How rural hospitals can recover from the brink of closure

Hospital closure is a phrase many healthcare leaders hope never to confront, yet it is becoming a real possibility for more systems. With 720 hospitals at risk of closure in the U.S., Sturgis (Mich.) Hospital recently became the latest to shut its doors, ending 101 years of service on June 19. The case has renewed attention on what pushes rural hospitals to the edge and what, in some situations, can help them recover.

Lauren LaPine-Ray, DrPH, vice president of policy and rural health for the Michigan Health & Hospital Association and executive director of its Center of Rural Excellence, pointed to a 13% drop in emergency department volume at Sturgis over the previous two years. She said that decline was significant. She did not say volume is always the first issue to worsen, but noted that decreased volume played a major role in the two most recent hospital closures in Michigan.

LaPine-Ray described a similar pattern at Aspirus Ontonagon (Mich.) Hospital, which closed and later transitioned into a rural health clinic in April 2024. In that case, she said low patient volume had persisted for years, making it harder to maintain services and cover costs. She emphasized that closure and restructuring are never the preferred path for hospital leaders, particularly in rural communities where hospitals often serve as the largest employer.

“There’s never a rural hospital leader that wants to close a hospital,” she said. “It’s a significant hit to the local economy and community.” She added that when a rural hospital closes, the impact on employees can be substantial because these hospitals are often among the most important employers in their areas.

At East Adams Rural Healthcare in Ritzville, Wash., the threat of closure became immediate rather than theoretical. Viola Babcock, who joined as hospital CFO one year ago, said the warning signs were unmistakable. In June 2025, she said, the hospital had no cash. Some vendors had not been paid for six to seven months. Todd Nida, who has been CEO for 11 months, described the same period as a moment when payroll itself was at risk.

“When your payroll is at risk, that’s a clear sign of closure,” Mr. Nida told Becker’s. He said the situation was overwhelming from the start, with vendors unpaid for months and no cash on hand. The fear of not being able to make payroll was immediate.

Both leaders said a turning point came when the hospital filed a WARN notice in fall 2025. The notice is required by federal law when payroll is at risk. Mr. Nida said everything changed after that. One year later, he and Ms. Babcock said the hospital’s finances had improved significantly. Net revenue now matches expenses on a month-to-month basis, leadership is focused closely on cash flow, and there is a fair amount of money in the bank. Payroll is no longer at risk, vendors are being paid biweekly, and the hospital has added a new ambulance to its fleet.

Ms. Babcock said a key factor in the turnaround was a leadership team that committed early to thinking beyond the next few months. Instead of focusing on a one- to six-month horizon, the team agreed to make decisions with a 30- to 50-year view. She said that long-term mindset set the team and board apart from other turnarounds she has seen, which she described as often too short term.

Asked what most often drives rural leaders toward closure, Mr. Nida pointed to a failure to face financial realities early. In his view, the common problem is not balancing declining revenue and rising expenses before the situation becomes severe. He said too many organizations wait until they are already deeply in trouble.

Nitesh Kumar, MD, CEO, founder and chief strategy officer of A3HCS, has worked with struggling hospitals and advised turnarounds. He told Becker’s the difference between a hospital that can still recover and one that has passed the point of no return depends on whether leadership can control the forces causing losses.

According to Dr. Kumar, a hospital enters point-of-no-return territory when losses are driven by factors leaders cannot reverse, such as workforce shortages that cannot be staffed around, a shrinking or aging local population that cannot support volume, or capital needs so large that no realistic financing path exists. He said the key question is whether the next dollar invested still changes the situation. If it does not, he said, the organization is no longer managing a turnaround and is instead managing a wind-down.

For a hospital with only six months of financial runway, Dr. Kumar said leaders should prioritize cash preservation and continuity of patient care, in that order. He said leaders need to renegotiate vendor and payer terms immediately. He also stressed the importance of communication with workers and the community so morale and trust do not erode further.

At that stage, he said, initiatives with a payback period longer than the runway itself are not worth the effort. He specifically cited new technology rollouts, long-term strategic planning and systemwide culture initiatives as examples of projects that can distract from the immediate needs of cash and care continuity. In a stable hospital, he said, those efforts matter, but not when time is that limited.

Gregg Miller, MD, chief medical officer at Vituity and an emergency physician, said financial distress is not the only path to closure. He previously worked at Los Angeles-based Martin Luther King Jr.-Harbor Hospital, which closed in 2007 after CMS found patients in immediate jeopardy. That closure came months after a patient died on the emergency department floor while a janitor mopped nearby.

Dr. Miller said he would advise leaders in a similar situation to fix broken systems and not assume a critical service guarantees safety. He said closure can happen even when it causes serious consequences for the surrounding community. He also said organizations need to build stronger internal culture and leadership so employees feel engaged and cared about.

He recalled that some staff members were deeply mission-driven and worked hard to save the hospital, but that effort was not enough to overcome bureaucracy and a broken culture. In his view, those internal problems can be as dangerous as financial strain.

At East Adams Rural Healthcare, Mr. Nida said the purpose of sharing the hospital’s experience is not only to describe a recovery, but also to encourage other leaders to keep fighting for their organizations when they can. He said there are options other than closing the doors, although not every hospital will have them.

“If they do, the fight is worth it,” he said. He added that rural communities depend on hospitals not only for healthcare services but also because these institutions are important employers and part of the local economy. The message from leaders and experts in these cases is consistent: when closure is not yet inevitable, facing financial realities early, preserving cash, and addressing broken systems may give a hospital a path back from the brink.