Illinois hospitals collected an estimated $80 million in extra Medicare payments this year under a rural designation — and in Illinois, the loophole runs backward.
Northwestern Memorial Hospital occupies a 926-bed campus on Chicago's Near North Side, five blocks from the Magnificent Mile. Medicare classifies it as rural.
So does Rush University Medical Center on the Near West Side. So does the University of Chicago Medical Center in Hyde Park. So does Loyola, so does Advocate Christ, so does Stroger — the Cook County public hospital.
Twenty-three hospitals in the Chicago metropolitan area hold a federal rural designation. That is more than any metropolitan area in the United States — more than New York, more than Los Angeles, more than Phoenix.
And Illinois hospitals are collecting an estimated $80.4 million in additional Medicare operating payments this fiscal year as a result, according to a Patient Daily analysis of the Centers for Medicare and Medicaid Services' FY 2026 payment file. Roughly $38.3 million of that goes to hospitals inside the Chicago metro.
Congress built a tradeoff into the rural designation. A hospital that petitions to be treated as rural under Section 401 of the Benefits Improvement and Protection Act gets rural benefits — Rural Referral Center status, easier access to 340B drug discounts, priority for rural residency slots. In exchange, it is supposed to accept rural wage rates, which are ordinarily lower. That cost was the brake on the system.
In Illinois, there is no cost. The brake doesn't exist.
Illinois's rural wage index for FY 2026 is 1.0815. Chicago's own wage index — the rate the Chicago labor market actually earns — is 0.9980.
The state's rural rate is higher than the rate for Chicago, and higher than the rate for every other labor market in Illinois. Peoria's is 0.8819. Rockford's is 0.8982. Springfield's is 0.9148. Champaign-Urbana's is 0.8615. The Quad Cities' is 0.7651.
This is a function of the rural floor, a provision guaranteeing that no hospital in a state is paid at a wage index below that state's rural rate. In most states the rural rate is the floor beneath urban rates. In Illinois it is the ceiling above them.
So a Chicago hospital that declares itself rural doesn't sacrifice anything. It gains 8.4 percent on its wage index. A Peoria hospital gains 22.6 percent. A Quad Cities hospital gains 41.4 percent.
The tradeoff Congress designed runs in reverse.
Downstate critical-access-adjacent hospitals. Suburban community hospitals. Academic medical centers on the Chicago lakefront. All the same number.
Beyond the Section 401 rural redesignation, they also hold a wage index reclassification through the Medicare Geographic Classification Review Board — a second, separate filing that lets a hospital move its wage index into a different labor market area. Statewide, 34 of the 37 Illinois hospitals paid as rural carry both.
Nationally, 679 hospitals hold this dual classification, and it is the target of the Defend Rural Health Act, H.R. 7409, introduced by Representatives Carol Miller of West Virginia and Glenn Thompson of Pennsylvania. The bill is written to close what its sponsors call the dual-classification loophole.
The three Illinois hospitals that took the rural designation without the second filing: the University of Chicago Medical Center, the University of Illinois Hospital and Clinics, and Jersey Community Hospital in Jerseyville.
Saint Francis Medical Center in Peoria collects the single largest estimated gain of any hospital in the state: $7.2 million.
Nor is it obviously indefensible in every case. Carle in Champaign-Urbana, Saint Francis in Peoria and Memorial in Springfield are genuine regional referral centers that draw patients from rural counties across central Illinois. The Rural Referral Center program exists in part for hospitals like them.
The harder question is what Northwestern Memorial, Rush and the University of Chicago Medical Center — three of the most sophisticated academic medical centers in the country, sitting in the third-largest city in the United States — are doing on the same list.
And the harder question still is structural. Rural hospital programs draw on finite pools. Residency slots reserved for rural training, 340B discounts meant to subsidize care for low-income patients, and enhanced reimbursement designed to keep small hospitals from closing all compete for fixed dollars. Illinois has lost rural hospital services steadily for two decades. Every dollar routed to a designation that a Gold Coast academic center can claim as easily as a downstate community hospital is a dollar that does not reach the latter.
MGCRB reclassification: A separate filing that moves a hospital's wage index into a different labor market area. Stacked on top of Section 401, it is what 21 of the 23 Chicago hospitals hold.
The rural floor: Guarantees no hospital is paid below its state's rural wage index. In Illinois, that floor sits above every urban rate in the state, including Chicago's.
Patient Daily has requested comment from Northwestern Medicine, Rush University System for Health, UChicago Medicine, Advocate Health Care, Loyola Medicine, Cook County Health, Carle Health, OSF HealthCare and Memorial Health.
