MORGANTOWN – A recent report by the Center for Healthcare Quality & Payment Reform predicts that 13 rural West Virginia hospitals are in danger of closure, with five of those 13 at immediate risk of closing in the next two to three years.
The report – featured in Becker’s Hospital Review – links the danger to inadequate insurance payments that don’t cover the cost of care, lack of other revenues to make up the difference and low financial reserves.
The report came out shortly before Congress passed the One Big Beautiful Bill that includes Medicaid provisions that will further reduce rural hospital revenues.
Jim Kaufman, president and CEO of West Virginia Hospital Association, put some perspective on this, noting that about 75% of West Virginians are covered by governmental programs – Medicaid, Medicare and PEIA, and all pay below the cost of care.
With OBBB’s changes to Medicaid, he said, “it is going to add a financial strain to rural hospitals across the state.”
And there’s a bigger picture, he said, mentioning people who say, “This doesn’t impact me because I’m not on Medicaid.”
That’s not true, he said. “A hospital does not recruit a provider or run a program only for Medicaid beneficiaries. They serve a community. So when you start taking resources out of a community because of Medicaid cuts, it affects everyone. … It affect rural communities, period.”
The report takes a look at rural hospitals nationwide, saying 760 (34%) of a total 2,248 are at risk of closure, with 314 (14%) at immediate risk. Of the 2,248 hospitals, 1,026 (46%) operate in the red.
Along with the Hospital Association, The Dominion Post reached out to WVU Medicine and Vandalia Health North for perspectives.
Vandalia provided a brief statement and directed questions to the Hospital Association. Vandalia said, “We are aware of the changes made to eligibility for Medicaid which will impact many in West Virginia. Until we know the full plan and the potential effects on health care delivery, it is premature to make any potential changes to our services. Our 13,000 employees and 2,000 providers remain committed to our mission of enhancing the health of our communities through clinical excellence, one person at a time.”
WVU Medicine did not respond to several requests for comment.
Kaufman talked about OBBB’s changes to Medicaid that will pose additional challenges, pointing out that the average hospital has a 1% operating margin; but as costs increase, government program payments are not keeping pace.
OBBB changes supplemental payments to hospitals under Medicaid, he said, and when fully implemented,West Virginia hospitals will lose about $1 billion per year. Those payments will be reduced to once again equal Medicare payments, which also don’t cover costs of service.
A requirement for able-bodied adults ages 19-65 to work or volunteer for 80 hours per month will have some impact, he said. Currently, about 60-65% of Medicaid recipients under the adult expansion population are working, but some of those will come off the rolls due to such things as administrative burdens (twice yearly eligibility verification), challenges getting transportation to work, and other issues.
“There could be various life factors that impact their ability to do that,” he said.
Kaufman said West Virginia is one of 49 states that uses state taxing authority to tax providers to generate state Medicaid matching funds to draw federal matching dollars. OBBB poses new limits on that, which will affect how states fund Medicaid.
Asked about this, Kaufman agreed with our question that this seems problematic. “This is state taxing authority,” he said. He likened it to fuel taxes that go into the state Road Fund to draw down federal highway dollars.
These provider taxes, he said, are not connected to fraud and abuse. They are based on total hospital revenue, wherever the revenue comes from – whether that is private or government insurance.
Some answers
The center’s report offers several possible solutions to save rural hospitals. One is requiring insurers – private and government – to increase and provide adequate coverage of costs.
Another is called “Standby Capacity Payments,” to cover rural hospitals’ costs for having staff on duty for delivering services (this is over and above service-based payments).
Kaufman mentioned one positive element of OBBB intended to offset some of the other elements: the $50 billion Rural Health Transformation Program to allow states to address rural health issues.
The Hospital Association, he said, is looking forward to working with Gov. Morrisey and the state on the opportunities that will offer. But the program sunsets after five years.
“That may help with certain investments, but then the question is how do you remain sustainably financially viable in year six and beyond.”
A few numbers
The center’s report doesn’t name any hospitals at risk, and Kaufman didn’t want to name any either, saying this could generate needless fear as hospitals adjust to survive in the new environment.
According to the report, West Virginia has 33 rural hospitals, with 14 of those operating at a financial loss. The 13 in danger of closure are 39% of the total; the five in immediate danger are 15% of the total.
For comparison, here are some numbers for neighboring states. Kentucky: 72 rural hospitals; 19 (26%) operating in the red; 16 (22%) in danger of closure; four (6%) in immediate danger.
Maryland: five rural hospitals; none in the red, none in danger of closure.
Ohio: 71 rural hospitals; 12 (17%) operating in the red; five (7%) in danger; three (4%) in immediate danger.
Pennsylvania: 50 rural hospitals; 20 (40%) in the red; 17 (34%) in danger; nine (18%) in immediate danger.
Virginia: 31 rural hospitals; eight (26%) in the red; nine (29%) in danger; seven (23%) in danger.
