Post-Obamacare, Rural Hospitals Are Hanging by a Thread - and the Lifeline May Be Cut

By Amelia Hamilton

New analysis by healthcare market intelligence firm Trilliant Health contains some bad news for hospitals, which continue to struggle in the healthcare landscape just over fifteen years after Obamacare became law. The signature progressive bill fundamentally reordered that sector of the economy, hitting many rural hospitals hard.

Now, Trilliant’s analysis shows that only about a third of hospital revenues are generated by patient care. In order to stay in the black in the post-ACA landscape, they need to diversify through revenue streams such as grants, investments, medical device sales, and real estate. "With the benefit of these non-operating revenue sources,” Trilliant said, “many nonprofit health systems with negative operating margins are able to achieve positive overall margins.”

In 1992, a federal initiative was enacted requiring pharmaceutical companies to sell certain medications at significant discounts to eligible hospitals and clinics. This 340B Drug Pricing Program allows eligible hospitals and clinics to stretch resources and reduce medication costs for patients. The Trilliant analysis offers a stark reminder of the importance of the program, especially for rural providers, since these hospitals rarely profit from patient care. They depend on having a diverse portfolio with multiple income streams so they can keep their doors open and continue to provide care for low-income and underinsured patients in their communities.

Obamacare cut Medicare reimbursements, slashed federal payments to hospitals treating uninsured patients, and saddled providers with costly new regulations, accelerating the closure of rural hospitals that were already operating on the margins.

While net patient revenue increased every year from 2018 to 2023 (with the exception of 2020), it is not keeping pace with the increase in hospital expenditures. The American Hospital reported that more than half of hospital costs “are tied to service lines where reimbursements fall short, or is less than, the cost to deliver care.” For behavioral health services, for example, hospitals are only reimbursed about 75 percent of the cost of care. Costs for tangible supplies have also increased. In 2010, it cost about $0.46 to produce a one-liter bag of saline. By 2013, that had already increased to $1.07. It’s hard to pin down an exact cost for more recent years, but most have it somewhere around $2.00. Then, there’s energy. In 2021, the average energy cost for a hospital was $3.16 per square foot. By the next year, it had jumped to $3.75. This was mostly due to increased costs from energy companies rather than increased usage by hospitals. Utilities can account for 10 percent of a hospital’s annual budget, and that is not an expenditure that has a corresponding patient to bill.

It is important to look at hospitals specifically because they are the biggest share of U.S. healthcare spending at nearly one-third (or $1.6 trillion). They also employ millions of workers across the country, so having those with razor-thin margins close rather than increase their margins could be economically catastrophic.

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Trilliant reports that, in 2023, 39 percent of hospitals reported negative operating margins (net patient revenue minus operating expenses). The plurality (22.1 percent) reported margins between zero percent and five percent. Net patient revenue as a percentage of gross revenue is somewhere between twenty and forty-five percent for most hospitals. Diversified income is necessary for a hospital to remain open and continue serving patients.

And if the 340B program is gutted, not only will the trend Trilliant identified worsen, the fallout may land on taxpayers. Even Joe Grogan, a former Trump White House policy advisor with ties to the pharmaceutical industry, has acknowledged that if 340B is dismantled, hospitals “are going to be under pressure” and the federal government “doesn’t have the money to shore up the community hospitals.” Rural communities don’t want a federal bailout. They want their hospitals to stay open.

Without other streams of income, such as discounts and outside financial sources, keeping them afloat, they would be forced to close. This would leave an alarming number of Americans without access to a hospital in their community. And that is a price that is far too steep to pay.

While Democrats will be keen to make claims about Republicans having hurt health care as the 2026 midterms approach, all of this detail is vital to remember. The GOP might want to remind voters that it was a Republican President (Bush 41) and a Republican Senator (Orrin Hatch) who created, and another Republican President (Trump) who protected via ceiling price rules for drugs in the program, the 340B solution that has made many of these challenges more navigable.

Amelia Hamilton is a writer and communications professional from Michigan with more than a decade of experience in messaging to promote liberty. Through her work with different organizations and publications, she knows how to craft the right message for each audience to help them connect with policy issues. Amelia has undergraduate and master’s degrees in both English and 18th-century history from the University of St. Andrews in Scotland.

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