The study looked at the average effect of Medicaid expansion in 2014 on payer mix and profitability for urban and rural hospitals. Specifically, researchers, from the University of North Carolina in Chapel Hill, examined 14,451 annual cost reports from hospitals between January 2011 and December 2014, a month before the ACA’s expansion of Medicaid, according to Kaiser Health News. They looked at how many Medicaid patients hospitals discharged, levels of uncompensated care provided and the institutions’ overall financial performance.
Researchers said rural hospitals in nonexpansion states were, on average, not as profitable as those in expansion states, with mean operating margins of 0.18 percent and 1.03 percent, respectively. But, they said, urban hospitals in nonexpansion states were, on average, more profitable than those in expansion states, with mean operating margins of 6.92 percent and 3.51 percent, respectively.
As far as providing uncompensated care as a percentage of operating expenses, rural hospitals in nonexpansion states provided relatively more uncompensated care than rural hospitals in expansion states, while urban hospitals in nonexpansion states provided slightly lower amounts of uncompensated care than urban hospitals in expansion states, according to the study.
Additionally, researchers found that after Medicaid expansion, the percentage of total discharges covered by Medicaid increased among rural hospitals in states that expanded Medicaid.
“This study suggests that the effect of Medicaid expansion is different for rural and urban hospitals. If rural hospitals continue to experience smaller reductions in uncompensated care than urban hospitals, the rural institutions may have a greater ongoing need for DSH [Disproportionate Share Hospital] funding than urban institutions,” researchers said. “Although early effects of Medicaid expansion on payer mix suggest that the expansion might have a positive impact on profitability, this analysis raises questions about which hospitals will benefit from the expansion, particularly in a rapidly changing payment and regulatory environment.”
More articles on healthcare finance:
Should providers become payers? 4 key considerations
Calif. denies Saint Agnes Medical Center’s request to lower charity care minimum
AHA urges CMS to delay site-neutral payment policy
