PROBLEM STATEMENTS:

(a) Rural populations are some of the most vulnerable in the nation. Our rural communities face unique challenges and barriers to care: limited resources, geographic isolation, low population density, and persistent poverty. Rural Americans are, on average, older, sicker, and poorer than their distant urban peers, and we see significantly higher rates of suicide, death from opioid use and substance use disorders, heart disease, cancer, and chronic respiratory disease. Additionally, rural populations are more likely to be underinsured or uninsured and to be poorer than their urban counterparts.

(b) Since 2010, 13 Tennessee hospitals have permanently closed, and only Texas has had more rural hospital closures than we have. These closures don't happen in isolation. Hospitals in rural and small communities depend heavily on Medicaid/TennCare funding to stay open. Not just bricks and beds, but sustainable funding, workforce investment, and policy changes like Medicaid expansion at the state level.

(c) Under the present Presidential administration, enacting deep Medicaid cuts and reforms that may reduce nursing home census and reimbursement. Enacting these drastic health care cuts that will kick millions of people off their health insurance coverage, rural hospitals will not get paid for the services they are required by law to provide to patients, and the hospitals will face "deeper financial strain that could lead to negative health outcomes for the communities they serve.

(d) The federal bill is projected to cut $1 trillion, mostly from Medicaid and Affordable Care Act insurance plans, and eliminate insurance coverage for 11.8 million people over the next decade.

(e) Tennessee's Medicaid program is called TennCare, and it covers about 1.5 million people in the state, according to the Tennessee Primary Care Association.

(f) Nine hospitals in rural Tennessee are "at-risk" of closing after the passage of the federal budget bill, according to a center for health services research at the University of North Carolina.

(g) According to the Rural Health Information Hub, it is estimated that 1,483,354 people in Tennessee live in non-metro areas, amounting to 21.2% of the state's population as of the 2023 U.S. Census estimates. The organization lists 15 critical access hospitals and two emergency hospitals located in rural parts of Tennessee.

(h) At-risk rural hospitals must be addressed to rectify the absence of medical facilities and emergency rooms in these rural counties. A rural hospital is labeled as at risk when it meets one or both of these criteria:

• The hospital is in the top 10% Medicaid payer mix of rural hospitals across the country.

• The hospital has experienced three consecutive years of negative total margin.

(i) The US is witnessing rapid hospital closures in rural communities, with devastating consequences for community residents beyond decreased access to health care services. Hospital closures have been associated with outmigration of younger generations due to loss of employment opportunities and economic decline, and with creating uncertainty and a sense of powerlessness among residents. While great efforts have been undertaken to document the effects of hospital closures on health care access, particularly during the COVID-19 epidemic, limited attention has been given to the public health ethics associated with dismantling health care for populations in greatest need. Drawing on the narratives of community stakeholders and residents, several themes evolved around processes, structures, and spillover effects of hospital closures on their daily lives, including decision-making processes of when and how to close hospitals. Concerns arose regarding the lack of transparency and disregard for alternative health care services to meet the needs of rural communities.

Tennessee has the second-highest number of rural hospital closures in the U.S. since 2010, with roughly 15 closures, and leads the nation in closures per capita. These closures, driven by financial strain and lack of Medicaid expansion, have left over one-quarter of Tennessee's rural counties without a hospital, forcing residents to travel long distances for emergency care.

(J) Tennessee has experienced one of the highest rates of rural hospital closures per capita in the U.S. since 2010, with roughly 13 to 16 rural facilities shutting down, creating "hospital deserts". These closures, driven by low reimbursement rates, high uninsured populations, and thin financial margins, disproportionately affect access to emergency care and, in some cases, are linked to higher local mortality rates.

Key Trends and Impacts

• High Closure Rate: Tennessee is often ranked among the top states for rural hospital closures, with over a quarter of its rural counties now lacking a hospital.

• Causes: Major factors include lack of funding, failure to expand Medicaid, high numbers of uninsured patients, and the high cost of maintaining services.

