Report: Rural Hospitals Face Challenges with Medicare Advantage

February 25, 2025

Rural hospitals are the lifeblood of their communities, creating jobs and stimulating the local economy; however, they face an array of financial challenges that threaten access to care for the residents who rely on it.

High among the threats to rural hospitals’ financial solvency is the Medicare Advantage (MA) program, according to a new report, The Growing Impact of Medicare Advantage on Rural Hospitals Across America, from the American Hospital Association (AHA).

“The MA program has expanded rapidly and now accounts for more than half of total Medicare enrollment,” the report states. “While MA offers some benefits, certain plans reimburse hospitals below cost, delay or deny payments, and impose significant administrative hurdles, especially to rural hospitals, which have seen the fastest growth in MA recently.”

Here are the report’s key findings:

MA growth explained:  The growth of MA enrollment in rural areas can be attributed to several factors, including beneficiaries choosing to enroll to receive supplemental benefits and employers offering, as a retirement benefit, MA plans with the same insurer as their sponsored plans to promote continuity of care.

Shortchanging the cost of care:  Traditional Medicare often pays less than the cost of care, and increasingly rural hospitals report that MA plans pay even less—only about 91 percent of traditional Medicare rates on a cost basis.

Access to quality care at risk:  Delays, denials, and excessive prior authorization from certain MA plans can hinder timely care. More than 80 percent of rural clinicians report quality reductions due to insurer requirements, and MA patients face nearly 10 percent longer stays before post-acute care compared to similar patients with traditional Medicare coverage.

Administrative burdens and payment challenges:  Delayed or denied MA payments worsen rural hospitals’ finances and increase administrative burdens. Nearly 4 in 5 rural clinicians report higher administrative tasks in five years, with 86 percent seeing negative impacts to patient outcomes.

Call for reforms:  Given the growing presence of MA plans in rural communities, meaningful reforms are needed to ensure fair and timely reimbursement and reduce the excessive administrative burden on rural providers. Without these changes, this added financial pressure may force more rural hospitals to cut services or close altogether, further limiting health care access in already underserved communities, the report notes.

Read the AHA report online.