News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

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News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel
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Most of the hospital closures occurred in states that did not expand their Medicaid programs following the Affordable Care Act of 2014

Sustained financial pressure is not limited to clinical laboratories. Rural hospitals are under grave financial pressure as well. These hospitals are particularly vulnerable, and many have closed their doors, leaving local physicians and independent pathologists in those communities with an unclear path going forward.

Now, a recent study by the North Carolina Rural Health Research Program (NC-RHRP) at the University of North Carolina Cecil G. Sheps Center for Health Services Research (UNC-CH) showed that since 2010, 89 rural hospitals in 26 states have closed. The majority of those closures (67) occurred in the south.

And Medicaid expansion, or more accurately the lack thereof, may have played a major role in these closures.

Medicaid Expansion ‘Coverage Gap’ Involved in Rural Hospital Closures

Medicaid expansion seems to be one factor affecting hospital closings. According to Becker’s Hospital Review (Becker’s) more hospitals have closed in states where Medicaid was not expanded following the passage of the Affordable Care Act in 2014.

This is likely related to the increasing number of uninsured people in those states. Incomes tend to be lower in rural areas and the number of uninsured people is higher there than in urban settings.

In a report on this coverage gap, the Kaiser Family Foundation (KFF) explains, “In states that do not expand Medicaid, many adults fall into a ‘coverage gap’ of having incomes above Medicaid eligibility limits, but below the lower limit for Marketplace premium tax credits.”

The graphic above is taken from the North Carolina Rural Health Research Program study. It shows the location of 95 hospitals that closed between 2010 and 2018. The researchers defined rural hospital closures as “… any short-term, general acute, non-federal hospital that is A) not located in a metropolitan county, or B) is located in a RUCA [Rural Urban Commuting Area] type 4 or higher, or C) is a Critical Access Hospital. For the purposes of this project, we have defined a hospital closure as the cessation in the provision of in-patient services.” (Photo copyright: University of North Carolina.)

Most Hospital Closures in Rural Southern United States

Approximately 2.2 million people are affected by the coverage gap, and there are similarities between where those people live and where hospitals are closing. For example, 89% of those caught in the coverage gap live in the south—where the majority of hospitals have closed, KFF noted.

According to Becker’s:

  • Texas has seen the most closures with 15;
  • Tennessee is second with nine closures since 2010;
  • Next is Georgia at seven; and,
  • Alabama, Mississippi, North Carolina, and Missouri are tied each with five hospitals closed in the last few years.

About a third of the hospitals (21) that closed between 2013 and 2017 were 20-35 miles away from the next nearest hospital, according to a report given to Congress by the Medicare Payment Advisory Commission in June of last year.

A printable list of the 95 closed rural hospitals can be downloaded by clicking on this link.

GAO Reports For-Profit Hospitals Most Vulnerable

The combination of lower incomes and fewer insured people makes it difficult for hospitals to cover their fixed costs, leading to bankruptcy. According to a report released by the Government Accountability Office (GAO), for-profit hospitals have been disproportionately affected by bankruptcy.

  • Only about 11% of the hospitals in rural areas were for-profit organizations in 2013;
  • However, 40% of those hospitals that closed due to bankruptcy between 2013 and 2017 were for-profit.

“While Medicaid expansion has improved all hospitals’ operating margins and total margins, the effect was particularly pronounced in rural areas,” noted a report from the Center on Budget and Policy Priorities. That’s because uncompensated care is provided more often in for-profit, rural hospitals located in states where Medicaid expansion did not occur.

Healthcare is undergoing massive changes and the reasons for the rising number of health system and hospital bankruptcies are complex and layered. The role of pathology labs isn’t always clear and many clinical laboratories are caught in shifting sands without a clear path forward. In rural areas, where hospitals are closing at an alarming rate, that is particularly true.

Thus, clinical laboratory managers and stakeholders should focus on improving outreach and solidifying revenues to navigate the uncertain waters that lay ahead. Especially in poorer states where high numbers of people cannot qualify for Medicaid coverage.

—Dava Stewart

Related Information:

The Rural Hospital Closure Crisis: 9 Things To Know

The Coverage Gap: Uninsured Poor Adults in States That Do Not Expand Medicaid

GAO: 10 Things to Know About the Spike in Rural Hospital Closures

Uncompensated Care Costs Fell in Nearly Every State as ACA’s Major Coverage Provisions Took Effect

Report to the Congress: Medicare and the Health Care Delivery System

Lab Companies and Bankrupt Hospitals: Dancing Around Medical Billing Fraud