For Rural Hospitals, Medicaid Expansion Acts As Shot In The Arm

Fairview Regional Medical Center in Fairview, Okla. (Provided)

Eight rural hospitals in Oklahoma have closed in the last decade, the third highest rate of rural hospital closures in the country. But, the recent vote to expand Medicaid could provide rural hospitals with a much needed financial boost.

For the past five years, Roger Knak, the CEO of Fairview Regional Medical Center, has been trying to keep his critical access hospital in rural Oklahoma afloat. The years have been a mixed bag of positive and negative financial margins. The cost to operate the hospital has been more than the revenue from patients.

“We’ve been struggling each year just to be able to keep our head above water, not being able to do anything to improve facilities or look to say, what can we do to expand or add services?” Knak said.

The hospital has mostly been surviving off of sales tax revenue from the city of Fairview, Knak said. About 9% of Fairview Regional Medical Center’s patients are categorized as charity care — people who can’t afford to pay, Knak said. Now that Medicaid is being expanded in Oklahoma after a tight statewide vote at the end of June, he says hospitals like his will care for more people who previously couldn’t afford it.

“People that are working in service-related industries that are functioning just barely above poverty level, do not qualify for any benefits to obtain help in getting health insurance and obviously cannot afford it themselves,” Knak said.

Medicaid expansion may help. States that expanded Medicaid had fewer rural hospital closures than those that didn’t, according to a 2018 Government Accountability Office report. Knak said a study by Leavitt Partners in 2019 estimates the expansion will bring in more than $500,000 to his hospital. He said it’s enough revenue to go from being considered an “at risk” hospital to breaking even. With the anticipated increase in revenue, Knak said he can plan infrastructure improvements and expansion.

Operating a rural hospital isn’t easy. More than 100 hospitals in rural areas across the country have closed since 2010, according to a study by the Chartis Center for Rural Health. Oklahoma has seen eight closures — the third highest in the country. Many operate on thin margins in Oklahoma, which has the third highest uninsured rate in the country according to U.S. Census data.

Patti Davis, president of the Oklahoma Hospital Association, said the high rate of uninsured in rural areas puts more pressure on rural hospitals.

“It’s a very difficult situation because our smallest communities in Oklahoma tend to be older, sicker and poorer than our urban counterparts,” Davis said.

When the Affordable Care Act passed in 2010, it expanded Medicaid, the government health insurance program for the poor and people with disabilities. But in 2012, the U.S. Supreme Court made the expansion optional. Former Oklahoma Gov. Mary Fallin declined the federal funds that would have paid for most of the expansion.

Now that voters have chosen to expand Medicaid, more people will be eligible for care who previously couldn’t afford the cost. For rural hospitals, the extra revenue from the expansion could be enough to keep the checkbooks balanced.

Oklahoma hospitals are required by federal law to provide emergency care and stabilization regardless of whether or not they have insurance or the ability to pay. So when hospitals take care of people who are uninsured, that hospital does not get compensated. Knak said if someone can’t afford care, they may put off getting the care they need.

“People that are working in service-related industries that are functioning just barely above poverty level, do not qualify for any benefits to obtain help and getting health insurance and obviously cannot afford it themselves,” Knak said.

Joan Alker, a research professor at Georgetown University who studies healthcare policy, said there is a higher percentage of uninsured people in rural areas of the state.

“Oklahoma had 38% of their adults uninsured in rural areas versus 32% in metro areas,” Alker said. “Both are very, very high. But this (Medicaid expansion) is even more important for rural communities.”

Jimmy Leopard, the CEO of Wagoner Community Hospital, said Medicaid expansion could mean more people are eligible for specialty care programs. His hospital offers a drug and alcohol abuse recovery program for people who are suffering from withdrawal symptoms.

“We can only take them if they have a payer source,” Leopard said. “And there are some patients that we have to turn away because they do not have a payer source.”

The federal government will pay for 90% of the bill to expand Medicaid. The Oklahoma state legislature will have to figure out a way to pay for the remaining 10% in the next legislative session. Leopard said the Oklahoma Hospital Association and hospital CEOs will be working with lawmakers to find budget solutions without raising taxes.

“I know it (Medicaid expansion) passed by a narrow margin, but it’s definitely going to help our hospital and help us to provide care to the people in need the most,” Leopard said.