This story was originally published by Knowable Magazine.

The way the United States typically finances hospitals isn’t working. The coronavirus laid this bare, along with many other long-standing societal problems.

Before Covid-19, most hospitals were operating on a standard “fee-for-service” model, in which the more procedures they do, the more they get paid. This worked for some hospitals, but it incentivized them to increase the number of procedures to make more money, which is not always in patients’ best interests. And the fee-for-service model wasn’t working for all hospitals, particularly those in rural areas or those that served low-income patients, where procedure volume and income are limited by sparse population and lower reimbursements from government payers, respectively. Before the pandemic, half of U.S. hospitals had a profit margin of 3.5 percent or less. Between 2010 and the beginning of 2020, 120 rural hospitals were forced to close their doors.

 …