Donald Lloyd, CEO and president of St. Claire HealthCare in Morehead, Kentucky, has spent more than a year dealing with higher costs for food and medical supplies for his regional hospital.
Now he’s trying to prepare for another financial hit — the loss of Medicaid reimbursements for treating people in rural Appalachia.
“We are all being forced to try to eke out a sustainable margin because of those (inflation) factors,” he said. “And then with the potential loss of reimbursement for those who did qualify, that’s just going to add an additional layer of burden upon rural institutions.”
Lloyd is referring to the unwinding of a policy that began in 2020 as a response to the public health emergency created by COVID-19. The Families First Coronavirus Response Act required states to allow Medicaid recipients to stay enrolled even if their eligibility changed. But that requirement ends on April 1, and with states once again able to remove people from the program, health care officials across the country are worried about how the loss of those Medicaid reimbursements will affect the financial health of their hospitals.
The loss of the federal revenue is expected to be particularly hard on rural hospitals that operate in areas with higher poverty rates and serve an older population and people with lower incomes — all factors that contribute to the financial pressure on hospitals, health care officials said. Rural hospitals were already closing at a rapid rate before the pandemic — more than 150 closed between 2005 and 2019, according to the Center for Healthcare Quality and Payment Reform. Without the federal money to prop them up, the Center estimates that 200 rural hospitals across the country are at risk of closing within the next two to three years.
A report released in January from George Washington University found that up to 2.5 million patients of community health centers, which treat both underserved rural and urban communities, could lose coverage as a result of eligibility redeterminations, costing the health centers somewhere from $1.5 billion to $2.5 billion in revenue. The Kaiser Family Foundation estimates that between 5 million and 14 million people will lose their coverage, and that two-thirds could be uninsured for several months up to a year.
Carrie Cochran-McClain, chief policy officer at the National Rural Health Association, a nonprofit focused on education and advocacy on rural health issues, said the financial impact will be twofold.
“It’s the loss of reimbursement for services, but then also a potential increase in the number of patients that are going to be uninsured who delayed care because they lose their coverage and they’re coming in when they have a more severe situation,” she said.
Simple mistakes in paperwork could result in many people losing Medicaid even though they’re still eligible for it, said Leighton Ku, professor and director of the center for health policy research at the Milken Institute School of Public Health at George Washington University. Ku said states can help by making the renewal process easier, and pointed out that people who can’t get Medicaid can find insurance at subsidized rates through the Affordable Care Act markets, and benefit from expanded premium subsidies through 2025 because of the Inflation Reduction Act. Still, there will be problems, he said.
“We still expect there’s going to be some increase in the number of uninsured people in the U.S. over the next year, no matter how hard we try, so hospitals and community health centers are going to have some rough times ahead,” Ku said.
Toni Lawson, vice president of governmental relations at the Idaho Hospital Association, said that the state department of health and welfare is sending out letters to tens of thousands of people alerting them to the change and their options. Still, she’s concerned about the effect of so many people losing coverage. Idaho has estimated that 150,000 people could be vulnerable to losing Medicaid, according to Idaho Capital Sun.
“We see a large percentage of our rural hospitals with a negative operating margin right now,” Lawson said. “We need to be particularly careful in making policy decisions that impact them negatively that maybe five years ago it would have been like, okay, this is a hit to your reimbursement, but you’ll survive. That same decision today could affect whether they stay open or close, she said.
Lloyd said he expects less than 3,000 people would lose coverage in the communities that St. Claire serves, which could cost the hospital about $5 million in Medicaid revenue.
The hospital is preparing for the decrease by slowing down its capital investments even though it needs to replace operating room tables and to repair and do maintenance on a wing built in the 1960s, he said. St. Claire is also looking at “reprioritizing a number of strategic growth projects,” Lloyd added, such as accommodating robotic surgery.
Family Health Centers in Louisville plans to cut back on the low-cost or free medical, dental, behavioral health and pharmacy services it has been offering to uninsured patients because of the expected revenue dip, according to the Louisville Courier-Journal. Hospitals also have announced other budget cuts, including layoffs, citing the end of pandemic payments.
