America’s rural health business model was built to mimic our urban care delivery infrastructure and incentives. It is a model that has been impractical and ineffective for decades and is entirely unsustainable in the COVID-19 era.

by Ben Jenson, Matt Holman and Gavin Boileau

Even before COVID-19 struck the United States in February 2020, the traditional hospital-centric rural health model was a failing business proposition that delivered sub-optimal patient outcomes. Well over one hundred rural hospitals have closed in the past decade with more closing in 2019 than ever beforeᵢ. For rural residents with diminishing options, higher rates of chronic conditions and hospitalizations for common ailments are a tangible leading indicator of the persistent and possibly growing lack of regular high-quality primary care utilization compared to urban areas. The threat of rural closures has increased dramatically as COVID-19 temporarily eliminated and continues to disrupt the flow of elective surgeries and other fee for service (FFS) volume that are critical to balancing the tenuous financial equation for most rural health systems. In the short-term, there is a clear imperative for ongoing state & federal flexibility and funding to reinforce the ability of existing rural institutions to continue to serve their patients during the pandemic. At the same time, we believe it is worth asking if the prevailing, failing model for rural health delivery is worth saving in the long term, or if we should use this moment as an inflection point for architecting a new paradigm.

In order to consider what needs to change in rural health it is helpful to consider how we got here. As with most aspects of the US health care system, our current rural care delivery infrastructure reflects the incentives in place as they emerged. These incentives date back to 1946 when the Hill-Burton Act began providing federal construction grants and loans for building hospitals, ultimately helping finance construction of over 6,800 facilities before being phased out in 1997. In addition, rural health has for decades operated under FFS reimbursement agreements with commercial insurers that were designed around urban area utilization patterns and based on high volume and efficiency that look very different in small communities. The Critical Access Hospital (CAH) program, enacted in 1997 and replacing Hill-Burton, further accelerated this trend by improving the incentives for hospital-based care of Medicare patients that tend to make up a large portion of rural hospital visits, as well as subsidizing capital improvements to rural hospitals. It is no accident that the “big blue H” typically stands as the largest employer, largest building, and community anchor point for small towns and cities across the country. By and large, federal and state incentives for nearly 75 years have focused on rural areas building health care “factories” in a scaled down mirror image of their urban counterparts. That model made sense in a time when rural areas needed to be self-reliant in managing a full range of medical needs. However, this model is inefficient and costly in an era where technology, telecommunications and transportation have evolved to a point where rural communities can and should leverage connectivity and comparative advantage to design a lighter and more unique footprint that better meets local needs.

While less than 20% of the US population is deemed to live in “rural” areas, the rural areas in which they live make up 97% of the country’s landmass. Rural populations skew older, less wealthy and less healthy than urban areas on a whole. Even so, rural communities are not monolithic, and the health care needs and issues facing America’s rural expanse are remarkably heterogeneous. Most major US cities have enough density that, while rates may vary, there is a minimum efficient scale of heart attacks, head injuries, cancer of most types, behavioral health conditions, etc., to justify the expansive generalist model of the US hospital. The health needs of rural communities can vary greatly, from a remote fishing community in Alaska to a retirement enclave in New Mexico to an industrial town in eastern Michigan. For each of these places there are common imperatives, such as emergency response, triage, stabilization and transport for acute care needs, as well as in delivering high-quality primary care and chronic care management. Where rural needs begin to diverge is across higher-level acute, specialty, and surgical care. As a result, the future rural health operating model likely has a core that is similar across communities, but very different from today, and a tertiary layer that is far more specialized to specific local conditions and needs.

So, what should the rural health care system of the future look like? Among the many models our Medicare financing model has incentivized, the path forward likely looks less like the traditional Critical Access Hospital and more like the more nimble Rural Health Center (RHC) and Federally Qualified Health Center (FQHC), models that were created to support primary care rather than acute episodic needs. If you were to re-architect these centers to be patient centered care delivery hubs, absent existing regulations and incentives, they would likely take on a broader mandate as medical home for primary care and overseeing acute care triage and specialty referrals (including hosting tele-specialty visits). Ideally they would address a wide range of health and social needs would incorporate case management to ensure an integrative approach across patient needs. They would leverage technology to bridge the miles between patients’ homes and their care teams. If done well, they could close the current health outcomes gap and provide flex capacity for serving a community as it grows.

COVID-19 and the related economic and social upheaval are creating generational tailwinds for health care transformation. In addition to the practical imperative for rural health care delivery to change by merit of financial crisis, many regulatory barriers have temporarily come down in ways that reflect the needs and demand for delivering care differently in rural areas. This includes provisions within the CARES Act and a CMS 1135 Waiver that temporarily removed interstate telehealth restrictions, expanded the range of platforms that can be used to deliver telehealth, and enable rural clinics to be deemed “distant sites” for originating telehealth visits to patients as well as for provider-to-provider consultations. The FCC, for its part, has added nearly $200 million to its rural health care program which focuses on increasing broadband and telecommunications capabilities in support of patient care. Some of these temporary changes will revert, but momentum is clearly with the trend toward greater flexibility by CMS and commercial insurers.

The starting point in transforming rural health must be grounded in a clear-eyed consideration of trade-offs. Is the priority to deliver all care in the community? Or is it to deliver the highest-quality care? Or to achieve lowest cost? In our current model we have chosen community-based delivery at the expense of quality and cost. In our second post on this topic, we’ll further tease out these tradeoffs, and put forward a specific vision for what a rural healthcare delivery system of the future could look like. We welcome your perspectives and feedback as we continue this important conversation.

This is a two-part series. Part 1 provides an overview of the challenge and opportunity. Part 2 articulates a specific vision for the future of rural health.