Virginia’s rural hospitals are increasingly remaining open by offering fewer services, a trend that lawmakers warned could leave residents with diminished access to health care even if their local hospital never closes.
A report recently presented to the General Assembly’s Joint Commission on Health Care found that while rural hospital closures have remained relatively rare in Virginia, many hospitals have steadily reduced inpatient care, eliminated labor and delivery services and become increasingly reliant on outpatient treatment as financial pressures mount.
“The key issue is therefore not only whether hospitals stay open, but how the composition of services changes within them,” commission staff stated in the report. “This shift towards outpatient care prevents closures, but narrows access to services.”
The study examined the financial and operational conditions of Virginia’s 36 rural hospitals after lawmakers directed commission staff last year to investigate growing concerns about rural health care access.
Researchers identified several rural hospitals in Virginia facing the highest risk of financial distress or closure.
A combination of challenges
Rural hospitals face a combination of challenges, according to multiple experts in the field. Those include lower patient volumes compared to locations in higher populated areas, growing labor costs, workforce shortages and a payer mix dominated by Medicare and Medicaid, which often reimburse providers at rates below the cost of care.
While larger hospital systems can offset losses through high-volume specialty services, many rural hospitals lack the patient base and negotiating leverage needed to generate similar revenue.
Since 2005, more than 100 rural hospitals have closed nationwide. Virginia has lost two rural hospitals during that period, while another closed and later reopened under a more limited service model.
Researchers found that service reductions have become more common than outright closures.
Among the seven highest-risk hospitals in Virginia, patient days declined between roughly 34% and 60% over the past decade while staffed beds were reduced and obstetric services largely disappeared, according to the report. Some hospitals eliminated surgical services entirely, while emergency department utilization remained stable or increased.
Across Virginia’s entire rural hospital system, inpatient utilization fell about 13% between 2015 and 2024. Labor and delivery volumes declined approximately 40%, while surgical volumes dropped 16%.
“They’re feeling these huge financial pressures,” said Del. Rodney Willett, D-Henrico, of rural hospitals during an interview with Virginia Scope.
Willett chairs the House Select Committee on Rural Healthcare Access.
“They want to stay open to avoid the ultimate bad solution, which is closure – yes – they’re cutting back on the inpatient services in response to that,” Willett said.
Outpatient care has become the dominant source of revenue. The report found that outpatient services accounted for nearly 75% of total gross revenue among Virginia’s rural hospitals in 2024.
The findings prompted concern among lawmakers, who said the loss of services can be just as consequential as a hospital closure.
“I think we got so hung up on which facilities are going to close, we didn’t address the fact that just contraction of these inpatient services removes an ability for someone who may be experiencing a heart attack to drive to their nearby hospital and access care,” said Joint Health Commission Chair Sen. Barbara Favola, D-Arlington, during the meeting earlier this month.
Patients in communities that lose services often must travel farther for emergency care, childbirth and specialty treatment, creating additional burdens for rural residents and potentially worsening health outcomes.
Thirteen rural hospitals in Virginia are considered at immediate or at risk of closure, according to the Center for Healthcare Quality and Payment Reform, while 12 rank in the highest or mid-highest categories of the Financial Distress Index.
Hospitals affiliated with larger health systems are more likely to continue operating because they have greater financial support and shared resources.
Two hospitals on both lists, Tappahanock Hospital and Community Memorial Hospital, are both part of the VCU Health System.
“We continue to see growth in both those markets and are continuing to invest heavily so that patients who depend on CMH and Tappahannock have access to the highest quality care,” said VCU Health CEO Marlon Levy.
Levy says VCU Health has not cut any services at either location.
Federal changes
The report also warned that pending federal policy changes could create additional financial strain.
Republicans in Congress passed and President Donald Trump signed H.R. 1 in 2025, which will cut nearly $1 trillion in Medicaid funding over the next 10 years.
Willett, who said his select committee identified many of these issues in 2024, fears they are getting worse, not better, after the passage of H.R. 1.
“When you start affecting the Medicaid formula, which is what’s happening under the big bill, you’re getting into multi-billion dollar impacts that hurt everybody,” Willett said.
Willett noted that if the larger healthcare systems are feeling the pain of funding cuts, the impacts are even worse for smaller systems in Southside and Southwest Virginia.
“Margins on a good day are razor thin,” he said for the smaller healthcare systems. “And now with the cutbacks that they’re facing, yeah, it’s just daunting, it’s overwhelming.”
According to Julian Walker, the Vice President of Communications for the Virginia Hospital & Healthcare Association, H.R. 1 reduces the effectiveness of two financing mechanisms that hospitals rely on: provider assessments and state-directed Medicaid payments that help offset low Medicaid reimbursement rates.
VHHA estimates those changes could eventually reduce funding to Virginia hospitals by more than $2 billion annually. Hospitals participating in the affected programs could see an average loss of about 16% of net revenue, with some rural hospitals facing losses exceeding 20%, 25%, or even 30% of revenue.
“In general, rural hospitals rely heavily on Medicare and Medicaid due to the populations they serve,” Levy said. “These governmental programs make up a substantial share of our reimbursements but are not designed to fully offset rising healthcare costs in every case.”
Levy continued to say that Medicare and Medicaid are “critical programs” for rural healthcare, but often reimburse below the cost of care.
At CMH, 61% of patients are on Medicare and 20% on Medicaid, and at Tappahannock, 69% of patients are on Medicare and 15% on Medicaid, according to Levy.
With additional requirements for Medicaid eligibility being implemented, the likelihood that hospitals will provide care to uninsured individuals will increase, worsening the financial distress in the health care system.
“Beginning in 2027, Medicaid work requirements, followed by reductions in supplemental payments in 2028, are expected to create additional financial pressure for many hospitals, not just rural hospitals,” Levy said, who noted that VCU Health is taking proactive measures in anticipation.
Not a new problem
While H.R. 1 is making the situation worse, Willett says the problems started long before its passage.
One of the first services hospitals cut is labor and delivery.
“The fundamental challenge is volume,” Willett said. “You basically need to be delivering several hundred babies per year, or the math just doesn’t work.”
“If you’re not there, you’re not there,” he continued.
Staffing shortages have also long plagued rural hospitals, where recruiting physicians, nurses and other healthcare workers can be difficult.
“A lot of times, doctors have spouses, the spouse needs to work, and maybe the spouse’s job is 50 miles away. Well, that’s not practical,” Willett, who grew up in Farmville, said. “So, the practicalities of being in a smaller area, it works for some, but a lot of folks, it’s just a hurdle that’s too much.”
Levy said CMH and Tappahannock are addressing this by “investing in workforce development, through nursing residency programs, a new ACGME-accredited Family Medicine Residency Program within the VCU School of Medicine, and partnerships with local and regional colleges that provide education, externships, and shadowing opportunities.”
Caution and preparedness
The rural healthcare crisis is often portrayed as one in which hospitals are on the brink of closing, but Walker cautioned against framing the current situation as an imminent closure crisis. Instead, he said the focus should be on the operational and financial pressures that may gradually erode access to care.
And for Levy, who oversees one of the largest healthcare systems in Virginia, addressing the long-term problems while preparing for the new changes is key.
“We are adapting to the evolving healthcare landscape with a clear focus on the health and well-being of all Virginians,” he said. “As the largest safety-net provider in the Commonwealth, we have a responsibility to ensure access to high-quality care for every patient, no matter where they live.”