By Shefali Luthra
Kaiser Health News
It isn’t news that in rural parts of the country, people have a harder time accessing good health care. But new evidence suggests opposition to a key part of the 2010 health overhaul could be adding to the gap.
The finding comes from a study published Wednesday in the journal Health Affairs, which analyzes how the states’ decisions on implementing the federal health law’s expansion of Medicaid, a federal-state insurance program for low-income people, may be influencing rural hospitals’ financial stability. Nineteen states opted not to join the expansion.
Rural hospitals have long argued they were hurt by the lack of Medicaid expansion, which leaves many of their patients without insurance coverage and strains the hospitals’ ability to better serve the public. The study suggests they have a point.
Specifically, the researchers, from the University of North Carolina Chapel Hill, found that rural hospitals saw an improved chance of turning a profit if they were in a state that expanded Medicaid — while in city-based hospitals, there was no improvement to overall profitability. Across the board, hospitals earned more if they were in a state where more people had coverage and saw declines in the level of uncompensated care they gave.
To put it another way: All hospitals generally fared better under the larger Medicaid program, but there’s more at stake for rural hospitals when the state expands coverage.
The study looked at how expanding Medicaid affected hospital revenue, how many Medicaid patients they discharged, levels of uncompensated care the hospitals provided and how well the institutions did financially overall. It compared those effects in rural versus urban areas, across more than 14,000 annual cost reports from hospitals between January 2011 and December 2014, or a year after eligible states could have expanded their Medicaid programs.
In states expanding Medicaid, rural hospitals saw a greater increase in Medicaid revenue than urban hospitals did. City-based facilities save a higher percentage than rural hospitals with the reduction in uncompensated care, though that change “did not translate into improved operating margins for urban hospitals,” the study notes.
How much these differences matter, though, remains up in the air.
“There is a disparity in the impact of Medicaid expansion, and probably the [law] overall,” said Brystana Kaufman, a doctoral candidate at the university’s department of health policy and management and the study’s first author. “There needs to be more exploration into why we’re seeing this.”
One likely factor: Rural hospitals serve more low-income people — who weren’t eligible for insurance before, but who got covered after the health law took effect. And rural hospitals are historically more likely to operate at a loss than are urban ones. So the chance to see increased revenue is greater than in a city-based hospital.
That said, these are preliminary figures, looking at barely a year’s worth of evidence when it comes to the Medicaid expansion. But the effect merits further scrutiny, experts said.
It’s important because hospital finances matter for consumers, too. In rural communities, hospitals are often among the largest employers, and the main source of health care. Financial duress can affect what kind of services the facility offers.
“If you’re [a hospital] in a state that did expand Medicaid, obviously you’re going to be experiencing lower amounts of uninsured. Your bad debts and charity care have gone down,” said Brock Slabach, senior vice president at the National Rural Health Association. He was not involved in the study, although he is familiar with the research team’s work. “Has [that expense] gone to nothing? No. But it has helped.”
That’s especially true for rural hospitals, Kaufman said, because they have narrower profit margins than do urban ones. Any squeeze on the budget “is going to be more influential” and may limit a hospital’s offerings or quality.
Hospitals are “still really trying to anticipate and assess the shakeout from all the changes that are happening,” said Kristin Reiter, an associate professor at UNC-Chapel Hill’s Department of Health Policy and Management and another study author.
Meanwhile, rural hospitals are already facing financial strains, Slabach said. More than 70 have shut down since 2010. Still more are at risk of closure. Many endangered hospitals are in non-expansion states.
How Medicaid affects rural and urban hospitals could influence other debates, the study authors said. For instance, the health law also is expected to cut so-called disproportionate health spending payments – cash infusions that support hospitals that treat low-income people, often in rural areas.
Those cuts haven’t taken effect yet, but the researchers suggest, the paper could make a case for indefinitely postponing them.
“The hospitals rely on that funding to address uncompensated care,” Kaufman said. In rural states that declined the expansion, uncompensated medical treatment poses a significant financial hurdle for hospitals.
But others cautioned against drawing hard conclusions yet. It’s unclear how meaningful the rural-urban difference will be, especially over time, said Doug Staiger, a professor of economics at Dartmouth who has researched rural health access but was not involved with this study.
“I’d be really cautious interpreting,” he said.
Plus, Slabach added, researchers must examine how the findings actually affect consumers.
And, it’s possible the effects seen here aren’t just thanks to Medicaid, said Mark Holmes, an associate professor at UNC and director of the university’s North Carolina Rural Health Research and Policy Analysis Program. Expansion states may have taken other steps meant to help hospitals and consumers. If so, it’s worth figuring out what those are.
“Medicaid expansion is not a random event. That’s very important to consider here,” said Holmes, another author of the study. “These are states that have decided to do it. There could be other elements” at play.