The Surprising Reason Rural Hospitals Are Closing — And What That Means For Communities

When Thomasville Regional Medical Center opened in 2020, it was hailed as a turning point.

Located in the U.S. Congressional district with the nation’s worst health outcomes, the $40 million hospital featured cutting-edge technology like 3D mammography and an MRI scanner. But less than five years later, in September 2024, it closed. Now, its hallways are dark and silent, the once-new machines idle.

“It’s almost like the apocalypse happened,” says Thomasville Mayor Sheldon Day, who spent nearly a decade fighting to bring the hospital to his town.

That “apocalypse” isn’t unique to Thomasville. Over 100 rural hospitals have closed in the U.S. over the last decade, and roughly one-third of all rural hospitals remain at risk, according to the Center for Healthcare Quality and Payment Reform (CHQPR). In Alabama alone, 23 rural hospitals—nearly half—are in immediate danger of shutting down.

Pending federal legislation could make things worse. The One Big Beautiful Bill Act, currently before Congress, proposes $119 billion in Medicaid cuts over the next decade—cuts that would hit rural areas hardest. Even Republican Sen. Thom Tillis of North Carolina, a fiscal conservative, has said the bill must be revised to avoid harming rural hospitals.

What’s Really Driving Rural Hospital Closures?

Most assume Medicaid and Medicare shortfalls are to blame. And it’s true: these programs often reimburse hospitals at rates below the cost of care. But according to CHQPR president Harold Miller, that’s not the full story.

“The problem is not Medicare and Medicaid,” Miller says. “The problem is private insurers.”

Rural hospitals, including Thomasville’s, rely heavily on private insurance to stay afloat—between 65% and 80% of patient revenue in Alabama comes from privately insured patients, according to CHQPR. In Thomasville, 65.4% of patients used private insurance; only 18.4% were on Medicare and 16.2% on Medicaid.

Yet even private insurance payments weren’t enough to keep the hospital open. In Thomasville’s case, private insurers were reimbursing just half the cost of care. Unlike large urban hospitals, which can negotiate better rates and offset public program losses, small rural hospitals lack leverage and patient volume.

“These hospitals need higher payments, not lower,” says Miller, citing their fixed costs—like 24/7 staffing—despite seeing fewer patients.

Why Private Insurers Pay Less

Part of the problem lies in market power. Large hospitals can negotiate better reimbursement. Small rural hospitals can’t. In Alabama, Blue Cross and Blue Shield of Alabama dominates the large-group insurance market, with a 94% share. That leaves hospitals with little negotiating power.

Hospitals can’t afford to reject Blue Cross plans. One Alabama facility, Medical Center Barbour in Eufaula, receives only $65 from Blue Cross for an X-ray, compared to $97 from Aetna.

“Blue Cross could single-handedly save rural hospitals in Alabama,” Miller says. “They just have to pay adequately.”

Blue Cross disputes CHQPR’s data, arguing that private insurance represents only a small share of rural hospital volume. They also say their rural support includes a scholarship program that has trained 38 doctors now practicing in underserved areas.

A Perfect Storm of Challenges

COVID-19 pushed many hospitals to the brink. Pandemic-related costs soared, while elective procedures—often key to financial stability—were paused. Thomasville, too new to qualify for federal pandemic relief, couldn’t recover.

Labor shortages, inflation, and burnout among medical workers further worsened the situation.

What Happens When a Hospital Closes?

Family physician Dr. Daveta Dozier, who has practiced in Thomasville for 40 years, walks the quiet halls of the shuttered facility. She points to the MRI machine she used to send patients to—now idle. Lab tests, once done in-house, now require a long drive.

“Half the time, patients just don’t go,” Dozier says. “They don’t have a ride, or they can’t miss work.”

That delay in care leads to more advanced illness. A study found hospitalization and readmission rates both increase after rural hospitals close—especially in remote areas.

Dr. Dozier’s husband, also a physician and medical director of the local nursing home, recently had to send eight patients to Mobile—90 minutes away—for treatment that the Thomasville hospital could’ve handled.

Residents like 78-year-old Barbara Smith know the burden well. Her late husband’s cancer treatment required frequent trips to Mobile.

“It was a lot of driving,” Smith recalls.

Emergency rooms in urban areas are also feeling the strain, with overcrowded ERs sometimes sending patients to neighboring states.

Nearby Options Are Shrinking Too

Grove Hill Memorial Hospital, just 20 minutes from Thomasville, is also struggling. It recently converted to a “rural emergency hospital,” eliminating inpatient services in exchange for federal support. It now offers emergency care only.

But that’s not always enough. Stacey Gilchrist, COO of the now-closed Thomasville hospital, points to a local woman who survived a heart attack thanks to fast care just minutes away.

“If she had to go 20 minutes further, she might not have made it,” Gilchrist says.

The Bigger Picture

Thomasville sits in Alabama’s 7th Congressional District, ranked last in the nation for life expectancy in a Harvard study. Mayor Day says poor access to care is a major reason.

“People just don’t go to the doctor until they’re really sick,” Day says.

That’s why the city gave land discounts and created a local sales tax to support the hospital. Investors built a facility with the latest diagnostic tools, attracting specialists from Mobile and opening a physical therapy clinic. A cancer center was in the works.

Then COVID hit. Expenses ballooned, revenue dropped, and insurance reimbursements stayed flat. Eventually, the hospital filed for bankruptcy. The economic fallout extended beyond health care.

“Businesses are hesitant to locate in rural areas without hospitals,” Day says. “Local employers suffer, too, as workers face delays in treatment and worsened health.”

Can Rural Hospitals Survive?

There’s a sliver of hope. A new buyer has acquired the hospital’s assets, and Day says reopening is on the table. This time, they’re exploring partnerships—with urban hospital systems or coalitions of rural hospitals—to negotiate better rates.

Federal help may also be coming. The Rural Hospital Stabilization Act of 2025, introduced in April, would offer grants to rural facilities.

U.S. Health and Human Services Secretary Robert F. Kennedy Jr. has called for more investment in preventive care. Day believes Thomasville’s hospital can help lead that charge. He envisions a regional medical campus with AI-assisted diagnostics, assisted living, and dementia care. It’s ambitious—and expensive—but Day is determined.

“Every rural community is fighting this battle,” Day says. “Closing hospitals isn’t an option. Without basic health care, you kill the community.”

Source: Time