Rural hospitals face distinct financial challenges with payments often failing to cover the actual costs of providing services. Half of rural hospitals are operating in a deficit—a number that’s up nearly 7% in just a 12-month period and the biggest jump researchers have seen since they began monitoring the issue, according to an AMA Council on Medical Service report adopted at the 2025 AMA Interim Meeting in National Harbor, Maryland.
Many hospitals that have stayed open have had to cut back on vital medical services. For example, since 2020, more than 100 labor-and-delivery units in rural areas have closed, with the first seven months of 2025 seeing the same number that closed in all of 2024. Between 2014 and 2022, 382 rural hospitals were forced to stop providing chemotherapy to patients.
“Rural hospitals face low patient volume, which paired with fixed costs of services, leads to higher per-patient cost,” says the council report. “As a result, the payments from many plans are not adequate to meet the actual cost of services provided. While there are some programs and subsidies through Medicare and Medicaid, this is not enough to make up for the deficits caused by other payers, especially [Medicare Advantage] plans.”
About 20% of Americans who live in rural communities rely heavily on their nearest hospitals for many aspects of their health care. And those living in rural settings are more likely to be sicker, older and underinsured than Americans living in more urban or suburban settings.
“Accordingly, it seems likely that the financial uncertainty facing many rural hospitals will continue without the development and implementation of additional strategies,” says the report.
“Rural hospitals provide essential care for nearly one-fifth of Americans and ensuring they remain open and financially viable is critical to community health,” said AMA Board Member Ilse Levin, DO, MPH & TM. “To sustain and strengthen access to health care for rural residents, the AMA believes that alternative payment models that meet the AMA’s new minimum standards will best support the financial viability of rural hospitals struggling to stay open within traditional payment structures.”
To help address this threat to the accessibility of rural health care, the AMA House of Delegates adopted policy supporting the following minimum standards for alternative payment models to rural hospitals in order to enhance their financial sustainability and ensure access to care:
- Fixed-cost payment: Rural hospitals should be paid an agreed upon and fixed sum delivered on a predictable schedule that is not tied to patient volume.
- Adequate payment rates: All payers should ensure that payments made for variable services are adequate to cover the full cost of care provision.
- Patient cost-sharing: Any out-of-pocket payments made by patients should be reasonable and affordable.
- Accountability and transparency: Care delivered should be of high-quality, evidence-based and part of a physician-led team.
- Administrative simplicity: Models should minimize administrative burdens.
The delegates also adopted new policy declaring that “rural hospitals are essential to the communities they serve.”
The AMA also will continue to work with interested national medical specialty societies and state medical associations to support:
- Novel payment models for rural hospitals and encourage uniform reporting, and to monitor such models.
- Educating physicians, nonphysician providers and patients on alternative payment models for rural hospitals.
- That funds allocated for rural hospitals be used to enhance or maintain rural health care.
- Educating patients and physicians on the impact of Medicare Advantage plans on rural hospitals and encourages all payers to provide adequate payment to support the financial stability of rural hospitals.
- The reintroduction of the state-designated Critical Access Hospital “necessary provider” designation.
Delegates also adopted new policy to “vigorously oppose Medicaid cuts as they significantly impact at-risk rural hospitals.”
Read about the other highlights from the 2025 AMA Interim Meeting.
