Arkansas’ Medicaid expansion boosts rural hospitals

Credit: Hyosub Shin

Credit: Hyosub Shin

This reporting and writing of this article were part of a collaboration with Kaiser Health News, an editorially independent program of the Kaiser Family Foundation.

By the numbers

Hospitals saw the following results in the first six months of the “private option.”

46.5% Drop in uninsured inpatient admissions

35.5% Decline in uninsured ER visits

36% Decrease in uninsured visits to outpatient clinics

$70 million Drop in money lost caring for uninsured patients

$58 million In payments to hospitals from private option health plans

Source: Arkansas Hospital Association

WARREN, Ark. — In many ways, this town of nearly 6,000 in southeast Arkansas mirrors the rural communities that dot Georgia's countryside.

It sits amid vast stretches of cotton fields and forests of neatly lined trees waiting to become lumber. Locals linger in the convenience store to chat and catch up on the latest news. A bell tolls from the county courthouse in its small downtown, home to antique shops and cafes.

The town’s 25-bed hospital lies not far away — not just healing the sick but also infusing millions of dollars into the local economy. Like its counterparts in rural Georgia, Bradley County Medical Center has suffered from falling populations, more government regulations, poorer patients than in metro areas and greater numbers of uninsured. But it also has a critical advantage rural hospitals in Georgia don’t: a growing number of patients who can actually pay.

More than 233,000 low-income Arkansans have gained health coverage under the state's controversial "private option" Medicaid expansion. The private option — a Republican-approved twist on the conventional Medicaid expansion called for by Obamacare — uses government dollars to buy private insurance for some of the state's poorest, most vulnerable citizens.

“Regardless of what your political affiliations are … you can’t argue the fact that it’s been effective,” said Rex Jones, CEO of the hospital in Warren. “Hospitals are now able to get paid. That’s huge for us.”

In Georgia, lawmakers, health care providers and residents have urged Gov. Nathan Deal and Republican legislators to look at Medicaid expansion as a way to shore up the state’s own crumbling rural health care system.

Eight rural hospitals have closed in Georgia since 2001. Another 15 are considered "financially fragile," and half a dozen are barely surviving.

Deal has long opposed Medicaid expansion, saying the state can’t afford to grow a program that is already bloated and inefficient. It currently covers 1.8 million low-income children, pregnant mothers, the elderly and disabled. Expansion would extend coverage to another 600,000 people, most of them adults without children.

Conservative lawmakers in Georgia, and some in Arkansas too, have also argued the federal government can’t be trusted to keep up its end of the bargain to pay at least 90 percent of the cost of expansion.

Expansion supporters say it wouldn’t be a magic bullet but it would help some rural hospitals stay afloat. Expansion would bring more than $30 billion in new federal dollars to the Peach State.

The governor has proposed a series of recommendations to address the rural hospital crisis. But those changes will take a long time to implement and will simply be too late for hospitals that are even now on the brink of collapse.

‘Enough revenue to keep the doors open’

Since the private option launched in 2014, hospitals across Arkansas have reported dramatic improvements.

Uninsured hospital admissions dropped by nearly half in the first six months. Visits to ERs by patients who couldn't pay fell by more than a third during that period. And the cost of caring for the uninsured declined by $70 million, a survey by the Arkansas Hospital Association found.

There are definitely rural hospitals that would have closed if it weren’t for the private option, said Bo Ryall, the group’s president and CEO. Some have been losing money for years, Ryall said.

“It provides enough revenue to keep the doors open in a lot of cases,” he said of the private option.

In Bradley County, roughly 10 percent of its 11,000-plus population is now on the private option. The hospital in Warren has seen nearly 40 percent declines in two key numbers: uninsured patients admitted to the hospital and uninsured patients visiting the ER. It’s also saved $1.3 million on free care to patients.

The hospital still stands to lose $900,000 this year, but that’s compared to a $2.3 million loss in its operations last year, Jones said. Some other rural hospitals are worse off financially, and Bradley County Medical Center isn’t in danger of closing, he said.

The private option enables small hospitals to think less about survival and more about making improvements to their buildings and improving services to the community, Jones said.

“There’s not a small community hospital that isn’t doing more than its share of charity care,” he said.

‘It just destroyed the family’

Allan Nichols and his staff see the benefits of the private option daily.

The group of safety net clinics Nichols runs treats thousands of Arkansans who live in the state’s impoverished delta region.

Many now have insurance through the private option Medicaid expansion. The clinics of Mainline Health Systems are growing and adding staff.

But the private option isn’t a guarantee, and that has Nichols and other providers concerned.

The Medicaid expansion experiment is set to conclude at the end of 2016. The state Legislature must then decide whether to extend it or some variation of it. Or lawmakers could choose a different course.

Nichols spoke of a local family, who owned a hair salon three or four years ago. They lost their health coverage when the insurer went bankrupt. The wife was diagnosed with ovarian cancer before they could sign up for a new health plan and insurers refused to cover her. She eventually died.

“They didn’t do anything wrong,” Nichols said. “It just destroyed the family.”

That family’s new stepmother is now suffering from pulmonary disease but can get treatment because she gets Medicaid.

“I pray for her that we don’t repeal it,” he said. “I don’t think you go backwards from here.”

‘Why wouldn't you do it?’

Even if the private option does remain, it’s no cure-all.

Under the Affordable Care Act, even as the federal government is pumping in money for Medicaid, it also will be cutting an estimated $1.6 billion in Medicare dollars over a next decade. (Medicaid is the program that provides health care for the poor; Medicare provides health care for those older than 65.) During that same time, the federal government is also eliminating nearly $400 million given to Arkansas hospitals to help make up for the loss of caring for the uninsured.

The hospital at the University of Arkansas for Medical Sciences in Little Rock is up $5 million so far this year because of the private option; it lost $1.5 million in the fiscal year before that. Its number of uninsured patients has plummeted from nearly 14 percent to less than 3 percent.

Five or 10 years from now, however, the hospital will be lucky to break even, said CEO Roxane Townsend. Inflation is outpacing increases in reimbursement rates; Medicare is establishing new penalties based on the quality of care, Townsend said.

Experts and hospital leaders say the money Medicaid expansion brings isn’t enough to cover the total loss of federal funds. But, they say, it’s better than nothing. States that don’t expand will see major funding cuts too but without any new Medicaid dollars to help offset the loss.

If there’s a way to help improve care for patients, “why wouldn’t you do it?,” said Jones in Warren. “If we don’t take advantage, shame on us.”