Early Evaluation of the Rural Emergency Hospital Program

Abstract

This cross-sectional study compares characteristics of eligible hospitals that did and did not adopt Rural Emergency Hospital designation.

Introduction

To preserve access to care after ongoing rural hospital closures, federal policymakers introduced the Rural Emergency Hospital (REH) designation, which took effect in 2023.¹ Hospitals converting to this model must eliminate inpatient services and maintain emergency services, in exchange receiving an annual $3 million facility payment and 5% add-on to outpatient service reimbursement in an effort to preserve some clinical resources locally for rural patients. Previous investigations described REH-eligible hospitals and counties where early conversions took place.^2,3 However, little is known about characteristics of early adopters of REH designation.

Methods

This cross-sectional study is reported according to the STROBE reporting guideline and was determined exempt from review by the University of Michigan institutional review board because it used deidentified secondary data. This cross-sectional study, conducted January 1, 2023, to December 15, 2025, assessed differences between hospitals that converted to REHs vs eligible rural hospitals that did not. We identified hospitals that converted using the Sheps Center REH database.³ We linked these data to Centers for Medicare & Medicaid Services hospital cost reports and the American Hospital Association Annual Survey to assess hospital features, services provided, use, and financial performance (eMethods in Supplement 1). We compared REHs vs eligible but nonconverted hospitals (those with <50 beds in a nonmetropolitan core–based statistical area).⁴ Characteristics were measured for the year before REH implementation.

We used χ² tests and t tests where appropriate. Financial outcomes were modeled as dependent variables in linear regression analyses, with REH conversion status as the primary independent variable and adjustment for critical access hospital status and hospital ownership, as done previously.^5,6,7 Additionally, given that financial data in the health care sector tend to have high and low outliers, we accounted for these data using 5% winsorization, as done previously.^5,6,7 To ensure that conclusions on financial performance were not biased by a single measure, multiple measures of financial performance were evaluated, including total revenue, operating and total margin, and days cash on hand. We used 2-sided statistical tests and P < .05 as our statistical significance threshold. Analyses were performed using Stata version 18.0 (StataCorp).

Results

As of December 2025, 42 of 1270 eligible hospitals (3.3%) had converted to REH, of which 38 REHs met inclusion criteria based on data availability. Compared with nonconverted hospitals, REHs were more likely to be in the South (68.4% vs 29.0%; P < .001), not be a critical access hospital (52.6% vs 14.3%; P < .001), and provide inpatient psychiatric services (10.5% vs 7.1%; P = .03) (Table 1). REHs had 52.3% fewer annual discharges (214 vs 449; P = .002), 56.0% fewer annual outpatient visits (20 514 vs 46 619; P = .003), and 32.1% fewer annual emergency admissions (4201 vs 6187; P = .03) vs nonconverted hospitals. In the year before REH implementation, REH hospitals had significantly lower mean annual revenue ($22 000 000 vs $83 000 000; P < .001) and mean total profitability margin (−5.7% vs 0.9%; P < .001) vs nonconverted hospitals (Table 2).

Table 1. Hospital Features and Services Provided.

Variable	Hospitals, No. (%)		P valuec
	Non-REH (n = 1228)a	REH (n = 38)b
Hospital features
Bed size, No. beds
0-25	977 (79.6)	19 (50.0)	<.001
25-50	251 (20.4)	19 (50.0)	<.001
Ownership
Not for profit	659 (53.7)	14 (36.8)	.04
For profit	69 (5.6)	5 (13.2)	.05
Government owned	500 (40.7)	19 (50.0)	.25
Census region
Northeast	65 (5.3)	2 (5.3)	.99
Midwest	545 (44.4)	8 (21.1)	.004
South	356 (29.0)	26 (68.4)	<.001
West	262 (21.3)	2 (5.3)	.02
Critical access hospital
Not critical access hospital	175 (14.3)	20 (52.6)	<.001
Critical access hospital	1053 (85.7)	18 (47.4)	<.001
System membership
Independent	666 (54.2)	25 (65.8)	.16
System member	562 (45.8)	13 (34.2)	.16
Medicaid expansion statusd
Hospital located in Medicaid expansion state	392 (31.9)	20 (52.6)	<.001
Hospital not located in Medicaid expansion state	836 (68.1)	18 (47.4)	<.001
Service provision
Psychiatric services
Adult inpatient psychiatric services	87 (7.1)	4 (10.5)	.03
Emergency psychiatric services	443 (36.1)	12 (31.6)	.43
Radiologic services
CT scan services	1097 (89.3)	29 (76.3)	.05
MRI services	941 (76.6)	17 (44.7)	<.001
Women’s health services: obstetrics services	503 (41.0)	6 (15.8)	.02
Surgical services
Outpatient surgery services	946 (77.0)	11 (28.9)	<.001
Inpatient surgical services	842 (68.6)	12 (31.6)	<.001
Critical care services
Medical surgical ICU services	396 (32.2)	6 (15.8)	.17
Designated trauma center	487 (39.7)	8 (21.1)	.14

Abbreviations: CT, computerized tomography; ICU, intensive care unit; MRI, magnetic resonance imaging; REH, Rural Emergency Hospital.