• At-Risk Facilities: As of 2025-2026, over 25 rural hospitals in Tennessee are considered vulnerable to closure, and several, including locations in Dyersburg, Erwin, and Huntingdon, have been flagged due to negative operating margins.

• Community Impact: Closures force residents to travel much longer distances for emergency services, leading to missed preventative care and delayed diagnoses.

Efforts and Outlook

• Some hospitals are attempting to convert to a "Rural Emergency Hospital" designation to maintain outpatient services.

• The Tennessee Justice Center and other advocates continue to highlight the financial danger many of these hospitals face due to the lack of state Medicaid expansion.

Major Aspects of Tennessee Rural Hospital Closures:

• Highest Per Capita Closures: With 15 closures, Tennessee is second only to Texas in total rural hospital shutdowns, but tops the nation when adjusted for population.

• Systemic Financial Issues: Many rural hospitals face high rates of uncompensated care for uninsured patients, contributing to financial losses.

• At-Risk Facilities: As of 2025, several additional rural hospitals in Tennessee are at risk of closure due to low margins and high Medicaid patient volume.

• Impact on Communities: Closures have created "healthcare deserts," creating dangerous delays in emergency care, particularly for stroke or trauma victims.

• Reopening Efforts: The Perry County Community Hospital reopened in 2025 after a five-year closure, illustrating both the potential for recovery and the ongoing financial challenges in rural healthcare.

Common Reasons for Closures:

• Lack of Medicaid Expansion: States like Tennessee that did not expand Medicaid have seen a higher concentration of hospital closures.

• Financial Distress: Negative operating margins due to low patient volume and high operating costs.

• Physician Recruitment: Difficulty recruiting physicians and specialized staff to rural areas.

Atwater’s administration will implement the first Tennessee RURAL (Rural Unified Recovery Agency Lifeline) Health Care Task Force. No rural areas should be without a hospital or emergency room. Healthcare should be a human right, and the rural communities will not be neglected!

Tennessee has one of the highest rates of rural hospital closures per capita in the U.S., with roughly 15 closures since 2010, resulting in over a quarter of its rural counties lacking a hospital. Key factors include low Medicaid reimbursement, financial losses, and workforce shortages. At least nine rural Tennessee hospitals are currently considered at risk of closure.

Recent Rural Hospital Closures and Closings (Since 2018)

• Jellico Medical Center (Jellico): Closed in March 2021.

• Cumberland River Hospital (Celina): Closed in August 2020.

• Jamestown Regional Medical Center (Fentress County): Closed in June 2019.

• McKenzie Regional Hospital (McKenzie): Closed in 2018.

• Copper Basin Medical Center (Ducktown): Closed in 2017

Rural Hospitals at Risk of Closure
According to research, several hospitals are experiencing sustained financial distress and are at risk of closing, converting, or reducing services: 

• Dyersburg Regional Medical Center (Dyersburg)

• Unicoi County Hospital (Erwin)

• Baptist Memorial Hospital Huntingdon (Huntingdon)

• Vanderbilt Wilson County Hospital (Lebanon)

• West Tennessee Healthcare Volunteer Hospital (Martin)

• Wayne Medical Center (Waynesboro)

• Ascension Saint Thomas DeKalb

• Saint Thomas Stones River

• Saint Thomas Highlands

Impact and Causes

• Healthcare Deserts: Over 25% of Tennessee's rural counties have no hospital, and 20% lack emergency services.

• High-Risk Status: Tennessee has seen the second-most rural hospital closures in the nation, often tied to low Medicaid reimbursement rates.

• Economic Impact: Rural closures affect local economies and increase travel time for emergency care, leaving residents with over an hour-long travel time for emergency care.

• Continued Financial Distress: Roughly 57% of Tennessee hospitals reported reducing or eliminating services due to financial struggles.

In 2027, Atwater’s Tennessee RURAL (Rural Unified Recovery Agency Lifeline) Health Care Task Force for rural hospitals centers on revitalizing, reconstructing, or building new facilities in all rural counties where rural closures have taken place. Funds will be allocated through state and federal budgets annually from 2027 to 2031, established by the future Working Families Tax Cuts Act. This funding, aimed at strengthening, modernizing, and improving workforce sustainability in rural areas, is largely funded by reducing waste and overcharging in various hospital and pharmaceutical management.

