Report: Medicaid cuts could force hundreds of rural hospitals to close their doors
Potential cuts to Medicaid are still making their way through budget proposal bills in Congress. While nothing has been finalized, work requirements and cuts to state funding were passed by the U.S. House of Representatives in May. If those cuts are implemented, the Chartis Center for Rural Health warns that they could devastate already struggling rural hospitals, forcing many to close their doors and leaving patients without access to care.
In a new report, consultants at the Chartis Center warned regulators that if the proposed 15% cuts to federal healthcare programs are enacted, the result would be rural hospitals losing more than $1.8 billion in revenue annually. Roughly 50% of hospitals in rural areas already operate at a loss, meaning the blow could push many to be bought out by larger systems or shut down completely, leaving communities with no nearby options for outpatient and emergency care.
Further, if Medicaid spending is drawn back by 20%, as has been proposed during Congressional hearings, the outcome would only be worse, the Chartis Center said. Hospitals would be forced to lay off staff to attempt to stay afloat—but the firm fears that may not be enough.
“At the largest end of our scale (20%), rural hospitals would stand to lose approximately $2.4 billion in hospital revenue. A 20% reduction would equal funding for more than 28,000 full-time hospital employees,” the report reads. “Nationally, variance exists when comparing the state-level impact of policies like sequestration and bad debt. States with lower rates of insurance coverage are more adversely impacted by bad debt reimbursement cuts. Not surprisingly, states such as California, Illinois and Wisconsin—which are among the most impacted by bad debt reimbursement—are likely to be highly impacted by any cuts to Medicaid.”
The Chartis Center used publicly available financial data on more than 2,000 rural facilities as the basis for its analysis, along with surveys from researchers at the KFF. Per the report, rural health is already struggling with a low number of OB-GYNs, leaving pregnant women with few options.
If Medicaid cuts are enacted, the Chartis Center said, obstetric services are likely to suffer the most. This could contribute to maternal mortality rates, which are already higher in rural and underserved areas than in larger markets.
“Nearly 50% of rural births currently are covered by Medicaid. Yet, Medicaid fails to cover the full cost of providing obstetrics-related services to the patient. It covers only about 50% of what private insurance carriers reimburse for childbirth-related services,” the center wrote.
Women and newborns could suffer greatest loss
“[OB-GYN] services are among the costliest for a rural hospital to provide. Reimbursement realities alongside low and negative operating margins are a driving force behind expanding OB care deserts. Between 2011 and 2023, nearly 300 rural hospitals stopped offering OB. Without local access to [care], expecting mothers must travel greater distances for prenatal care, labor and delivery—invariably increasing the risk to mother and baby,” the Chartis Center added.
The authors of the report point to 400 hospitals in rural communities that are already on the brink of closure, and that have already been forced to cut staff and services. The firm is concerned that the only thing that allows them to operate at all is safety-net funds, mainly those from Medicare and Medicaid.
The Chartis Center said that, on average, Medicaid provides $3.9 million in annual revenue to rural hospitals—the exact number varies heavily by state, as many benefit from the increased funding allocated by the Affordable Care Act (ACA).
In some cases, Medicaid is upwards of 9% to 15% of all revenue some of these hospitals take in. Any cuts—especially those upwards of 10% to 20%—could effectively undo the gain seen from the ACA, the Chartis Center concluded.
“Rural hospitals in states that expanded Medicaid under the Affordable Care Act have consistently fared better than peers in non-expansion states—e.g., fewer rural hospitals operating in the red, fewer rural hospitals closed or vulnerable to closure. In fact, our rural hospital vulnerability model has repeatedly identified expansion state status as a protective measure against hospital closure,” the group wrote.
The Chartis Center urges lawmakers to remember that 10 million Americans rely on rural facilities as their primary source of healthcare, and current bills in Congress offer no reprieve for how to compensate for lost Medicaid revenue.
The full report is available here.
Chad is an award-winning writer and editor with over 15 years of experience working in media. He has a decade-long professional background in healthcare, working as a writer and in public relations.