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Report: 8 of 9 Rural Hospitals NE Texas Operate in the Red

Jair Lazaro
Rural health services could be in trouble under proposed federal policy changes.

Eight of nine rural hospitals in Northeast Texas are running on negative operating margins. That’s according to a study by the Chartis Center for Rural Health that measures just how thin the ice is beneath the country’s rural hospitals.

"What we’ve seen is kind of a slow and steady erosion of operating margins," says Michael Topchik, national leader of the Chartis Center for Rural Health. About a decade ago, he says, around 36 percent of rural hospitals operated with margins in the red.

"Three years ago that was 40 percent," he says. "Two years ago that was 44 percent and this year it’s 46 percent."

And he expects that to worsen if so-called Medicaid block grants are enacted. Essentially, block grants encourage states to apply for caps on Medicaid spending in exchange for greater flexibility on how to spend it.

Opponents, like Topchik, see these Trump-touted, mainly Republican-backed block grants as a back door way of gutting Medicaid and endangering increasingly jittery rural hospital operating margins by putting control of federal dollars in the hands of states that might be unfriendly to programs like Medicaid. 

Fourteen states, including Texas, have not yet adopted Medicaid expansion.

This, he says, could have a big effect on regions like Northeast Texas, where all but one rural hospital between Greenville and the Arkansas border -- Christus Mother Francis in Winnsboro -- had a 2018 operating margin above zero. It was a little more than 20 percent.

On the other end of the spectrum, East Texas Medical Center in Quitman was operating on a margin of negative 12.5 percent in 2018.  That’s the largest negative margin in the region.

Something to keep in mind is that negative operating margins are not necessarily a sign that a hospital is in danger of sinking. Most rural hospitals in the Northeast Texas are non-profit or not-for profit ventures. That means they get a lot of their overall operations money from donors, foundations, and grants.

But even if rural hospitals can supplement shaky operating margins, rural patients are likely to feel the effects of increasingly limited healthcare services like cardiology, which can be tough to provide in rural areas, where specialists are not drawn and hospitals keep closing.

Topchik says that if block grants become the norm, new outpatient services in rural areas could be stifled and existing programs could struggle to recruit and retain specialists.

According to Chartis, about 70 percent of the money rural hospitals bring in comes from outpatient and specialty services.

Scott Morgan has been an award-winning journalist since 2001. His work has appeared in several newspapers and magazines as well as online. He has also been an editor, freelancer, speaker, writing teacher, author, and podcaster.