Key Aspects of the Federal Plan (2026): Tennessee - $206,888,882

Federal Funding Distribution: The $50 billion is distributed across all 50 states via the Centers for Medicare & Medicaid Services (CMS), with 2026 first-year awards ranging from approximately $147 million to $281 million per state.

Focus Areas: Funds are directed toward strengthening the rural health workforce, upgrading and modernizing facilities, and deploying advanced technology to improve access.

Goal: The program seeks to reverse trends of rural hospital closures by enhancing financial sustainability and supporting low-volume, high-need facilities.

Operational Flexibility: The administration will address adequate requirements for outpatient therapeutic services in Critical Access Hospitals (CAHs), providing more operational, database-driven decisions and flexibility.

The initiative is designed to address the specific financial and operational challenges faced by rural hospitals with low patient volumes.

The Centers for Medicare & Medicaid Services (CMS) in all 50 states will receive awards under the Rural Health Transformation Program, a $50 billion initiative established under Working Families Tax Cuts legislation (Public Law 119-21) to strengthen and modernize health care in rural communities across the country.

In 2026, these states are supposed to receive first-year awards from CMS, averaging $200 million within a range of $147 million to $281 million, which will be the first nucleus to the RURAL (Rural Unified Recovery Agency Lifeline) Health Care Task Force. This unprecedented federal investment will help states expand access to care in rural communities, strengthen the rural health workforce, modernize rural facilities and technology, and support innovative models that bring high-quality, dependable care closer to home.

Tennesseans living in rural areas have the right to equal access to quality care. This will be a historic move for any Tennessee Governor. This historic investment from innovative state allocation, coupled with federal funds, will place local hospitals, clinics, and health workers in control of their communities’ healthcare. Rural Tennesseans deserve to have affordable healthcare close to home, free from bureaucratic neglect and obstacles.

Atwater will be bold and aggressive in restoring rural healthcare in Tennessee. No mother delivering a baby should be worried about her health or her baby’s birth. No senior citizen or veteran should be worried about a true emergency and having to drive a long distance for treatment. The Atwater’s Tennessee RURAL (Rural Unified Recovery Agency Lifeline) Health Care Task Force will be stepping forward with bold, creative medical plans to expand rural access, strengthen their workforces, modernize care, and support the rural communities. CMS will be a partner with Tennessee to turn Tennessee’s ideas into lasting improvements for rural families.

The Tennessee RURAL (Rural Unified Recovery Agency Lifeline) Health Care Task Force will be actively improving the health and well-being of rural communities across the State of Tennessee. With this state and federal funding, Tennessee will implement comprehensive strategies to improve care delivery, support providers, and advance new approaches to coordinating health care services across rural communities.

Atwater’s Tennessee RURAL (Rural Unified Recovery Agency Lifeline) Health Care Task Force will expand preventive, primary, maternal, and behavioral health services and create new medical and emergency care access points that bring care closer to home and help preserve strong rural healthcare systems. (RURAL) will implement a holistic evidence-based, outcomes-driven strategies such as physical fitness and nutrition programs, food-as-medicine initiatives, and chronic disease prevention models to address root causes of diseases and manage chronic conditions. States will also strengthen rural emergency care through improved emergency medical services (EMS) communication, treat-in-place options, and coordinated transfers.

Atwater’s Tennessee RURAL (Rural Unified Recovery Agency Lifeline) Health Care Task Force will strengthen and sustain the Rural Hospital Clinical Workforce.

(RURAL) will support clinical workforce training, residencies, recruitment and retention incentives, and new pathways that help students begin health care careers in their own communities. (RURAL) will also investing in programs to train and support the existing clinical workforce and build futures close to home.

Atwater’s Tennessee RURAL (Rural Unified Recovery Agency Lifeline) Health Care Task Force will modernize rural health infrastructure and technology where it is feasible.

