Rural hospitals shut out of stimulus loans face financial crisis

By Rachel Roubein
·5 min read

Government-owned hospitals were shut out of the coronavirus rescue package’s loan program, putting some of the most financially vulnerable rural health care systems in danger of running out of money just as the virus hits the heartland.

Dozens of Republican and Democratic lawmakers are now pleading with the Trump administration to make an exception for rural health providers or for a legislative fix. Without one, they’re warning the industry could tumble into further financial turmoil. About one-third of rural hospitals — as well as over 15 percent of rural health clinics — are owned by local governments, but municipal owned entities are not allowed to receive small business loans.

City-owned Magnolia Regional Medical Center in Arkansas, where the virus is projected to peak later this month, is in dire financial straits — the rural hospital just furloughed 10 percent of its staff for two months, in what CEO Rex Jones called a “painful” reduction for the 49-bed facility.

This hole in the stimulus was apparently unintentional, multiple Republican and Democratic congressional aides said. Congress or possibly the Trump administration would have had to create an exception to let municipal-owned entities receive federal small business loans.

“Many of these hospitals are the sole provider for health needs in their community and their closure would leave wide areas of America with even greater access to care issues than ever before, which we simply cannot risk during this pandemic,” nine senators wrote in a letter to leadership.

For years, rural health providers have grappled with low patient volumes, staffing shortages and thin operating margins. Over 120 rural hospitals shuttered in the past decade, and another 1 in 4 were considered a high-risk for closure even before the pandemic hit. Now, the widespread cancellation of pricey elective surgeries, which make up the bulk of hospitals’ revenue, have made their finances all the more precarious.

Hospitals on Friday began receiving the first tranche of a separate $100 billion rescue fund dedicated to health care providers, but rural health providers are also competing with larger and more politically connected urban systems for funding. Rural health providers said this funding will help, but it won’t sustain them for very long.

“It was a desperately needed lifeline, but they’re still treading water out there,” said Maggie Elehwany, head of government affairs for the National Rural Health Association. “We need more assistance to keep them afloat and that makes it all the more important to let them access the SBA provisions.”

Rural providers have flooded the Hill with requests to make the forgivable loans available to them as congressional leadership grapple approving more money for the newly created — and almost exhausted — $350 billion program.

Hill aides and hospitals say it’s unclear if the Small Business Administration has the authority to make the change on its own. The agency and the Treasury Department, which is helping SBA oversee the program, didn’t return a request for comment.

Meanwhile, some smaller doctor practices have applied and gotten approved for the loans, according to anecdotal information from a trade group for family physicians.

An estimated 600 rural hospitals are government-owned, or about one-third of those remaining, according to the National Rural Health Association. Despite that distinction, that doesn’t necessarily mean these facilities are heavily financed by their county or city, and some receive no direct funding from their local governments.

Hospitals across the country have been pleading for more funding since coronavirus cases began to climb. They’re spending money on increasing crucial supplies, like specialized gear for providers, and losing out on major revenue from elective procedures.

The Trump administration last week began doling out an initial $30 billion from the hospital bailout fund based on providers' Medicare claims — a formula that health officials said may overlook rural hospitals but was intentionally simple to get much-needed money out the door faster. They said future funding rounds would be better targeted toward coronavirus hot spots, rural providers and those serving Medicaid populations. Medicare has also shoveled out over $50 billion in loans to help keep providers afloat, but rural health providers have said they’re wary of the high interest rates attached to those dollars.

Democratic lawmakers are pushing for $100 billion more in grants for health providers in the next coronavirus package that’s been held up amid feuding between congressional leaders.

Lawmakers representing Colorado, where more than 20 hospitals are government-owned, have called on the Small Business Administration to let those facilities tap into the stimulus small business loans. Nearly all those hospitals “operated in the red and their cash flow problems have become increasingly dire” since canceling elective procedures like colonoscopies and non-emergency hip replacements, both of the state's senators and four House members wrote to the SBA.

In Arkansas, each of the state’s seven publicly owned rural hospitals, including Magnolia, contacted Sen. John Boozman (R-Ark.) to complain they were unable to apply for loans.

And in Texas, more than two-thirds of rural hospitals are government-owned, according to John Henderson, president and CEO of the Texas Organization of Rural and Community Hospitals.

Among their ranks is Goodall-Witcher Healthcare, a 25-bed facility in central Texas that has reported a 95 percent decrease in outpatient surgeries and 27 percent drop in all outpatient services in three weeks. President and CEO Adam Willmann said he’s reluctant to furlough anyone from an already lean operation of roughly 235 employees.

He said getting a small business loan from stimulus funding would be “huge for rural hospitals who are struggling who are already running on a very thin margin of profit.”