HARRISBURG — The collective fiscal footing of Pennsylvania’s rural hospital network appeared to improve as operating margins and net patient revenue grew year over year, according to a new industry analysis, but the positive returns mask looming cuts to federal funding expected to tear through the gains.
The Pennsylvania Health Care Cost Containment Council, or PHC4, on Thursday released its financial analysis of 63 hospitals operating in rural counties for fiscal year 2025.
The hospitals serve Pennsylvanians in 48 rural counties. Nine counties don’t have a hospital, and all are rural: Cameron, Forest, Juniata, Northumberland, Perry, Pike, Snyder, Sullivan, Wyoming.
The analysis showed operating income for the rural facilities grew to $1.05 billion, raising the statewide average operating margin to 8.7%, up from 7.59%. Operating revenues reached $12.1 billion compared to expenses of $11 billion.
Net patient revenue jumped by 8%, reaching $11.5 billion.
The facilities collectively improved on operating losses, though that’s a positive point only for those not in the red — 17 reported losing an average of $72 million in 2025 compared to 2024 when 22 reported losses averaging $80 million. It’s better, too, than in 2023 when 31 facilities reported average losses of $107 million.
And, there were no rural hospital closures between fiscal 2024 and 2025, which doesn’t account for the closure of inpatient and emergency room services at Bradford Regional Medical Center in McKean County in May.
On its face, the report shows the financial environment for rural hospitals is on the mend, if only slightly.
“It’s a mirage and it doesn’t reflect the current reality,” said Liam Migdail, vice president of strategic communications for the Hospital and Healthsystem Association of Pennsylvania.
The full force of Medicaid changes approved by Congress in the One Big Beautiful Bill take effect Jan. 1, 2027, including the implementation of work requirements to be eligible for the government-funded insurance, more frequent periodic reviews of program eligibility, continued funding cuts toward a $1 trillion decrease across a decade, atop the already expired enhanced premium tax credits that had boosted enrollment in private plans offered through the Affordable Care Act Marketplace.
Medicaid reimbursement in Pennsylvania stands at about 71 cents on the dollar and is expected to fall to 64 cents.
The administration of Gov. Josh Shapiro maintains that an estimated 300,000 Pennsylvanians will lose Medicaid coverage as a result of program changes. Pennie, the commonwealth’s ACA marketplace, reported 40,000 people dropped private coverage from February through June, citing increased costs, and was down more than 51,000 compared to peak enrollment of 497,000 in 2025.
“Either the insurance premiums were too high and people chose not to enroll, or they may have gotten employer health insurance. Sometimes, I think that’s pretty doubtful,” said Lisa Davis, director, Pennsylvania Office of Rural Health.
“There are individuals who enroll during open enrollment, they know they need to have health insurance, and are willing to make whatever changes they need in their finances to afford it. The ongoing cost of that may become something they can no longer tolerate,” she said.
The Pennsylvania legislative Independent Fiscal Office predicts that enrollment contraction could save the commonwealth upward of $300 million; however, the savings are anticipated to be offset by increased costs to hospitals, namely in uncompensated care — charity care and bad debt.
That’s a trend line already worrisome to the Hospital and Healthsystem Association of Pennsylvania. Uncompensated care is particularly burdensome on communities with a higher concentration of low-income residents.
According to the PHC4 report, uncompensated care at rural hospitals grew by 9.1% in fiscal 2025, reaching $192 million and trending up. The figure had stood at $176 million in 2024 and $147 million in 2023 following a period of annual decreases.
The total stands to grow as more people become uninsured.
HAP commissioned an analysis from the consultancy Oliver Wyman, released in January, that found without targeted government support, growing costs could lead to the closure of up to 14 hospitals by 2031 — rural and urban. That would lead to a 22-minute add-on to the average drive Pennsylvanians make to the nearest hospital, and see about $900 million in wages disappear due to job losses, the report found.
“We are definitely concerned about uncompensated care increasing. There’s still a very high level of strain among our rural hospitals. We know that’s going to get worse as changes happen over the next couple of years,” Migdail said.
The report is the third from PHC4 focusing specifically on the fiscal condition of rural hospitals. The key factors contributing to financial challenges facing the facilities remain the same since the series began:
• Decreased reimbursements from government healthcare programs like Medicare and Medicaid;
• Rural communities are aging, requiring more complex and costly care;
• Patient volume is growing lower with population shrink;
• Operating costs continue to grow higher;
• Uncompensated patient care — bad debt and charity care — continues to grow, too, and barely eclipses the facilities’ collective net patient revenue.
Davis said that 2026 will provide insight into what it looks to have growing uncompensated care. In 2027, she said, there will be real evidence about the public health costs of lost Medicaid coverage.
“A not-for-profit hospital is required to provide care if someone shows up regardless of their ability to pay,” Davis said. “Just because you don’t have health insurance doesn’t mean you won’t get sick. By the time they seek care, they will obviously have much more extensive issues which are much more expensive to treat.”