(RURAL) will modernize rural facilities and equipment; strengthen cybersecurity and interoperability; and expand telehealth, remote patient monitoring, and digital tools that enable timely access to care. (RURAL) will also explore the use of technology such as AI scribes and clinical workflow improvement tools to reduce burdens on clinicians, but never with the foresight of replacing the medical workforce of committed nurses, physicians, medical technicians, laboratory workers, etc.

(Rural) will prioritize streamlining operations, empowering providers to enhance coordination of care and resources, and building partnerships across the counties with the goal of keeping care local. This includes establishing specialized hub-and-spoke models, rural regional centers of excellence, comprehensive data-sharing platforms, and rural clinically integrated networks.

(RURAL) will test new primary care and value-based care models, strengthen partnerships among rural and other providers, and promote regional collaboration that improves health sustainability and patient outcomes.

Atwater’s Tennessee RURAL (Rural Unified Recovery Agency Lifeline) Health Care Task Force will work with the Federal Awardees and Funding Amounts if it does not compromise any development of rural hospitals in the State of Tennessee. The receipt of these federal funds will not manipulate or control the care that will be submitted to rural Tennesseans.

The Rural Health Transformation Program’s $50 billion in funds will be allocated to approved states over five years, with $10 billion available each year from 2026 through 2030. As directed by Public Law 119-21:

50% of the funding is distributed equally among all states approved. This provides states with a strong foundation to begin implementing their Rural Health Transformation Plans, and 50% is allocated based on a variety of factors. As described in the Notice of Funding Opportunity, those factors include individual state metrics around rurality and a state’s rural health system, current or proposed state policy actions that enhance access and quality of care in rural communities, and application initiatives or activities that reflect the greatest potential for, and scale of, impact on the health of rural communities. All scoring factors are outlined further in the Notice of Funding Opportunity.

ATWATER'S GOAL AND STRATEGY PLAN

I would launch a progressive "Medicaid for All" Plan to ensure that all Tennesseans have access to quality healthcare. Healthcare should be a human right. Tennesseans should not be medically suffering because they are poor. I would immediately assess the fiscal budget to cut governmental waste, abusive government contracts, and duplication of governmental services. To aid in assisting with governmental waste, I would employ electric government cars or retrofit them with solar panels or a hydrogen combustion engine. Place solar panels on governmental buildings.

1. The time is now. Tennesseans should not be going without healthcare when multi-billions of new development is going on across the State of Tennessee. Nationwide, over 1.6 million adults fall into the Medicaid coverage gap, lacking any affordable health coverage option; their income is too high to qualify for their state’s Medicaid program but too low to qualify for financial assistance in the Affordable Care Act (ACA) marketplace. In Tennessee, some 95,000 uninsured adults in the coverage gap would become eligible if the state expanded Medicaid. Expanding Medicaid to 138 percent of the federal poverty level ($20,780 for an individual in 2024) would provide coverage to Tennesseans who are now shut out of coverage. To qualify for Medicaid in Tennessee, parents must earn less than 82 percent of the federal poverty level (or less than $21,170 for a family of three annually). Adults without dependent children are not eligible for Medicaid at all.

2. Medicaid expansion in Tennessee could cover roughly 150,000 to 300,000 uninsured residents, potentially lowering rural hospital closures and improving health outcomes. Proponents argue it provides crucial care and economic benefits, while opponents raise concerns about long-term state costs exceeding $1.7 billion and increased taxpayer burden. My team of economists would analyze government waste, non-progressive budgetary line items that cause hardship to Tennesseans, address financial corruption due to aggressive lobbyists, break the political campaign bonds connected to new development, and redistribute the budget to reflect all Tennesseans. Revisit the $ 232 million given to CoreCivic in the last fiscal year and reallocate those funds to productive agendas for Tennesseans such as preventive and intervention measures, healthcare in prisons, skill development to promote active citizens, mental health initiatives, and an overhaul of the system regarding how we do business to benefit billionaires and not the working class and middle class in Tennessee. Healthcare should be a human right.

