At Big Sandy Medical Center in north-central Montana, the emergency room is a single space divided by a curtain between two beds. The 25-bed hospital, built by local farmers and ranchers in 1965, still depends heavily on donations and grants to operate. CEO Ron Weins says the facility needs at least $1 million in deferred maintenance — including a failing HVAC system — even as it sometimes struggles to meet payroll.
Weins hoped Montana’s portion of the federal Rural Health Transformation Program would help renovate facilities and provide direct support to keep small hospitals open. Montana received more than $233 million in its first-year award from the $50 billion program. But the program — added late to a broader federal bill signed last summer — prioritizes new care models to expand rural access rather than direct capital investments or ongoing operating support. The larger legislation is expected to reduce Medicaid spending by roughly $1 trillion over a decade, and the rural fund was intended in part to lessen disproportionate impacts on rural providers.
That emphasis on redesign and innovation has alarmed many rural hospital leaders. Montana’s application proposes projects such as community gardens, paramedic home visits, school-based clinics and mobile clinics. It also says hospitals could be paid for adopting recommendations, “including right-sizing select inpatient services,” and notes that right-sizing may include “downsizing.” Weins and other local leaders say that language about restructuring and reducing inpatient capacity leaves them uneasy.
Residents fear consequences if services beyond emergency care are trimmed. Rancher Shane Chauvet, who credits the Big Sandy hospital with stabilizing him after a serious arm injury, worries that cuts to outpatient or inpatient services would set off a downward spiral for his town. State officials have said emergency departments would not be eliminated, but Chauvet and others worry that losing other services could hollow out the community.
Across the country, at least 10 states’ applications or new laws mention right-sizing, restructuring, or removing unprofitable or duplicative services. Oklahoma’s plan explicitly allows realigning clinical services in ways that could mean “shutting down service lines.” Wyoming’s rural health law requires facilities that accept program funds to agree to “reduce unprofitable, duplicative or nonessential service lines.” Wyoming officials contend right-sizing simply means concentrating on essential services — emergency care, ambulance services and labor and delivery — and possibly moving elective procedures to higher-volume regional centers where they can be delivered more cost-effectively.
Seven states — Nebraska, North Dakota, Tennessee, Kansas, Nevada, South Carolina and Washington — said they will help hospitals convert to the new Rural Emergency Hospital (REH) designation. REHs must stop offering inpatient care but receive enhanced payments to support emergency and outpatient services. At least 15 more states indicated they would use the federal funding to right-size, evaluate or adjust services, which could include adding services, eliminating others, or shifting care to outpatient or telehealth settings.
Rural hospital advocates warn that steering funds primarily toward redesign and away from direct operating support could backfire. Brock Slabach, chief operating officer of the National Rural Health Association, says administrators are rightly concerned the money may not reach the hospitals that need it most. Tony Shih, a senior adviser at the Commonwealth Fund, cautions that if states remove high-margin services without replacing the lost revenue, hospitals could be weakened. Converting care to outpatient clinics or telehealth may help patients in some cases, he notes, but outcomes will vary and will take time to measure.
Local leaders also emphasize that service changes should come from collaboration, not top-down edicts. Josh Hannes of the Colorado Hospital Association says hospitals are willing to pursue efficiencies and partnerships, but state agencies should not unilaterally select which services to cut. Colorado’s plan to classify rural facilities as a hub, spoke or telehealth node — intended to clarify which services are sustainable locally versus regionally — has stirred concern that it could pressure some hospitals to reduce services. Colorado and Oklahoma health departments maintain they will not force any facility to end services, though they acknowledge some hospitals might choose to shift care to regional providers as part of broader stabilization efforts.
Opinions in Montana are split. Ed Buttrey, president and CEO of the Montana Hospital Association and a state lawmaker, says the plan could help rural hospitals adjust to lower Medicaid funding and become financially sustainable. Others, including Weins and Darrell Messersmith of Dahl Memorial Hospital in Ekalaka, worry hospitals may feel compelled to cut services or convert to REHs in order to access federal dollars. Messersmith says his hospital “functions quite well as an inpatient facility” and does not want to become a simple transfer point for sicker patients.
Residents and clinicians fear that losing inpatient or other local services could accelerate population decline in small towns, further reduce patient volumes and undercut long-term viability. Supporters of the program argue that well-designed investments in outpatient care, community health initiatives and telehealth can improve access, reduce reliance on costly inpatient care and stabilize rural health systems — but that success depends on thoughtful implementation and adequate replacement of lost revenue.
Which states and strategies will actually stabilize rural hospitals remains uncertain. The federal program’s focus on innovation and restructuring, combined with state plans that explicitly allow downsizing or service realignment, has created deep anxiety in small communities that rely on local hospitals for more than just emergency care.
This story was produced by NPR’s health reporting partnership with Montana Public Radio and KFF Health News.