States’ decisions not to expand Medicaid appears to be affecting the financial stability of rural hospitals in the United States more than in hospitals in urban areas, according to a study in Health Affairs.
States’ decisions not to expand Medicaid appears to be affecting the financial stability of rural hospitals in the United States more than in hospitals in urban areas, according to a new study in Health Affairs. The study suggests that opting out of Medicaid expansion is adding to the gap between urban and rural hospital financial stability.
Brystana G. Kaufman, a doctoral student at the University of North Carolina at Chapel Hill, and colleagues used a difference-in-differences approach to evaluate the average effect of Medicaid expansion in 2014 on the mix of payers and the profitability for urban and rural hospitals. They found that if rural hospitals were in a state that had expanded Medicaid, they had a better chance of being profitable, whereas urban hospitals experienced no improvement to their profitability by being in a state that expanded Medicaid.
In any event, hospitals in both rural and urban areas earned more if they were in a state that had expanded Medicaid and thus had a greater number of people with health coverage and a lower level of uncompensated care. The authors suggested that rural hospitals have more to lose when the state does not expand Medicaid.
The study compared more than 14,000 annual cost reports in rural and urban US hospitals from January 2011 to December 2014. Researchers compared how expanding Medicaid affects revenue, how many Medicaid patients were discharged, how much care was uncompensated, and what the general overall financial picture was at all the hospitals.
Rural hospitals in states that expanded Medicaid had greater increases in Medicaid revenue than urban hospitals in the same state. The researchers found that the reduction in uncompensated care led to the urban hospitals saving a higher percentage of money than rural hospitals, but that fact did not translate into improved operating margins for urban hospitals.
According to Kaufman, there is not only a disparity in the impact of Medicaid expansion, but likely the Affordable Care Act (ACA), overall. More research is needed to explore why this is the case, but the researchers said a likely factor is that rural hospitals serve more low-income people who weren’t eligible for insurance before the ACA took effect, but who were covered after. In addition, rural hospitals are also historically more likely to operate at a loss than urban hospitals.
The authors noted that rural hospitals have narrower profit margins than urban hospitals and therefore any budgetary squeeze has more of an effect and may limit a hospital’s quality and ability to offer care. In addition, rural hospitals are already experiencing financial strains, with more than 70 having closed since 2012 and still more at risk of closing. Many endangered hospitals are in states that did not expand Medicaid.