3. Increased Coverage: Over 300,000 uninsured Tennesseans could gain access to healthcare.

4. Rural Health Support: Expansion could help prevent rural hospital closures, with data suggesting expansion states see a 62% decrease in such risks.

5. Financial Security: Increased coverage helps lower medical debt and improves personal finances.

6. Economic Impact: The American Rescue Plan could offer an additional $1 billion to Tennessee, with studies suggesting expansion could save the state millions annually.

7. Long-Term Costs: Critics estimate a 10-year cost to Tennessee taxpayers of over $1.7 billion. The cost would be recouped from the billionaires who are not paying their excise taxes at present, which is an abomination to the working class that is paying their taxes and struggling to stay afloat due to inflation.

8. Fiscal Responsibility: Opponents fear the federal government could reduce its 90% matching rate, leaving the state responsible for more funding. Governmental waste and the collection of taxes from billionaires would balance this presumption. A possible change from the 90/10 match for Medicaid expansion to a “blended rate formula,” which would create a federal funding level somewhere in the middle, but below 90/10.

9. "Woodwork Effect": Concerns exist regarding the influx of newly eligible individuals ("woodwork effect"), increasing costs unexpectedly. Creative maneuvers will be integrated to offset this concern.

10. Philosophical Opposition: Some, including state leadership, have hesitated to support expansion due to political and fiscal concerns. I have no hesitation in supporting Medicaid for All. It is overdue, and it is time for a Governor to step up and do what is in the best interest of all Tennesseans.

Closing the Coverage Gap Will Help Tennesseans:

A study identified rural-urban differences in baseline factors and procedural outcomes in patients presenting to a tertiary care center for cardiac procedures. Providers should anticipate that health disparities may be associated with more interventions and worse outcomes in their rural patients. Being aware of such differences may also help policymakers in directing health care funding to lower gaps in health care and access, ultimately leading to better health outcomes.

(a) Improving access to care and health outcomes - Expanding coverage increases the use of preventive care, reduces utilization of emergency care, and improves health outcomes for pregnant and postpartum people, babies, and people with cancer, mental health conditions, and other health conditions. Medicaid expansion prevents premature deaths; due to the state’s decision not to expand Medicaid, 964 Tennesseans aged 55-64 died prematurely between 2014 and 2017 alone.

(b) Reducing racial and ethnic disparities - People of color make up 65 percent of the coverage gap population nationwide and 36 percent in Tennessee. Closing the coverage gap is one of the most effective ways to reduce inequities in coverage and health outcomes, as well as reduce inequities in delayed care and unmet need for care.

(c) Covering more children - When parents have coverage, children are more likely to be enrolled and to access health services. Between 2016 and 2019, a time of rising uninsured rates, the uninsured rate among children in non-expansion states grew at nearly three times the rate in expansion states.

(d) Improving financial security - People with coverage are less likely to face catastrophic medical costs, leave bills unpaid, face eviction, or borrow money to pay for medical care. Between 2013 and 2020, states that expanded Medicaid in 2014 experienced a decline in new medical debt that was 34 percentage points greater than that of states that did not expand Medicaid over this period.

(e) Reducing uncompensated care costs and creating state savings • Research shows that state costs of expanding coverage are largely or fully offset by savings in uncompensated care and other areas. • The American Rescue Plan offers an additional $1 billion to Tennessee should it expand Medicaid.

(f) Keeping Rural Hospitals Open - Since 2010, 15 rural hospitals have closed in Tennessee. Being located in a Medicaid expansion state decreases the likelihood that a rural hospital will close by 62 percent. When rural hospitals close, a critical source of health care and employment disappears in rural communities, and strain falls on surrounding hospitals.

WIN-WIN SITUATION FOR MEDICAID EXPANSION (MEDICAID FOR ALL):

Expanding Medicaid in Tennessee (often referred to in advocacy as "Medicaid for All" in the context of covering the "coverage gap") offers significant potential benefits, primarily aimed at improving health access for over 300,000 uninsured residents and bolstering the state's economic and healthcare infrastructure. Key pros include the infusion of federal funding, increased financial stability for rural hospitals, and improved health outcomes.

