiliation and Characteristics of Inpatient Stays at Rural and Metropolitan Hospitals, 2016 highlights that 66.6% of all inpatient stays at rural hospitals areas took place at a system-affiliated facility.

Rural Hospitals' Perspectives On Health System Affiliation [not currently available online] outlines challenges facing rural hospitals that may motivate executives to consider health system affiliation, including impediments to value-based performance and contracting, lack of purchasing power, underdeveloped clinical and financial data systems, inadequate training and support for leaders and staff, and more. The Rural Hospital and Health System Affiliation Landscape – A Brief Review [not currently available online] outlines factors rural hospitals, Critical Access Hospitals, and health systems may consider when they pursue affiliation agreements. Rural hospitals and healthcare networks and systems can combine each member's resources and expertise to improve the health of the community while reducing overall costs. For example, members of a rural healthcare network may pool resources to purchase an expensive piece of medical equipment or share administrative staff. Health systems may pursue agreements with rural hospitals to increase their market share or gain territory, increase subspecialty referrals, and reduce costs, among other reasons. By working together, participants in health networks and systems aim to improve the clinical and financial performance of rural hospitals. However, Access, Quality, and Financial Performance of Rural Hospitals Following Health System Affiliation found that while rural hospitals saw increased margins after affiliating with a health system, the now-affiliated rural hospitals also experienced reductions in obstetric and primary care service lines and onsite imaging technologies.

How is technology changing healthcare provision in rural hospitals?

Technological advancements have the potential to increase access to, and the quality of, healthcare services in rural communities. These include two prominent examples:

  • Telehealth services – Telehealth services allow for the remote delivery of healthcare and information via telecommunications technology. According to The Role of Telehealth in Achieving a High Performing Rural Health System: Priorities in a Post-pandemic System, a 2023 publication from the Rural Policy Research Institute (RUPRI) Health Panel, telehealth services help improve access to specialty services, allow patients to stay in the community, and reduce healthcare costs.
  • Health Information Technology (HIT) – HIT is the use of computers to store, protect, retrieve, and transfer healthcare information, enabling healthcare professionals to better provide care due to improved contextual awareness of the patient's health status. Interoperable Exchange of Patient Health Information Among U.S. Hospitals: 2023, a 2024 brief from the Assistant Secretary for Technology Policy/Office of the National Coordinator for Health Information Technology, notes that rural hospitals were less likely than urban hospitals to routinely engage in the four domains of interoperable exchange — send, receive, find, and integrate. Additionally, 41% of rural hospitals did not engage in all four domains at least “sometimes,” compared to 23% of urban hospitals.

Technologies such as these have advanced communication between physicians and patients and offer innovative methods of overcoming challenges providing healthcare services to rural communities. To learn more about the utilization of telehealth services and HIT in rural areas, see the Telehealth and Health Information Technology in Rural Healthcare topic guide.

What funding is available for rural hospital capital improvement projects?

Capital funding is the term used for financing construction costs and/or major purchases, such as:

  • Renovation or expansion of the hospital
  • Construction of a new facility
  • Major equipment, such as ambulances, CT scanners, telemedicine equipment, and health information technology systems

Several funding opportunities are available for rural hospitals. See the Capital Funding for Rural Healthcare topic guide to learn about options for financing a new facility, renovating an existing facility, or purchasing major equipment.

What are the most prominent challenges faced by rural hospitals?

There are many challenges to operating a hospital in the current healthcare environment:

