Last year, a group of Democratic U.S. senators warned that proposed Medicaid cuts could put hundreds of rural hospitals across the country at risk of reducing services or closing.
The June 2025 letter, written by four senators including Edward Markey of Massachusetts and Ron Wyden of Oregon, cited analysis from the Cecil G. Sheps Center for Health Services Research at the University of North Carolina. It identified 12 Indiana hospitals as financially vulnerable because they either had multiple years of negative operating margins or served a high share of Medicaid patients.
Story continues below.
Among those hospitals were Daviess Community Hospital in Washington and Sullivan County Community Hospital.
A year later, both hospitals remain open and are expanding services. But while their financial situations differ, officials from both hospitals say workforce shortages remain one of the biggest long-term threats to rural healthcare.
"We've been able to break even just in the last month," said Justin Harris, CEO of Daviess Community Hospital.
When Harris arrived last summer, the hospital had posted losses for several consecutive years.
"Over the past couple of years, this hospital has not made any money," he said. "They've not even come close to break even."
Harris said the hospital was nearing the point where it risked missing payroll before changes to operations and new investments began improving its finances.
One of those investments was a new Women's Health Center, which employs two full-time OB-GYN physicians and brings obstetrics, gynecology and imaging services under one roof.
The investment comes as rural maternity care continues to shrink across Indiana.
"Since 2023 there have been almost a dozen hospitals that have closed their OB units," Harris said. "We don't believe in having healthcare deserts."
For Harris, keeping those services local is about more than convenience.
"If your wife was pregnant, getting ready to have a baby, you're expecting them to drive 30 or 40 minutes while they're in labor," he said. "I don't think so."
Not every hospital included in last year's report viewed itself as financially distressed.
Michelle Franklin, CEO of Sullivan County Community Hospital, said her staff was surprised when the hospital appeared on the list.
"We have no intention of closing," Franklin said. "We have an excellent balance sheet and continue to grow our footprint and continue to grow our service line."
Still, Franklin said future Medicaid funding remains a concern for rural hospitals across Indiana.
"I remain optimistic that something will be done before we see this kind of really catastrophic effect on our healthcare ecosystem," she said.
Even as their financial situations differ, Harris and Franklin pointed to the same challenge: finding enough healthcare workers.
"You always have workforce challenges in a rural community because it's difficult to recruit," Franklin said.
Harris said the shortages extend well beyond physicians and nurses.
"We need more nurses. We need more surgical technicians. We need more radiology technicians. We need more respiratory technicians," he said.
Hospital leaders hope a new statewide partnership announced this summer can help address that problem.
The Crossroads Academic Medical Institute brings together Marian University, Purdue University and healthcare systems across Indiana to expand clinical training and residency opportunities, particularly in rural communities.
Instead of training students primarily at one large academic medical center, the partnership will place future physicians at hospitals throughout the state.
Harris said exposing residents to rural communities could encourage more of them to stay after completing their training.
"This distributed academic medical center approach allows these students to go out and do a rotation in a rural facility," he said. "They're more likely to stay."
Read more: Health insurance failures mean trouble for rural hospitals
Marian University President Daniel Elsener said Indiana educates more medical students than it currently has residency positions for, meaning many graduates leave the state to complete their training and often never return.
The new institute is designed to keep more of those physicians in Indiana while helping rural hospitals recruit providers.
Cara Veale, CEO of the Indiana Rural Health Association, said rural hospitals continue to adapt despite financial and workforce challenges.
She said rural hospitals are often much more than healthcare providers, serving as major employers and community institutions while ensuring residents can receive care close to home.
For Franklin, preserving that access remains the ultimate goal.
"Not having access to medical care very quickly,” she said, “is ultimately an issue of life or death."