ENDING MEDICAL DEBT:

Ending medical debt in rural counties involves a combination of targeted financial aid, policy reforms, and nonprofit intervention. Key strategies include utilizing the Rural Health Transformation Program (which provides $50B to states per), eliminating medical debt from credit reports, and expanding charity care programs. Nonprofits like RIP Medical Debt buy and cancel debt for pennies on the dollar.

Strategies for Ending Rural Medical Debt:

• CFPB Regulatory Changes: The Consumer Financial Protection Bureau will finalize a rule in 2027 to remove medical debt from credit reports, alleviating a major financial burden for 15 million Americans.

• Nonprofit Debt Cancellation: Organizations such as RIP Medical Debt are utilized to purchase large bundles of medical debt at heavily discounted rates and abolish it.

• Medicaid Expansion: Expanding Medicaid has increased insurance coverage for rural residents, resulting in higher reimbursement rates and fewer unpaid bills, with Medicaid revenue for rural hospitals rising on average by 33% in expansion states 2.

• Charity Care and Financial Counseling: Rural hospitals can improve patient financial health by making charity care programs, which cover medical bills for low-income patients, more accessible and transparent.

• Funding for Rural Hospitals: The Rural Health Transformation Program in 2025 aims to provide $50 billion to states to help stabilize rural hospital finances and reduce the need for aggressive billing practices. Working with federal and non-profit organizations.

• Support for Rural Health Care Providers: Addressing the financial fragility of rural hospitals is essential for reducing the overall economic burden of medical care in these communities.

• Impact of Medical Debt in Rural Areas: Research from the various Tennessee Universities will offer recommendations for policy changes that can reduce medical debt, such as lowering patient costs and addressing the challenges posed.

While Medicare Allowable Bad Debt (MBD), defined as unpaid patient financial obligations Medicare partially reimburses to hospitals, represents only 0.12% of patient revenue, policymakers and executives should note that the $1.7 billion reimbursed in 2022 affects hospitals of different types in various ways. The recent passage of the One Big Beautiful Bill Act did not eliminate MBD, but elimination has been proposed, supporting a need to understand what elimination could do to hospitals.

Methods & Solutions:

Using Medicare Cost Reports, we conducted a retrospective, longitudinal analysis of short-term general acute-care hospitals in 2022. Total margin was evaluated with and without MBD by Critical Access Hospital (CAH), rurality, state, and Hospital Referral Region.

The Solution: Stopping significant reimbursement cuts and offering innovative care models can stabilize rural hospitals and provide opportunities for the growth and development of new and existing facilities.

The Save Rural Hospitals Act will stop the impending flood of rural hospital closures and provide needed access to care for rural America.  Additionally, it will create an innovative delivery model that will ensure emergency access to care for rural patients across the nation. 

Part 1: Stabilize rural hospitals and provide regulatory relief.

• Rural hospital stabilization includes: the elimination of Medicare Sequestration for rural hospitals (CAH, SCH, MDH, and subsection (d) facilities in rural census tracks and non-MSA counties); Reversal of  “bad debt” reimbursement cuts (The Middle Class Tax Relief and Job Creation Act of 2012); Permanent extension of current Low-Volume and Medicare Dependent Hospital payment levels; Reinstatement of Sole Community Hospital “Hold Harmless” payments;  Extension of Medicaid primary care payments; Elimination of Medicare and Medicaid DSH payment reductions;  Establishment of Meaningful Use support payments for rural facilities struggling to maintain MU compliance; permanent extension of the rural ambulance and super-rural ambulance payment’ Equalize patient copayments for outpatient services at CAHs with copays at other hospitals.

• Regulatory relief includes: Elimination of the CAH 96-Hour Condition of Payment; Rebase of supervision requirements for outpatient therapy services at CAHs and rural PPS facilities; and modification to the 2-Midnight Rule and RAC audit and appeals process.

Part 2: Create an innovative future model solution.

