How Shared Services May Affect Rural Hospital Operating Models

By Two Pillars & Co Advisory Group · Sources checked October 2026

What are shared services and why do rural hospitals consider them?

Shared services are functions delivered jointly by several organizations instead of separately by each. In health care, common examples include revenue cycle management, group purchasing, information technology, compliance, coding, laboratory, pharmacy, telehealth, visiting specialists and executive management. Rural hospitals consider them because small scale makes many functions expensive per patient, and because recruiting specialized staff is hard.

The Rural Health Information Hub summarizes the reasons rural executives consider system affiliation: impediments to value-based performance and contracting, lack of purchasing power, underdeveloped clinical and financial data systems, and inadequate training and support for leaders and staff.^[1] Shared services address many of these directly.

What models exist?

Models vary in formality. A health network is defined by the National Cooperative of Health Networks Association as a collaboration of at least three like-minded entities that join together to improve health outcomes for rural communities and advance a common mission.^[1] A multihospital health system is, in the American Hospital Association’s definition, two or more hospitals owned, leased, sponsored or contract-managed by a central organization.^[1] Between these lie management contracts, clinical affiliations, joint ventures and purchasing cooperatives.

A published case study in Health Care Management Review describes the hub-and-spoke organization design used by the Willis-Knighton Health System, in which a larger hub hospital establishes partnerships with neighboring rural hospitals and integrates them into a network while ensuring continuity of services in remote regions.^[2] The authors argue that relationships with stronger urban or suburban institutions offer a prudent avenue for rural hospitals to keep serving patients, but that arrangements must be structured with care. It is a single-system case study, and it should be read as illustration, not proof of general results.

How common are affiliations?

Very common. The Rural Health Information Hub cites research finding that 61 percent of rural prospective payment system hospitals were affiliated with health care systems in 2020, up from 46.8 percent in 2009, and that affiliation among Critical Access Hospitals rose from 38.7 percent to 45.9 percent over the same period. It also cites a finding that 66.6 percent of all inpatient stays at rural hospitals in 2016 took place at a system-affiliated facility.^[1] Affiliation is no longer unusual; the question is which type and with whom.

What are the potential benefits and costs?

Benefits can include lower purchasing and supply costs, access to specialist support and telehealth, stronger revenue cycle and compliance functions, shared recruitment, access to capital and better data systems. Costs and risks include loss of local governance, changes to service lines, transfer of referrals to the partner, management fees, integration costs and dependence on the partner’s priorities.

The Rural Health Information Hub reports that research on service offerings after system affiliation exists, which suggests that services can change after joining a system.^[1] Leaders should therefore negotiate commitments about services, governance and local decision-making before signing.

How should a hospital evaluate a shared-services proposal?

Define the problem the proposal solves. Quantify expected savings and revenue, and what the hospital will pay. Identify what control is shared. Ask for references from other partners. Test the partner’s own financial strength. Define performance measures, termination rights and the transition if the arrangement ends. And compare it with doing nothing and with alternatives.

An invented example: a 25-bed hospital considers outsourcing revenue cycle to a partner at 3.5 percent of collections. If net days in accounts receivable would fall from 62 to 48 and denials by one third, the added cash and revenue might exceed the fee, but the case depends on the baseline. The numbers are illustrative only. The interactive example below shows a simple version of such a comparison.

Frequently asked questions

What to do next

1. List the functions where you lack scale or capability.
2. Identify possible partners and what each could provide.
3. Quantify costs and savings under realistic assumptions.
4. Negotiate service, governance and exit terms before signing.