New tax credit is a 'lifeline' for Georgia's rural hospitals

SYLVESTER — In here, a couple of senior citizens lift small hand weights. In there, cardio machines idle until the next users arrive. In the extra-wide hallway connecting them, a stairstep sits off to the side. The lone sign that this physical therapy department used to be an operating room is the thick red line of tile just in front of the double doors that no longer fly open for inbound stretchers.

“As we change, we make do, and we make things fit in different areas,” says Kim Gilman, chief executive of the Phoebe Worth Medical Center in this town of 6,200 halfway between Albany and Tifton. “Some more funds would make it more efficient.”

Funds have been hard to find at this rural hospital, like others across the state. Medicaid expansion, long off the table in Georgia, was set for serious consideration in 2017 — until Donald Trump’s election threw the future of Obamacare into doubt. States may get more flexibility for Medicaid funding, but no one is sure yet. For now, there is promise in the form of a new state tax credit for rural health providers billed as the first of its kind in the U.S.

“It truly is a lifeline,” Gilman says.

The credit is the brainchild of state Rep. Geoff Duncan , R-Cumming, who modeled it after Georgia’s existing tax-credit scholarship program. Donors to eligible rural hospitals can file for a credit on their state income taxes (individual or corporate). Legislators approved it late in the 2016 session, putting $50 million in the pot for next year, $60 million for 2018 and $70 million for 2019.

The credit is worth only 70 percent of the donation — the scholarship credit is dollar-for-dollar — so no one knows what to expect when it goes live Jan. 1. But officials at four rural hospitals I visited during a South Georgia swing this month expressed hope it will help them bridge a very precarious financial gap.

The economics of health care is broken, and nowhere is this more evident than in rural hospitals. Phoebe Worth reports providing more than $8.4 million in charity and indigent care last year, plus almost triple that amount in uncompensated Medicare and Medicaid services. The new private plans on the Obamacare exchanges have hardly helped: Most carry such high deductibles that neither patients nor hospitals get paid.

It’s a familiar story in rural Georgia. The new tax credit could provide a huge shot in the arm. If all the credits are claimed, almost $260 million in donations will flow to about four dozen hospitals.

Building upgrades and new equipment could be in the offing. So could new services that have high upfront costs but would be profitable once established, sustaining themselves and cross-subsidizing other, loss-making services. That could include telemedicine technology that allows patients to see specialists from cities such as Atlanta without traveling too far from home.

“It wouldn’t take much (upfront investment) and would still be cost-effective,” says Michael Hester, CEO of Liberty Regional Medical Center in Hinesville.

But even those kinds of investments are difficult for hospitals to make when they’re bleeding money on each patient. At Phoebe Worth, a new floor for the emergency room cost $50,000; the hospital needed two years to scrounge up the money. “Squeezing quarters out of pennies,” the hospital’s chief financial officer, Candace Guarnieri, calls it.

The state needs a broader overhaul of health care (hint, hint, aspiring governors). This new tax credit may be rural hospitals’ best bet for surviving until that happens.

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About the Author

Kyle Wingfield
Kyle Wingfield
Kyle Wingfield joined the AJC in 2009. He is a native of Dalton and a graduate of the University of Georgia.