LANSING, Mich. (Michigan News Source) – As of May 2025, Michigan has 64 rural hospitals, but a new report from the Center for Healthcare Quality and Payment Reform finds that six are at “immediate risk of closure” due to severe financial instability. That puts nearly 1 in 10 rural hospitals in danger of shutting their doors. In total, 13 rural hospitals statewide, about 20%, are considered at risk. Four have already closed since 2005.
Michigan is not alone. According to the report, more than 700 rural hospitals in the country, or 1/3 of them, are at risk of closing because of the serious financial problems they are experiencing, with 300 of them at immediate risk of closing.
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While Medicaid and Medicare funding issues are mentioned as a factor, they are not identified in the report as the main cause of the financial distress in these hospitals. The report attributes these risks primarily due to inadequate payments from private insurance plans, which often fail to cover the full cost of services. The report states “insurance plans are paying them less than what it costs to deliver services to patients.”
Cuts and closures.
Hospitals in the middle of nowhere don’t operate like hospitals in the middle of Ann Arbor. They serve fewer people but often have the same overhead. Many of Michigan’s rural hospitals are operating at a loss, largely thanks to insurance reimbursements that don’t cover services that the hospital offers. It’s sometimes only because of local tax revenues and government grants that some of the hospitals are able to remain open.
Welcome to the “rural emergency hospital” shell game.
Michigan already has one REH (Rural Emergency Hospital) and 17 rural hospitals that have slashed services to survive. For those who want to keep federal funding, they might have to stop treating inpatients like one Michigan hospital did to keep the money flowing. To qualify as an REH, hospitals must eliminate inpatient beds and focus solely on emergency and outpatient care.
An REH is a healthcare facility designation established by the Centers for Medicare & Medicaid Services (CMS) under the Consolidated Appropriations Act of 2021. This designation aims to maintain access to emergency and outpatient services in rural areas that may not be able to sustain full- service hospitals.
The Center for Healthcare Quality and Payment Reform warns that hospital closures don’t just mean longer ambulance rides – they jeopardize the entire economic stability of rural America. Farms, ranches, and energy sites can’t attract workers if there’s no access to basic healthcare. Imagine recruiting a utility line worker with the promise of a two-hour drive to the nearest ER.
The real villain? Private insurance payouts that can’t even cover a cold.
While Medicaid and proposed cuts gets blamed a lot in the media today for problems in the health care field, the report makes clear that the real hemorrhage is from private insurance companies
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paying less than the cost of care. Rural hospitals lose money even on patients with employer- sponsored or Medicare Advantage plans.
Although politicians, especially those in the Democratic Party, offer “solutions” in the form of increasing Medicare or Medicaid payments or expanding eligibility to fix the healthcare system, the report says that about half of patients in rural hospitals are insured by private insurance. They state, “In most cases, the amounts these private plans pay, not Medicare or Medicaid payments, determine whether a rural hospital loses money.”
The diagnosis currently appears grim: If insurance companies, Congress, and state officials don’t change course, rural Michigan could soon become a healthcare desert. A fix would cost about $6 billion a year according to the report – but instead of intravenous support, policymakers and insurance companies seem to be offering them a “Do not resuscitate” order instead.
