Innovating for survival in a rapidly changing environment
Rural hospitals are used to doing more with less. But the definition of less seems to grow all the time. Less clinical staff, less capital, less negotiating leverage and less room for error as payers tighten requirements and deny more claims. At the same time, rural organizations are being asked to modernize the patient experience, adopt AI and compete for talent and patients in the way large systems do.
Across conversations with rural health leaders at the most recent Becker’s CEO + CFO Roundtable, a consistent message emerged. Innovation is essential, but survival hinges on improving payer relationships to reduce transactional friction, mastering disciplined technology adoption and maintaining an operational focus in an environment where costs continue to rise and margins are already razor-thin.
Payer relations see limited leverage, rising friction
For many rural hospitals, the payer landscape is the most destabilizing force – especially when the community’s health needs are rising, and reimbursement is not keeping pace. David Dunkle, MD, CEO of Johnson Memorial Health, described a reality familiar to many independent community hospitals when even the best possible claim does not guarantee payment.
“You can get a perfect claim, but that doesn’t necessarily mean the perfect claim is going to be reimbursed,” said Dunkle. “That is the issue. And honestly, I think payers should be fined if you have a perfect claim that gets denied.”
Denials, repeat documentation requests and retrospective claw backs leak revenue and drain small teams that can’t easily absorb more administrative work. Dunkle also underscored how rural and small community hospitals can’t use tactics sometimes discussed by larger systems.
“I just sat in and listened to people talking about going out of network with the big payers to get better rates,” said Dunkle. “I can’t go out of network like that. I mean, who am I? So, I think that not everyone understands those dynamics and how the small guys get pushed around a little bit more. We just don’t have the same leverage.”
Abba Agrawal, MD, president and CEO of North Star Hospitals, sees that lack of leverage as a structural disadvantage for independent rural providers and believes collective strategies can help restore negotiating power.
“There are things we can do,” said Agrawal. “We can create a conglomerate, sort of a confederation of rural hospitals, even if they’re independent, then collectively they can have better leverage, better buying power as opposed to one individual hospital or small system.”
With thin margins, every investment has to work
Rural leaders are weighing the same technology opportunities as large systems, but with a fundamentally different risk profile. Limited cash reserves and limited access to capital make ROI scrutiny non-negotiable.
“When you’re a smaller organization like us, you’re never going to be the first to adopt the latest technology,” Dunkle said. “And again, a lot of that is just affordability. We can’t afford to make a mistake. We can’t afford to make an investment that doesn’t pay off because capital is so limited.”
That financial reality shapes how rural organizations approach everything from automation to cybersecurity. The rule of thumb most often cited is that any move forward must be done carefully, with trusted partners and with clear operational objectives.
Technology adoption requires practical use cases, not hype
Rural organizations are not particularly opposed to artificial intelligence. They are, rather, pragmatic about where it can help first, especially in regard to easing the administrative burden, improving clinical documentation and optimizing revenue cycle performance.
Chris Harrison, CEO of Quorum Health, emphasized that successful AI adoption starts with a clear purpose – to enable staff, not simply to reduce headcount.
“It’s not a situation of let’s put AI in that manual process to eliminate the job,” said Harrison. “Now it’s let’s make that person more productive and make their job easier. And then we should have a better result as a company, because now they can spend their time on more productive processes.”
That mindset matters in rural communities where the hospital is often a major employer and economic anchor. Harrison also described physical automation that’s easy to overlook like robots that handle internal deliveries so clinical staff can stay focused on care. For rural hospitals adopting technology like telehealth is also an access strategy, especially when geography, travel time or isolation makes specialty care scarce.
Patient experience must prioritize access, clarity and trust
Rural healthcare is deeply local. But patients still expect the same convenience as they experience from other industries like digital scheduling, transparent billing and faster replies to patient requests. Harrison pointed to this consumer shift as a major driver for modernization, and says he thinks often about how to provide patients with more efficient and satisfying experiences.
Agrawal highlighted another opportunity for rural health – using AI to reduce barriers for patients navigating complex medical language, literacy levels and different languages. He says AI technology can reduce that friction significantly to deliver a better patient experience.
The throughline highlights mission, community and sustainability
Despite the pressures they face from payer friction, administrative costs, regulatory constraints and payer relationships, these leaders consistently return to why rural hospitals matter. Rural hospitals keep care close to home, they stabilize local economies and they serve as a safety net when other options are limited.
At R1, we support rural hospitals and health systems in developing practical pathways to strengthen financial resilience, especially across payer performance, denials management and patient access, by adopting technology solutions in ways that fit their scale. The goal isn’t and should not be innovation for its own sake. The goal is protecting the ability to care for communities that can’t afford to lose their hospital.
