Reeling in Rural Texas

Hospitals in remote parts of the state need help from lawmakers on several fronts.


Three times during the COVID-19 pandemic, Dimmit Regional Hospital came close to taking out a loan just to make payroll. One of those times, the Carrizo Springs facility – tucked deep in rural Southwest Texas – came within mere hours of heading to the bank.

Then, Dimmit’s uncompensated care payment came in the day before the hospital needed to arrange payroll.

For CEO John Graves and his staff, it was a relief – and also a sobering indicator of what rural hospitals faced not just during the worst of the pandemic, but continue to face today as well.

Staffing shortages have long been the norm but are far worse coming out of the pandemic. Inflation is, well, inflating hospital costs. Those and other factors are affecting hospitals across Texas, but are especially hitting the ones that may be the only facility of their kind for miles and miles.

“My hospital, fortunately, we’ve come out of the hole a little bit, despite COVID,” Graves said. “I’m not sure what the future is with all of these continuing costs, when costs are increasing and reimbursements are decreasing. Eventually, that’s going to catch up to us.”

Recent research commissioned by the Texas Hospital Association revealed that more than one in four Texas rural hospitals are at high risk of closure, a game of sustainability Russian roulette that threatens the health of communities all over the state. When rural hospitals are challenged, so are the health and infrastructure of their communities.

That’s why THA is urging help from the Texas Legislature during the current session, through funding and legislation that can keep rural facilities alive and thriving.

The struggles, explained

A recent report by Kaufman Hall on the financial impact of COVID-19 on Texas hospitals revealed a devastating analysis on the state’s entire hospital landscape. Nearly half of hospitals operated at negative margins in 2022, according to the report; expenses ballooned by more than $33 billion over pre-pandemic levels; and the number of hospitals at risk of closure nearly doubled compared to 2020, with almost one in 10 hospitals possibly staring at the end of their existence.

But within that last figure contained a specifically eye-opening sign for Texans in the state’s rural communities. Significantly more rural hospitals face the end of the line than facilities in Texas’ major metros – in fact, 26% of rural hospitals are at risk of closure, as compared to 5% of urban hospitals.

“Extreme pressure on life-saving hospitals creates risk for patients and the state’s overall health,” said John Hawkins, President/CEO of the Texas Hospital Association. “Hospitals are critical infrastructure for communities and serve as a backbone for health, safety, jobs and stability.”

John Hawkins, President/CEO, Texas Hospital Association
In a 2022 report from Kaufmall Hall

“Which means that a rural community hospital is five times more likely to close, or highly vulnerable, than their urban friends,” notes John Henderson, president and CEO of the Texas Organization of Rural & Community Hospitals (TORCH).

Just about every challenge hospitals are facing is exacerbated in the rural setting – whether it’s workforce shortages affecting nurses, physicians and other health care professionals, or rising expenses and other hits to the bottom line. For instance, recruiting workforce to remote areas of Texas is challenging to begin with, and the attrition that came with COVID-19 was another blow to facilities way outside of any major metro.

“We’ve had to make some pretty significant adjustments to our salary structure just to be able to maintain nurses,” Graves said of Dimmit Regional, which has about 9,000 Texas residents in its primary service area. “Because if you’ve ever been to southwest Texas, you would understand it’s a little difficult trying to recruit people down there, particularly for the physician’s side and the mid-levels. The nurse practitioners and [physician’s assistants], those are just very difficult.”

Sparse housing numbers in such communities mean sparse tax revenue, which also puts rural facilities at a natural disadvantage. “We’re one of the lowest-taxing districts in the state – I think the bottom third,” Graves added. “So our tax revenue is not quite what other folks’ are. So the financial bottom line is a challenge with some of these obstacles.”

And “cash is king,” he said. Dimmit is “in good shape now” due to the strategic and operational changes that the pandemic necessitated. But it’s still among the rural centers that has to watch its cash flow more closely than some others.

“Some of these hospitals [that] are at risk of closure, they’re below 30 cash days on hand. We’re sitting around 40, so we’re not that far above the 30-day threshold,” he said. “So that’s always a concern.”

Henderson of TORCH notes that while COVID brought damaging impacts, in some ways, the response to the disease deferred aspects of the current rural-risk crisis, which had started well before the pandemic. Federal relief payments helped keep hospitals afloat for about the first 21 months of the pandemic before those payments ceased in late 2021. And bed capacity was pushed to a breaking point, which forced hospitals – with the blessing of regulatory authorities – to find nontraditional solutions they don’t have in non-pandemic times.

“We needed every bed that we could get our hands on,” Henderson said. “And rural communities, even though it was terrible, probably benefited from that operationally in a way that, as we move out of the pandemic, they [are returning] to that vulnerable state they were experiencing in 2019.”

The way forward: THA’s rural agenda

Much of what rural hospitals need from lawmakers during this session of the Texas Legislature are the same things every hospital needs to combat widespread workforce shortages and financial stability pain points. But rural hospitals have their own unique needs, and THA is striving to make sure legislators follow through on delivering those as well.

Workforce recruitment and retention programs are largely the domain of the state budget. The House and Senate’s respective, highly similar initial budget proposals for 2024-25 contain THA-supported funding levels for these programs, including:

  • The Nursing Shortage Reduction Program to increase nursing school graduates: $46.8 million (an increase of about $18 million from 2022-23);
  • The Loan Repayment Program for Mental Health Professionals, which encourages those professionals to practice in a health professional shortage area: $28 million (a gigantic increase of $26 million);
  • The Nursing Faculty Loan Repayment Program to increase the number of nursing faculty: $7 million (increase of $4 million); and
  • The Graduate Medical Education (GME) Expansion Program, funded at a proposed $233 million to help keep Texas medical school students in Texas when they start residency, a strong indicator that they’ll stay there when their career finally begins.

In a proposed figure that would directly target rural services, Senate Bill 1 and House Bill 1 would also maintain the current $8 million in funding for $500 rural labor and delivery service add-on payments in Medicaid. THA supports that funding, and the ongoing discussions about whether it should be adjusted upward. Rural outpatient add-on payment funding – as well as funding for safety-net and trauma care add-ons – would remain level as well. And money for additional inpatient psychiatric beds across the state would include the dollars for 85 beds in rural communities, with THA asking for a rate increase for those beds as well. Overall Medicaid funding gets a slight bump in the current budget version.

Henderson calls Medicaid “number one” in the state budget for rural concerns, and would also like to see hospitals explore enhanced regional collaboration to address bed capacity challenges. At the federal level, THA continues to advocate for delaying or abandoning harmful cuts that can damage rural hospitals, including federal sequestration cuts. THA is also pushing for Congress and the Centers for Medicare & Medicaid Services to strap a stronger legislative and regulatory leash on Medicare Advantage plans – which are notorious for delaying and denying care and have a significant rural impact.

“There are implications of [Medicare Advantage] for everyone, but it seems like it disproportionately affects rural communities where literally half of the community is Medicare-eligible,” Henderson said.