^a A total of 4 non-REH hospitals were excluded due to incomplete data within Centers for Medicare & Medicaid Services cost reports.

^b A total of 19 hospitals converted in 2023, while 17 converted in 2024 and 6 converted in 2025.

^c Categorical variables that constitute this table were compared using χ² tests.

^d States were considered to have expanded Medicaid if Medicaid expansion had occurred at the time of implementation of the REH waiver program.

Table 2. Use and Financial Performance of REH Hospitals Before Conversion.

Measure	Estimate, mean (95% CI)		Difference (%) [95% CI]a	P value
	Non-REH (n = 1228)	REH (n = 38)
Annual use per hospital
Emergency department visits, No.	6187 (5879 to 6495)	4201 (2074 to 6328)	−1986 (−32.1) [−3805 to −168]	.03
Outpatient visits, No.	46 619 (43 698 to 49 540)	20 514 (351 to 40 677)	−26 106 (−56.0) [−43 348 to −8864]	.003
Discharges, No.	449 (423 to 474)	214 (37 to 391)	−235 (−52.3) [−386 to −83]	.002
Medicare discharges, %	46.8 (45.8 to 47.8)	45.2 (38.1 to 52.3)	−1.6 (−3.5) [−7.7 to 4.5]	.60
Medicaid discharges, %	9.8 (9 to 10.5)	9.2 (3.5 to 14.9)	−0.6 (−5.8) [−5.5 to 4.4]	.82
Inpatient days, No.	1397 (1316 to 1479)	1158 (588 to 1727)	−240 (−17.2) [−728 to 248]	.34
Outpatient surgeries, No.	934 (882 to 985)	653 (298 to 1008)	−281 (−30.1) [−584 to 23]	.07
Inpatient surgeries, No.	122 (110 to 134)	109 (26 to 192)	−13 (−10.7) [−84 to 58]	.72
Yearly financial performance per hospitalb
Total revenue, $1 000 000	83 (78 to 87)	22 (−7 to 51)	−61 (−73.5) [−86 to −36]	<.001
Outpatient revenue, % of total revenue	81.6 (81.1 to 82.2)	77.6 (73.5 to 81.7)	−4 (−4.9) [−7.5 to −0.5]	.03
Total operating expense, 1 000 000 $	38 (36 to 40)	11 (−1 to 22)	−27 (−71.9) [−37 to −17]	<.001
Operating margin, %	−8 (−8.7 to −7.3)	−17.2 (−22.1 to −12.4)	−9.2 (−115.3) [−13.4 to −5.1]	<.001
Total margin, %	0.9 (0.5 to 1.3)	−5.7 (−8.4 to −3)	−6.6 (−733.3) [−9.0 to −4.3]	<.001
Days cash on hand, No.	77 (72 to 82)	63 (27 to 100)	−14 (−17.8) [−45 to 17]	.39
Uncompensated care, % of total operating expense	7.6 (7.2 to 7.9)	8.6 (6.2 to 10.9)	1.0 (13.3) [−1.0 to 3.0]	.32

Abbreviation: REH, Rural Emergency Hospital.

^a This table displays adjusted differences in annual means of clinical use and financial performance between REHs and eligible but nonconverted rural hospitals; t tests were used for comparison of clinical use variables. Differences are in units of No. for variables measured in No., percentage points for variables measured in percentage (%), and $1 000 000 for variables measured in $1 000 000. Multiple comparisons were conducted across use and financial outcomes, and P values should be interpreted in this context.

^b To assess financial performance, a linear regression with 5% winsorization and adjustment for critical access hospital status and hospital ownership was used.

Discussion

With hundreds of rural hospitals facing significant financial distress, this cross-sectional study found that a small fraction had converted to REHs, and those that had were the most financially at risk.³ Given that so few converted, these results may suggest that the financial benefits of REH may not outweigh associated costs in meeting REH compliance (eg, eliminating inpatient services) for most rural hospitals. While many factors contribute to a rural hospital pursuing an REH waiver, conversion appears to serve as a last resort for institutions with limited revenue and negative profitability margins. Together, these data highlight current limitations in policies supporting rural hospitals, which are likely to be further exacerbated by anticipated reductions in Medicaid reimbursement.^8,9 Without further action, rural hospitals are likely to continue struggling financially, which may lead to more hospitals pursuing REH to preserve some aspect of care locally.

Study limitations include that cost reports data are self-reported and may be subject to reporting bias. We did not assess longitudinal outcomes owing to significant missing data in current 2024 cost report data and cannot elucidate causal mechanisms. Given the descriptive nature of our study and available data, there may be confounding variables, such as geographic clustering or patient catchment differences influencing estimations of hospital financial performance. Additionally, health care financial data have inherent skewness in distributions. We modeled financial outcomes with linear regression and winsorization to limit the influence of outliers, but additional modeling approaches may influence point estimates.

Supplement 1.

eMethods.

eReferences.

Supplement 2.

Data Sharing Statement