Rural hospitals prepare for unwinding of pandemic Medicaid coverage

ATLANTA — Donald Lloyd, CEO and president of St. Claire HealthCare in Morehead, Ky., 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.

Simple mistakes in paperwork could result in many people losing Medicaid even though they’re still eligible for it, Leighton Ku, professor and director of the center for health policy research at the Milken Institute School of Public Health at George Washington University, said. 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.

The COVID-19 pandemic both helped and hurt rural hospitals.

“In rural communities, the majority of their revenue comes from outpatient-like business and it comes from doing outpatient surgeries and imaging and visits,” Steve Lawler, president and CEO of the North Carolina Healthcare Association, said. “When you shut those things down to protect your hospital assets to take care of COVID patients, it has a significant financial impact and that has carried on through the current economic conditions where the cost of goods and services and talent for hospitals is up 30% but revenue is only up 2%.”

During the pandemic, billions in federal money from the Paycheck Protection Program, Provider Relief Funds and the American Rescue Plan Act helped keep rural hospitals afloat even as they dealt with revenue losses and higher costs for everything from protective gear to salaries.

Health care experts say policy changes, including more states expanding access to Medicaid, is needed to keep rural hospitals viable.

Eleven states, including Alabama, Georgia, Florida, Kansas, Tennessee and Wisconsin, still haven’t expanded Medicaid coverage through the Affordable Care Act, and rural hospitals in those states are at a particular disadvantage, health care officials said.

Lloyd, the St. Claire HealthCare CEO, said that there’s no doubt that Medicaid expansion makes a difference for hospitals. Before coming to St. Claire, he was president and CEO at CHRISTUS Health Southwest Louisiana. Louisiana expanded Medicaid in 2016 and Kentucky in 2014.

“There was greater access to care and a greater sustainability to the hospitals post-expansion, both in Louisiana and here in Kentucky,” he said. “We’ve just been very fortunate in the commonwealth that we’ve had a Medicaid expansion longer than some of the other states that were kind of slow to expand.”

A new payment model that became effective in January could offer support to some rural health care facilities, but health care officials caution that it is not the answer for all rural hospitals.

Under the change, hospitals that agree to a new rural emergency hospital designation would receive more Medicare reimbursements and a monthly facility payment. The hospitals would have emergency rooms, clinics and outpatient care, but patients couldn’t stay for more than 24 hours. The hospitals also can’t have more than 50 beds and must meet other eligibility requirements.

Lloyd said it’s possible that a hospital in the area of Kentucky that St. Claire HealthCare serves could convert to the new designation, which would have implications for his health care system.

“Obviously we would handle the inpatient admissions for those institutions and so it would increase our capacity, but we’re prepared to do so if necessary,” he said.