Virginia report flags financial risks at several rural hospitals

A Virginia legislative report found seven rural hospitals are at the highest risk of financial distress or closure under at least one national assessment model, with all seven reporting negative operating margins in 2024.The report, presented to the Joint Commission on Health Care, examined the financial and operational condition of Virginia’s rural hospitals amid concerns about workforce shortages, rising costs and reimbursement challenges.
According to the report, seven hospitals met the highest-risk criteria under at least one of two national models used to assess rural hospital financial health.
Those hospitals are Bon Secours Southampton Memorial Hospital, Bon Secours Southern Virginia Medical Center, Carilion Giles Community Hospital, Carilion Tazewell Community Hospital, Sentara Halifax Regional Hospital, VCU Health Community Memorial Hospital and VCU Health Tappahannock Hospital.
The report found all seven reported negative operating margins in 2024, meaning they spent more on operations than they generated in operating income. Three of the seven hospitals were operating at a loss in 2015.
Staff told commission members that rural hospitals face challenges including lower patient volumes, higher percentages of Medicare and Medicaid patients, workforce shortages and rising operating costs. Labor expenses account for more than half of hospital operating costs, according to the report, while Medicare and Medicaid reimbursement rates often do not fully cover the cost of care.
Researchers found patient days declined by roughly 34% to more than 60% across the seven hospitals over the past decade. Obstetric services also declined across most facilities, while emergency department use remained stable or increased.
Although outpatient services account for a growing share of revenue, the report found the shift has not offset mounting financial pressures. All seven hospitals reported operating losses or negative margins in 2024 despite substantial growth in gross revenue between 2015 and 2024.
Nationwide, 108 rural hospitals have closed since 2005, according to the report. Another 139 have eliminated inpatient services and shifted their focus to emergency and outpatient care.
Staff told commission members that two Virginia rural hospitals have closed since 2005, while another closed in 2013 and reopened in 2021 under a limited-service model that restored emergency and outpatient care but not full inpatient services.
The report warned that hospital closures can affect more than access to care. Staff said neighboring hospitals experience more than a 10% increase in emergency department visits within two years of a rural hospital closure, while communities can face job losses and other economic impacts when hospitals reduce services or close.
The Joint Commission on Health Care directed staff to conduct the study in October 2025 as part of its 2026 work plan. The report said financial and operational trends among the seven highest-risk hospitals reflect broader challenges facing Virginia’s rural hospital system.

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