Many small rural hospitals struggle with profitability compared to their urban counterparts. The findings brief describes the pre-pandemic (2011-19) trend of rural hospital profitability and explains why possible increases in reported profitability during the pandemic (2020-21) may mask the long-term financial challenges of rural hospitals. Since the start of the coronavirus pandemic, the federal government has provided enhanced financial support for hospitals and other health care providers to compensate for revenue loss and higher costs associated with the pandemic.

• In the nine years before the COVID-19 pandemic began (2011-19), the median total margin of rural hospitals was on a downward trajectory, ranging between 1.5% and 3.1%, and the percentage with a negative total margin was increasing.
• In 2020, rural hospitals and urban Inpatient Prospective Payment System (IPPS) hospitals reported receiving over $32 billion in federal support, primarily from the Provider Relief Fund (PRF), to compensate for loss of revenue and increased expenses from the pandemic.
• The PRF and Paycheck Protection Program (PPP) funds and timing differences in reporting could temporarily distort reported profitability measures and conceal the long-term financial challenges facing rural hospitals.

PRF and PPP funds were an important financial lifeline for many rural hospitals. However, the PRF and PPP funds are temporary and will be fully distributed at some point in 2022. Unless Congress authorizes additional funding, we expect rural hospitals to return to pre-pandemic levels of profitability. It is important for policy makers and others to carefully interpret profitability increases during the pandemic and to recognize the long-term financial challenges facing rural hospitals.