The Affordable Care Act’s Medicaid expansion drove down the uninsured rate in the United States.
Now a new study suggests that the expansion boosted the financial health of many hospitals that serve a high number of the uninsured, especially in rural areas.
Researchers found that hospitals in the 32 states and District of Columbia that expanded Medicaid were more than 6 times less likely to close than hospitals in the 18 states that said no to the expansion.
Some areas were helped more than others by the Medicaid expansion.
“The effect, in terms of the closure rates between expansion and non-expansion states, seems to be especially strong for rural hospitals,” said study author Gregory Tung, PhD, an assistant professor in the Colorado School of Public Health at the University of Colorado.
Hospitals in areas with high numbers of uninsured people before the expansion also saw more benefits from the Medicaid expansion. This includes rural areas.
The reason that the Medicaid expansion helped hospitals at risk of closing is straightforward.
Hospitals are required to treat all patients that come into their emergency rooms, even those without insurance.
That means hospitals are never paid for some of the services they provide.
The American Hospital Association estimates that community hospitals provided more than $38 billion in uncompensated care to their patients in 2016.
In states that expanded Medicaid, many of the previously uninsured people now had coverage. So hospitals received payment for their services, which boosted their bottom line. This helped them stay afloat.
And Medicaid doesn’t even pay hospitals all that well.
“Even though the Medicaid reimbursement rates are not great, it is better than not being reimbursed and relying on the DSH [Disproportionate Share Hospital] payments,” Marcelo Perraillon, PhD, a study author and an assistant professor in the Colorado School of Public Health at the University of Colorado, told Healthline.
Federal law requires that state Medicaid programs make DSH payments to hospitals that treat a large number of Medicaid and uninsured people. This is meant to help the hospitals remain financially stable and stay open.
For the study, the researchers compared hospital closures in Medicaid expansion and non-expansion states before and after the expansion.
Before 2012, there were similar rates of hospital closures in Medicaid expansion and non-expansion states.
The two groups started to diverge in 2012, after the Supreme Court decided that the Medicaid expansion should be optional for states.
After this time, closure rates declined in expansion states, while they remained high in non-expansion states.
The most recent study was published in the January issue of Health Affairs.
What happens if Medicaid expansion ends?
If the Medicaid expansion ends, without being offset by an increase in DSH payments or other subsidies, this could hurt hospitals in expansion states.
“If the Medicaid expansion goes away, it’s going to lead to more hospital closures — that’s the implications of our results,” said Tung. “This might be especially impactful for rural hospitals.”
Whatever happens with the expansion in the future, states that didn’t expand Medicaid, such as Alabama, Florida, and Georgia, may see more hospital closures.
This could also include Maine, whose voters approved an expansion of Medicaid in the state, only to be blocked recently by Governor Paul LePage.
Since 2010, three rural hospitals in Maine have closed, according to the North Carolina Rural Health Research Center. Eighty-three rural hospitals have closed nationwide during that time.
The Medicaid expansion isn’t the only factor that affects whether rural hospitals stay open.
George Pink, PhD, a professor of health policy and management at the University of North Carolina Gillings School of Global Public Health, told Healthline that there are “three broad categories of reasons why rural hospitals are closing.”
One is market factors. Rural hospitals tend to be located in areas with small, declining populations, high unemployment rates, and high numbers of uninsured patients.
Because there are a lot of low income and older people living in rural areas, hospitals in those areas rely heavily on Medicaid and Medicare as sources of revenue.
Next are hospital factors, such as deteriorating physical facilities and difficulty hiring doctors to staff the rural hospitals.
Pink said that some rural hospitals also have problems with patient safety, “which Medicare gets concerned about.”
The final “bucket” — financial factors — is “by far the most important,” said Pink.
Rural hospitals may have high rates of charity care, bad debt, and bond payments that they can’t cover, which forces them into bankruptcy.
“This is not an overnight phenomenon,” said Pink. “Most of the hospitals that closed have been losing money for many years.”
New rural health care model
Some experts have advocated for using Medicaid and DSH payments to support rural hospitals.
But even with government financial support, rural hospitals still face an uphill battle trying to keep the current system of healthcare afloat in sparsely populated areas.
“The problem here is basic economics. A lot of rural hospitals have declining volumes and fixed costs,” said Pink. “You’re spreading the cost of the hospital over fewer and fewer patients, so their cost per patient is going up. That makes them financially unviable.”
The Center for Medicare and Medicaid Innovation and some state hospital associations are testing new models of rural healthcare. This includes focusing more on preventive care and tailoring services to match the community’s needs.
Last year, three U.S. Senators also introduced a bill to help rural hospitals stay open and shift their focus to emergency and outpatient services. Another rural health bill was introduced in the House.
As rural hospitals struggle to keep their doors open — often providing the only medical care around for miles — momentum grows for finding new ways of helping people in these communities stay healthy.
“There’s a general recognition that there’s a big problem with the financial sustainability of current models of rural health care,” said Pink, “and that we really need to find alternatives.”