Rural Hospitals Face Threat of Closing

Without Medicaid expansion, more shutdowns like Brownsville are expected

Just six months ago, the Tennessee Hospital Association warned that rural hospitals would begin to close if Tennessee did not expand its Medicaid program. Now those prophetic words are ringing true as the hospital in Brownsville is scheduled to close this summer. Effective July 31, Community Health Systems is ending both inpatient and emergency services at Haywood Park Community Hospital because it cannot afford to keep operating them.

Craig Becker, president of the Tennessee Hospital Association, sees this closing of rural hospitals as an example of what is to follow.

“Closing a rural hospital is likely to trigger the departure of physicians, as well as pharmacists,” Becker said. “Patients will experience increased costs as they have to travel for their care. Acute care will likely necessitate the use of an ambulance. Even routine care will be impacted, especially if a patient needs to see a specialist.

“Underserved areas will increase, which is likely to be the beginning of the unraveling of an area’s social fabric. For example, businesses looking to locate to a particular area will consider available medical care, just as they consider school systems, in their decisions. Truly, it will have a wide-spread ripple effect.”

But these closings are not merely the result of what has happened in the last six months. For years, rural providers have been warning that failure to expand the public health program would put them in jeopardy.

Becker explained, “The choice was left to each state, and Tennessee is one of the states that is not participating in the Obamacare provision of Medicaid expansion. In fact, most of the states that are not participating are in the South, and have large segments of their population in rural areas.”

Many rural hospitals operate at a loss because they serve a high number of poor and uninsured patients who can’t always pay for their care. These hospitals, referred to as Disproportionate Share Hospitals (DSH), received reimbursements from the federal government. Because the Affordable Care Act intended for every state to expand Medicaid, thereby reducing the number of uninsured people who can’t pay their bills, the reimbursements for those DSH hospitals have been reduced.

According to Kathleen Sebelius, former secretary of the Department of Health and Human Services, Tennessee began losing out on more than $6 million a day on January 1 when the federal government began picking up all the cost for covering people who newly qualified for Medicaid under expanded guidelines -- an offer that goes away at the end of 2016. It then phases down the federal match to a permanent 90 percent in 2020.

W. Larry Cash, chief financial officer for the community health group that operates the hospital in Brownsville, says Tennessee’s refusal to expand Medicaid was a “contributing factor” in the move to close the hospital. The 62-bed facility will become an urgent care clinic, treating minor illnesses and non-life-threatening injuries.

A document prepared by the Rural Policy Research Institute Health Panel reports that states can opt to expand Medicaid at any time and receive the 100 percent federal match for newly eligible recipients. Arkansas is one of two states (the other is Iowa) that have been granted waivers from the Centers for Medicare and Medicaid Services (CMS) allowing Medicaid recipients with incomes between 100 percent and 138 percent of FPL to purchase health plans through the new marketplaces, using Medicaid payments to cover the costs of premiums.

Paul Cunningham, executive vice president of the Arkansas Hospital Association, said, “We have chosen to implement a state-tailored version of the expansion. We are losing financially on the Medicare side, but we hope to balance things out with our private option insurance option.

Yet, even in states that opted for Medicaid expansion, such as Arkansas, rural hospitals are still facing difficulties. Case in point, Crittenden Regional Hospital in West Memphis. With or without its Medicaid expansion, the hospital serves a high number of people who cannot pay for their care. Crittenden Regional is trying to address its financial problems by asking local residents to vote for an increase in the local sales tax to help save the hospital. The vote is scheduled for June 24.

“Basically, what we’re seeing is just the beginning,” Becker said. “There will be more and more areas without acute care services. Similar situations have already occurred elsewhere in Tennessee, in Jellico and in Scott County. In the latter case, the hospital reopened, but without OB services. The big question is, ‘How do we keep a medical presence in these communities?’ If not a hospital, then what?”