The innovative future model solution, created by the Save Rural Hospitals Act, establishes a new Medicare payment designation, the Community Outpatient Hospital (COH). This model will ensure access to emergency care and allow hospitals the choice to offer outpatient care that meets the population health needs of their rural community. 

Eligibility: Critical Access Hospitals (CAH) and rural hospitals with 50 beds or less will be eligible to become COH (this includes facilities as described that have closed within 5 years before enactment).

Services:

Emergency Services – a COH must provide emergency medical care and observation care (not to exceed an annual average of 24 hours), 24 hours a day, 7 days a week; and have protocols in place for the timely transfer of patients who require a higher level of care or inpatient admission.

Meeting the Needs of Rural Communities – Based upon a community needs assessment, a COH could provide medical services in addition to the Emergency services, but not limited to observation care, skilled nursing facility (SNF) care, infusion services, hemodialysis, home health, hospice, nursing home care, population health, and telemedicine services.

COHs are encouraged to provide primary care services through an FQHC (or FQHC look-alike) or rural health clinic. These primary care services will ensure the community doesn’t lose primary care and inappropriately use the emergency room. The COH will not operate any inpatient acute care beds, but can operate swing beds and observation beds. ​

Payments: The Medicare payment rate for services furnished at a COH (emergency care and outpatient services) will be 105% of the reasonable cost. Plus, wrap-around grants for population health to ensure sufficient payments to allow the COH to serve the needs of the community.

Conversion: For every CAH that converts to a COH, another hospital currently not designated as a CAH and located in the same state would be eligible to become a CAH so long as all criteria other than the distance criteria are met.

CAHs that convert to COHs may revert to the CAH designation at any time and under the same conditions they were originally designated.

Rural Hospital Grants: New grants are included for Rural EMS. Hospital-based grants are available to assist rural hospitals with the change to value-based payment models and for rural hospitals working on population health (including a grant program targeted at COHs).

Elimination of this reimbursement would have impacted many hospitals; though findings highlight more adverse impacts on CAHs (accounting for a 0.3% point [PP] reduction in total margin), other rural hospitals (a 0.25PP reduction), states like Nevada (a 0.48PP reduction), and certain HRRs around the Appalachia region and parts of Tennessee.

Elimination of MBD may further jeopardize financial solvency for some rural hospitals that provide access to acute care across America's vast (mostly rural) land mass, particularly in rural and underserved communities.

Historical Significance:

In 2022, it was estimated that Medicare paid hospitals only 82 cents for every dollar of care delivered, creating nearly $100 billion in annual underpayments and contributing to two-thirds of all hospitals reporting negative Medicare Margins. While some question whether Medicare truly underpays hospitals, persistent negative profit margins and seemingly technical reimbursement rules can determine a hospital's survival. One rule under scrutiny often at the center of deficit-reduction discussions, is Medicare's “allowable bad debt,” unpaid deductibles, and coinsurance from beneficiaries. Under current regulations, the Centers for Medicare & Medicaid Services (CMS) reimburses hospitals 65% for these bad debt losses.

While CMS reimbursement of Medicare bad debt has never fallen below 55%, this payment has long been a target in federal budget negotiations, with renewed efforts underway to reduce or eliminate it. The idea persists in policy circles because of the federal savings it offers. The recent “Fair Care Act” proposed reducing reimbursement from 65% to 25%. For example, the Congressional Budget Office estimates that ending Medicare bad debt reimbursement entirely would eliminate federal outlays by about $54 billion over ten years. Opponents state these savings, however, could come at the cost of further straining hospital finances, especially for rural facilities and those dependent on Medicare, where even small losses in reimbursement can threaten continued operation.

Earlier studies have suggested that cutting Medicare allowable bad debt (MBD) payments would erode hospital margins, but the evidence base is dated and limited in scope. For instance, a 2007 brief modeled the impact of repeal only for a subset of rural hospitals, while other analyses combined bad-debt cuts with unrelated payment changes, making specific effects difficult to isolate. This is often because analyses bundle proposed reductions to bad debt reimbursement with other policy levers, such as modifications to Disproportionate Share Hospital payments, or they did not distinguish Medicare-specific losses from a provider's total bad debt and charity care portfolio. Other studies have estimated total dollars at risk, differentiating the financial impact across the continuum of care, but not separating findings for acute care (inpatient and outpatient services), free-standing inpatient rehabilitation facilities, long-term care hospitals, and integrated post-acute care units (eg, skilled nursing and home health).

