New Hampshire has been lucky. Since 2005, 110 rural hospitals in the United States have closed, and another 85 have converted to an out-patient service provider. Maine was home to three of those conversions and one closure, all since 2013.
No closure or conversion has hit New Hampshire. Yet.
That could change if the state burdens its rural hospitals with additional regulations that restrict their ability to innovate.
Financial distress is “the primary driver of rural hospital closures,” a 2025 University of Illinois analysis of rural hospital closure studies found.
“The primary drivers of rural hospital closures are, in fact, economic,” a 2019 review of rural hospital closures by the Federal Reserve Bank of Richmond concluded. “Rural hospitals have tighter profit margins than urban hospitals.”
Amid a wave of hospital closures, conversions and consolidations caused by declining margins, the New Hampshire Senate is considering legislation that would make it harder for rural hospitals in the state’s most distressed county to make ends meet.
Senate Bill 664 would freeze executive compensation for 18 months at any Coos County hospital that accepts Medicaid if the hospital reduces staffing by more than 10 in any department in any six-month period.
Why this particular regulation? Last year, North Country Health Care, owner of the three hospitals in Coos County, announced that it would contract out its revenue cycle management operation. The company said the move would require some immediate layoffs but save jobs in the long run by improving the organization’s financial position.
Layoffs were postponed to this year, and SB 664 would block them. The bill, which applies only to North Country Health Care, seeks to punish hospital management for finding efficiencies that protect the organization’s long-term financial viability.
SB 664 presumes that current employment levels are optimal and that North Country Health Care can remain financially viable forever with its current workforce, regardless of changing market conditions.
But rural hospital margins are small and the health care industry is changing rapidly. Increased competition from ambulatory surgical centers, telemedicine, pharmaceutical advancements and artificial intelligence put increasing pressures on all hospitals, particularly rural ones.
“Hospital revenue decreases are partly a result of medical advances that allow for more procedures to be performed as outpatient services,” the Richmond Federal Reserve’s review found. “In many instances, this can reduce or eliminate the need for patients to receive hospital care.”
SB 664 cites “employment loss and declining population trends” in Coos County as a justification for capping executive pay in the event of double-digit workforce reductions. But those would be factors in favor of workforce reductions, not against them. Population decline is customer decline.
Pressuring Coos County hospitals to maintain needlessly high staffing levels as competition and changing consumer preferences threaten their margins would make them more economically vulnerable. And Coos County’s 2.8% unemployment rate suggests that other employment opportunities are not exactly scarce.
Outsourcing back office operations is a proven way for health care providers to become more efficient, which improves financial strength. In a misguided effort to freeze current employment levels in place, SB 664 would discourage the pursuit of efficiencies by dangling a punishment over the heads of all top executives (even the head of nursing).
That would also discourage top executive candidates from taking any hospital jobs in the North Country. The New Hampshire Advantage is a mix of mostly economic and quality-of-life incentives for people to move to this relatively remote, largely rural state. Punishing hospital executives for improving their organization’s financial position would be a huge disincentive for top industry personnel at a time when the North Country already has trouble recruiting medical professionals.
“Limiting hospital executive compensation” leads the bill’s title, but that’s not the aim. The purpose is to regulate higher employment levels than hospitals would choose otherwise. The tie to executive compensation is a splash of populism to make the regulation more politically palatable.
Like minimum wages and benefit mandates, SB 664 offers yet another example of lawmakers attempting to force additional costs on employers while assuming that sufficient revenues to cover those costs will magically continue forever.
Rural hospitals already face immense financial challenges. Piling on regulatory burdens that create additional stresses would only worsen the financial stability of Coos County’s hospitals.
Though New Hampshire hasn’t had a rural hospital close in the last two decades, layering on regulations like this would increase the odds of that happening.
