Rural hospitals are struggling with mounting financial pressure, and looming Medicaid cuts could deepen the crisis.

An analysis of hospital financing data from the National Academy for State Health Policy (2020–2023) reveals troubling trends. Among the 2,142 hospitals designated as rural based on Rural-Urban Commuting Area codes in 2023, 99 hospitals posted negative net profit margins for four consecutive years. In addition, 150 rural hospitals relied on Medicaid for more than 30% of their revenues, making them especially vulnerable to federal funding changes. Of those Medicaid-dependent providers, more than half (76) are non-profit hospitals, while 48 are government-owned.

The financial fragility is especially pronounced in New Mexico, California, Louisiana and Hawaii, where half of all rural hospitals either serve a high concentration of Medicaid patients or have experienced four straight years of negative net profit margins since 2020.

Among states with more than 10 rural hospitals, Oklahoma, Virginia, Tennessee, Indiana and South Carolina each reported that more than 10% of their rural hospitals have operated in the red since 2020.

In July, President Donald Trump signed the One Big Beautiful Bill into law, which includes a reduction of over $860 billion in federal Medicaid spending by 2023. According to estimates from the Congressional Budget Office, this could result in more than 7.8 million people losing health insurance coverage. Coupled with policies that limit states’ ability to raise Medicaid revenues through provider taxes, hospitals are likely to face deeper financial strain, particularly those in rural areas.

The Senate introduced a $50 billion Rural Health Transformation Program aimed at addressing the growing challenges rural providers face. While the White House described the initiative as “a historic investment in rural healthcare” in its memo, it only offset 37% of the estimated cuts to federal Medicaid spending in rural areas. And how the funds will be distributed across and within states remains unclear.

According to a Senate fact sheet, 50% of the $50 billion will be divided equally among states that apply to the Centers for Medicare & Medicaid Services (CMS). This approach raises equity concerns, as states with vastly different numbers of rural hospitals may receive the same amount of funding. Rhode Island, which has only one rural hospital, could receive the same funding as Texas, which has 148 rural providers.

The remaining $25 billion is set to be allocated based on a formula developed by CMS. According to the fact sheet, CMS needs to consider a state’s “rural population, proportion of health care facilities in rural areas and the situation of hospitals that serve a high proportion of low-income patients.” However, the law does not specify the exact formula, metrics, or methodology CMS must use, nor does it require the agency to publicly disclose how the funds are ultimately distributed.