Rural hospitals in nonexpansion states at risk: 4 things to know

Cost cuts under the Affordable Care Act and the lack of Medicaid expansion in some states could spell disaster for rural hospitals around the country, according to a study published in Health Affairs.

Researchers examined more than 1,700 rural hospitals, of which 1,111 were critical access hospitals and 595 were other rural hospitals. Of the critical access hospitals, 54 percent were located in states that chose not to expand Medicaid, and of the other rural hospitals, 62 percent were located in nonexpansion states.

Though both CAHs and other rural hospitals in nonexpansion states recorded significantly lower total dollar value for uncompensated care than those in expansion states, their results suggest rural hospitals in nonexpansion states are still more financially vulnerable.

Here are four things to know about their findings.  

1. Uncompensated care accounted for a greater percentage of total net patient revenue at hospitals in nonexpansion states. The study attributed this difference to unreimbursed costs in Medicaid, Children's Health Insurance Program and other programs.

2. Levels of charity care and bad debt, however, were higher for noncritical access hospitals in nonexpansion states, compared to those in expansion states. Charity care and bad debt are associated with uninsured and underinsured patients. Critical access hospitals had similar levels of charity care and bad debt in both expansion and nonexpansion states.

3. Operating margins at critical access hospitals in nonexpansion states were lower than those in states that have expanded Medicaid. In fact, critical access hospitals in nonexpansion states had negative operating margins on average, according to the report. If disproportionate share hospital payments, Medicare reimbursement, Medicaid rates or bad-debt reimbursement are cut, these hospitals will be under great financial pressure, as they depend more on Medicare payments and bring in less revenue for outpatient and surgery services, according to the report.

4. The study found hospitals in nonexpansion states are in more sparsely populated regions, giving them a smaller pool of patients to draw from. Less traffic in the hospital will drive up per patient costs in nonexpansion state hospitals compared to expansion state hospitals. According to the report, nonexpansion states also have higher poverty rates, which means more patients will fall into the coverage gap, leading to higher bad debt and charity care. Patients fall into the coverage gap if their income is above the amount required to be eligible for Medicaid, but below the amount to be eligible for premium tax credits in the Marketplace.

 

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