  • Remote geographic location – This barrier is at the root of the challenges that rural hospitals face. Low population density results in low volumes and high relative operational costs.
  • Modest budgets – Low population density tends to keep hospital size small and patient volume low, thereby keeping hospitals' budgets modest. Lean budgets with limited flexibility in cash flow make necessary capital investments in the facility or equipment difficult. This leaves facilities vulnerable, with little capacity to keep services and equipment up to current standards.
  • Workforce recruitment and retention – Workforce is an ongoing challenge closely linked to the remote geographic location of the healthcare facility. Without an adequate workforce, it is difficult for hospitals to provide necessary and high-quality services to meet the needs of their communities. To read about the factors that make recruiting, retaining, and maintaining an adequate workforce difficult for rural hospitals, see the Recruitment and Retention for Rural Health Facilities and Rural Healthcare Workforce topic guides.
  • Demographics of rural America – Community Sociodemographics and Rural Hospital Survival Analysis [not currently available online] explains that rural hospitals at risk of financial distress are more likely to serve populations with lower incomes, higher unemployment, and higher rates of self-reported poor health status.
  • Rapid changes within healthcare – Changes to reimbursement, quality reporting requirements, and the related transition to value-based care and focus on population health are creating new opportunities for rural hospitals but also require new approaches and adaptation. A 2019 report from the American Hospital Association, Rural Report: Challenges Facing Rural Communities and the Roadmap to Ensure Local Access to High-Quality, Affordable Care, discusses how these changes are impacting rural hospitals.
  • Cybersecurity – Hospital Cyber Resiliency Initiative Landscape Analysis, a 2023 report from the U.S. Department of Health and Human Services HHS 405(d) Program and the Health Sector Coordinating Council Cybersecurity Working Group, outlines recent cybersecurity threats facing hospitals and assesses hospitals' current state of cybersecurity preparedness. Understanding the Rise of Ransomware Attacks on Rural Hospitals describes trends in ransomware attacks on rural hospitals between 2016 and 2021 and the types of rural hospitals that experienced ransomware attacks during this period. Recovering from a Cybersecurity Attack and Protecting the Future in Small, Rural Health Organizations, a 2023 Rural Monitor article, describes the impact cyber-attacks can have on rural facilities. For more information, see the Cybersecurity for Rural Healthcare Facilities topic guide.

How many rural hospitals are closing, and why do they close?

According to the North Carolina Rural Health Research Program, between January 2010 and January 22, 2025 86 rural hospitals closed and 64 hospitals converted to another facility type such as an outpatient clinic or nursing or rehabilitation facility. See the North Carolina Rural Health Research Program's Rural Hospital Closures for current information on rural hospital closures in both a list and map format. Rural Hospital Closures: Number and Characteristics of Affected Hospitals and Contributing Factors, a 2018 report from the Government Accountability Office, and News Media Coverage of Rural Hospital Closures and the Causes, a 2024 brief from the North Carolina Rural Health Research Center, examine the causes and impact of rural hospital closures. Community Sociodemographics and Rural Hospital Survival also explores the socioeconomic and health outcomes in rural counties that experienced hospital closures. Rural Health Research Recap: Rural Hospital Closures: 2023 Update [not currently available online] summarizes findings on rural hospital closures from FORHP-funded rural health research centers.

What other alternative hospital models have been used or proposed to serve rural communities?

The Frontier Community Health Integration Project (FCHIP) is a Centers for Medicare & Medicaid Services (CMS) demonstration program to develop and test new models for the delivery of healthcare services in frontier areas. Ten Critical Access Hospitals in Montana, Nevada, and North Dakota participate in the demonstration, which provides enhanced payment for certain services with the aim of keeping patients in the community who might otherwise be transferred to distant providers. In December 2020, the U.S. Department of Health and Human Services published findings for the initial demonstration period in Frontier Community Health Integration Project (FCHIP) Demonstration Evaluation: Final Evaluation Report. While the initial demonstration period ended in 2019, the Consolidated Appropriations Act, 2021 (Public Law 116-260) authorized a five-year extension period for participating Critical Access Hospitals. See the Testing New Approaches section for more information about FCHIP and other rural-specific and rural-relevant payment and service delivery models, as well as historical programs that have tested rural healthcare delivery and payment models.

Who can I contact for information and technical assistance related to rural hospitals?

For information on small or rural hospitals
American Hospital Association Rural Health Services

For support, resources, and technical assistance
State Offices of Rural Health

For technical, policy, and operational assistance of rural health issues
CMS Regional Office Rural Health Coordinators

Last Updated: 3/7/2025
Last Reviewed: 1/20/2025