Additional previous analyses predate the financial shifts triggered by the COVID-19 pandemic. Since 2020, hospitals have faced persistently high inflation, higher labor costs, pharmaceutical price increases, and ongoing supply chain challenges. Many hospitals became reliant on costly contract labor to fill staffing gaps, straining operating budgets. At the same time, the rise of Medicare Advantage now covering more than half of all Medicare beneficiaries has shifted hospitals' payer mix toward plans that typically reimburse less and deny more claims than traditional Medicare. One recent important study evaluating Medicare bad debt highlighted differences in “distributional consequences” of eliminating Medicare's bad debt reimbursement, calling for further understanding of such a policy change that is “inadequately understood”. This research builds upon that work by calculating the impact of such an elimination on profits, and doing so by hospital type and across geographical differences.

Higher structural costs and tighter reimbursement make the potential loss of bad debt reimbursement far more consequential than earlier estimates suggest. An updated understanding is needed, particularly of how rural vs urban hospitals, critical access hospitals (CAHs), and specific regions would be affected if this reimbursement were eliminated.

Using hospital cost reports from 2022, this study addresses three key research questions: (1) How would financial margins of U.S. acute-care hospitals have changed if current Medicare bad debt payments were fully eliminated? (2) What type of hospitals would shift from positive to negative margins under these scenarios? and (3) Which regions of the U.S. would be most impacted if bad debt payments were eliminated?

Factors to Consider:

Determining what health care resources a given community needs locally is complicated and warrants further research. There is some consensus that primary and emergency care are the most essential health care services needed in rural communities.  There are, however, multiple factors that drive the type and amount of health care services a community might need:

• What are the medical needs of the community? The kinds of conditions individuals have may dictate the kinds of services that a community needs most. The demographics of a community also play a role, as different age groups (e.g., children, women of childbearing age, elderly, etc.) may call for different kinds of health care services and providers.

• What resources does a community have to help access and afford medical services? For example, large numbers of uninsured, low-income, or underserved individuals may call for more safety net services like community health centers.

• Are alternatives available? For example, are another community’s resources in proximity? Are telehealth services available and appropriate for the health care needs of the population? Are there other barriers that may affect a community’s ability to access these alternatives for example, geographic, technological, or transportation barriers?

The Larger Holistic Rural Picture

Health care access along with health behaviors and physical, social, and economic environments are all major driver of health that is influenced by where we live. Our rural communities and neighborhoods can affect our access to the factors that influence health, including not only health care resources but also education, jobs, social support, transportation, and healthy foods.

The drivers of health are also complex and interconnected, affecting one another while also influencing our health and well-being. Social and economic factors, for instance, can impact our access to health care. As an example, Tennessee counties with higher median incomes tend to have more practicing primary care physicians per resident. Higher income and wealth generally provide better access to medical care, nutritious food, safe neighborhoods and communities, opportunities for physical activity, and high-quality education. 

Study Data and Methods to Restore Rural Hospitals and Hospital Accessibility

As the next potential Governor of the State of Tennessee, my team and I will conduct a retrospective, longitudinal analysis of short-term general acute-care rural hospitals in 2027. Hospital financial and operational data will be extracted from the CMS Hospital Cost Report Information System files, “cost reports.” Hospital-level characteristics will be sourced from the CMS Hospital Cost Report Information System, combined with market population data from the American Community Survey and system affiliation characteristics from the Agency for Healthcare Research and Quality (AHRQ) Compendium of U.S. Health Systems, American Hospital Association (AHA) Annual Survey, and the Provider Enrollment, Chain, and Ownership System (PECOS) Hospital Change of Ownership (CHOW).