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Rural Hospitals Closing in States That Didn’t Expand Medicaid

By Rosaland Tyler
Associate Editor
New Journal and Guide

Of the 106 rural hospitals that have closed since 2010, 77 were located in states that did not expand Medicaid, according to according to a new study recently published by the Pittsburg Morning Sun and GateHouse Media.

Think of it as a vicious cycle to understand the decline. Fewer people choose to live in rural areas so populations continue to decline. Jobs dry up. Younger folks move away. Rural hospitals shrink services. Next, hospitals need fewer beds. Since rural communities have older, poorer populations and a greater number of uninsured – it explains why more than 180 rural hospitals shut down in the 1990s alone.

The new study shows the trend is not reversing. Many areas that rejected Medicaid expansion left money on the table, according to the Gatehouse study.

“More than half of all rural hospitals in Mississippi, South Carolina, Georgia, and Oklahoma lost money from 2011 through 2017,” the GateHouse study notes. “In Kansas, the bloodletting was even more widespread. Two out of three rural hospitals in the state operated in the red during the seven-year period. Five were forced to shut down.

“What these states also have in common is that legislators voted against expanding Medicaid under the Affordable Care Act, which would have provided coverage for hundreds of thousands of uninsured residents and bolstered rural hospital bottom lines.”

The study highlighted Kansas as the state where hospitals have suffered the most, with 70 of its 109 rural hospitals losing money between 2011 and 2017.

Medicaid expansion would not have prevented all rural hospital closures, the study notes. But it would have significantly boosted funding for medical facilities in some of America’s poorest communities.

The new study also singles out Utah as a rare success story: the state’s rural and urban hospitals share revenue, so only 14 percent of its rural hospitals lost money in the same time period.

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“High rates of poverty in rural areas, combined with the loss of jobs, aging populations, lack of health insurance and competition from other struggling institutions will make it difficult for some rural hospitals to survive regardless of what government policies are implemented,” the study noted.

Patti Davis, president of the Oklahoma Hospital Association, said in the GateHouse report, “A hospital closure is a frightening thing for a small town. It places lives in jeopardy and has a domino effect on the community. Health care professionals leave, pharmacies can’t stay open, nursing homes have to close, and residents are forced to rely on ambulances to take them to the next closest facility in their most vulnerable hours.”

Without a hospital, it also becomes difficult to attract new businesses to an area and keep others from leaving, Davis said.

Ironically, Kiowa District Hospital in Kansas recorded $5.6 million in profits from 2011 through 2017, although 64 percent of all rural hospitals in the state lost money during the same period, according the report.

The hospital in Kiowa survived because of what’s called the legislated term, the Critical Access Hospital (CAH) designation, which guarantees that a select group of rural hospitals will have all of their costs covered for Medicare patients.

Specifically, Congress created the CAH designation through the Balanced Budget Act of 1997 (Public Law 105-33) in response to a string of rural hospital closures during the 1980s and early 1990s.

In plain terms, the CAH designation means that if it costs $1 million to run a hospital for a year and the hospital has one Medicare patient, who is treated over a couple of days, Medicare will reimburse the hospital for practically the entire $1 million, explained Robert Whitaker, the chief executive of Kiowa District Hospital in Kiowa, Kan. If that same hospital had one Medicare patient and one insured by Blue Cross and Blue Shield, Medicare would pay $500,000, but Blue Cross would pick up only the cost of the patient’s stay while in the hospital, which might amount to just a few thousand dollars.

Whitaker, whose hospital mainly treats Medicare patients, attributed its survival to the CAH designation and vigilant attention to both managing costs and maintaining a profitable patient mix.

“We take care of everyone,” Whitaker said. “But we watch the mix.”

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