Practical steps for physician-led partnerships – workforce, technology and advocacy – that help rural facilities remain viable while improving access and outcomes.

Kevin Stansbury, MS, JD, FACHE, and Kenneth Blake, MD, FASCRS

Rural health care in the United States is at a critical inflection point, and Colorado offers a stark example of the challenges. An estimated 70-80 percent of rural health facilities in Colorado are operating on unsustainable financial margins. Approximately 50 percent of the state’s rural hospitals are operating in the red, with cash reserves quickly dwindling, leaving many struggling simply to keep their doors open.

The story is similar across many communities. Rural hospitals are being asked to meet rising patient needs with declining reimbursement, fewer resources, fewer clinicians, and aging infrastructure. The consequences extend far beyond hospital walls, affecting patients, families, and the economic viability of these communities. The “rural penalty” is real, with rural residents experiencing lower life expectancy and higher rates of chronic and preventable disease.

Even for those who do not reside in these areas, most of us value traveling across our scenic state – from the Eastern Plains to the Continental Divide, or destinations like Craig and Telluride. It is important to recognize that if we or a loved one need medical care during these travels, we will depend on a rural hospital.

One of the most visible signs of strain is the reduction or elimination of essential services. Obstetrics, chemotherapy and specialty services are frequently curtailed because they are costly to staff and difficult to sustain with low patient volumes. For example, on Colorado’s Eastern Plains, only four hospitals remain that offer routine obstetric services.

When these services disappear, patients are forced to travel long distances – sometimes several hours – for care that was once available close to home. Ironically, these reductions further weaken rural hospitals financially by shrinking revenue streams, creating a vicious cycle that accelerates decline. While most rural hospitals strive to adopt an abundance mindset and responsibly expand services, doing so is often difficult without stronger support from urban physician colleagues. Geographic distance, time constraints, and administrative barriers all contribute to this challenge.

Payment structures further compound these issues. Reductions in Medicaid eligibility and the loss of subsidies for exchange plans leave many rural patients uninsured, increasing uncompensated care and reducing hospital revenue. Federal Medicare sequestration has also had a meaningful impact. “Cost-based” reimbursement for Critical Access Hospitals – intended to be paid at cost plus 1 percent – is now effectively below cost, minus 1 percent.

For larger Prospective Payment System (PPS) designated rural hospitals, Medicare’s wage index presents another challenge, as it ties reimbursement to local income levels. Rural wages are typically lower, despite similar professional and clinical requirements. Commercial payers often reimburse rural hospitals significantly less – frequently up to 20 percent less – for the same services provided in urban settings.

In addition, rural hospitals are disproportionately impacted by the administrative burden imposed by commercial payers, including prior authorizations, peer-to-peer reviews, and restrictive payment denials. Smaller, independent institutions often lack the administrative capacity to navigate the gauntlet of these processes. Collectively, these factors place rural hospitals at a systemic disadvantage that cannot be overcome through internal efficiency alone.

The impact of hospital closures or service reductions reverberates throughout local communities. Hospitals are often among the largest employers in rural towns. When services are cut or facilities close, jobs are lost, local economies suffer, and communities become less attractive to new businesses and families. Access to health care is not only a medical issue – it is a cornerstone of community viability. A study by the Federal Reserve Bank of Kansas City examined the effects of rural hospital closures and found that while the initial job losses are significant, the economic impact continues for years. As populations decline, additional job losses occur in schools and local businesses that depend on the hospital as an economic anchor.

Against this backdrop, physicians have a critical role to play. While many of the challenges facing rural health care are structural and policy-driven, physician engagement can be a powerful force for stabilization and innovation.

The first step is understanding. Physicians – particularly those practicing in suburban and urban settings – benefit from learning about the unique financial, workforce and operational realities of rural hospitals. These facilities are not simply smaller versions of urban systems; they operate under fundamentally different constraints. Awareness fosters empathy and opens the door to meaningful collaboration. Physicians can also take the initiative to reach out directly to rural hospitals. Asking local leaders what they need – rather than assuming solutions – can reveal practical opportunities for partnership. Staffing shortages, especially in primary care, obstetrics, anesthesia and certain specialties, remain among the most pressing issues. Creative staffing models – such as rotating coverage, shared service lines, locum tenens support or hybrid arrangements in which practitioners divide their time between rural and urban settings – can help maintain critical services without imposing the full cost of permanent staffing.

Technology gaps represent another important area for collaboration. Many rural hospitals lack access to modern clinical technology, data analytics and digital infrastructure. Physicians affiliated with larger systems can help rural partners adopt telehealth platforms, remote monitoring tools and, where appropriate, advanced procedural technologies, including robotic surgery. These tools can expand access to specialty care, reduce unnecessary transfers and improve quality while helping control costs. At the same time, it is important to ensure that such innovations support care delivery within the community whenever possible, rather than inadvertently shifting services away from local facilities.

Colorado’s rural hospitals are not standing still in the face of these challenges. In 2024, a group of rural hospital CEOs formed the Colorado Rural Futures initiative to better understand the root causes of financial and operational distress and to develop potential solutions. Organizations such as the Western Health Care Alliance and its sister organization, Community Care Alliance, the Eastern Plains Healthcare Consortium, Colorado Rural Futures and Colorado Rural Health Center work tirelessly to support health care delivery in rural communities. Their work, combined with resources available through the Rural Health Transformation Program, may help drive meaningful progress.

The Rural Health Transformation Program will distribute $50 billion nationwide over five years, with Colorado receiving more than $200 million in the first year. Colorado’s rural and frontier hospitals welcome this new funding, however due to restrictions on how these funds may be used, the program is limited in its ability to bring about sustainability for these at-risk hospitals.  This funding is not intended to fully offset anticipated payment reductions; instead, it is focused on future delivery models and creative solutions. While these efforts are necessary, many rural advocates believe it is important to first stabilize the financial status of our frontier and rural hospitals. Doing so will improve the likelihood of success of this important program. Failure to first stabilize operations may put the overall likelihood of success of the RHTP program at risk.  

Physicians can support rural and frontier hospitals by advocating on their behalf to take advantage of the RHTP funds in a constructive way to first stabilize facilities which will free them up to then focus on future models of care in a sustainable way.  

Moreover, physicians will play an important role by supporting efforts to focus the use of these funds on identified clinical priorities that support programs and care models that optimally address local needs. This may include developing tele-specialty networks, supporting workforce training and retention, investing in technology that enables care closer to home, or piloting new, more efficient care delivery models.

Perhaps most importantly, physicians can help bridge the divide between rural and urban health systems. By forming regional partnerships, sharing expertise, and co-developing service lines, physicians and hospitals can create integrated networks that improve access to care while allowing rural facilities to remain viable. These collaborations reflect a fundamental truth: the health of rural communities is inseparable from the health of the broader system.

Rural health care in Colorado is under extraordinary pressure. However, with informed and engaged physicians working alongside rural hospitals and with strategic use of resources such as the Rural Health Transformation Program, there remains a path toward more resilient and sustainable systems that continue to serve the communities that depend on them. If, during your travels, you or your family utilize a rural hospital, please take a moment to acknowledge the extraordinary efforts of the professionals who sustain these essential institutions.

Kenneth Blake, MD, FASCRS, is a colon and rectal surgeon and co-founder of Provider One Solutions.

Kevin Stansbury, MS, JD, FACHE is the CEO of Lincoln Health and a member of the RHTP Advisory Committee.