What Would Medicaid Expansion Mean for Kansas’ Rural Hospitals?

Near Moundridge, Kansas

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There’s reason to believe rural hospitals in expansion states are doing better.

The only thing that stands between Kansas and an expanded Medicaid program is Republican Gov. Sam Brownback, who on Thursday vetoed legislation that would have done that.

On Tuesday, the state Senate approved a bill that would increase coverage eligibility for KanCare, the state’s privatized Medicaid program, to 138 percent of the federal poverty line. Experts say roughly 150,000 people would gain coverage under the expansion plan.

Brownback has historically been a staunch critic of Medicaid, and his staff put out a number of statements opposing expansion since the Senate vote.

“To expand Obamacare when the program is in a death spiral is not responsible policy,” Melika Willoughby, the governor’s communications director, said in a statement.

It will take 84 votes in the Kansas House and 27 in the Senate to override him.

In the heat of this debate, it’s important to remember the stakeholders that have the most to gain or lose. Rural hospitals in the Sunflower State in particular have a lot riding on the possible expansion.

What’s at Stake?

According to a national study conducted in 2016 by the Maine-based for-profit research group iVantage Health Analytics, as many as one in three rural hospitals in Kansas is at risk of closure—an estimated 31 out of 107 such facilities in the state.

The rural health care ecosystem in the United States is already in a precarious position—rural hospitals like those in Kansas must adapt to population shifts and changing patient preferences on top of finding qualified physicians and nurses willing to serve in relatively isolated communities.

Compounding those existing troubles is a particularly thorny problem—the communities that rural hospitals in Kansas care for tend to be sicker, lower-income and with lower rates of health insurance coverage.

Therefore, in states like Kansas that have held off on expanding Medicaid, rural hospitals receive less money from the federal program, and in turn, provide more uncompensated care.

“Rural communities in Kansas, as in all states in the country, have a much higher utilization of Medicare and Medicaid,” Brock Slabach, a senior vice president at the Leawood, Kansas-based National Rural Health Association.

According to Slabach, a typical rural hospital in Kansas could expect to receive 70 to 80 percent of their revenue from just two payers, Medicare and Medicaid. And, as a result changes in coverage matter a great deal to these hospitals’ bottom lines.

“Any time you expand coverage to include more people,” Slabach said, “it should help to alleviate some of the bad debts that many rural hospitals see all too often.”

There’s some indication that expanded coverage has indeed had an impact in states that went that opted in to the beefed-up program. In 2015, a team from the Sheps Center for Health Services Research, part of the University of North Carolina at Chapel Hill, compared rural hospitals in expansion states with states that opted out in terms of how uncompensated care affected profitability.

The study found that in states that expanded Medicaid, rural hospitals experienced a better chance of turning a profit than those that found themselves in one of the 19 states to turn down expansion.

There’s also reason to believe that Medicaid expansion is linked to hospitals remaining open. Recent research, also carried out by the Sheps Center, set about to study the rise in hospital closures around the country—the rate has been increasing since 2010. As part of the investigation,the hospitals that do close are more likely to be in non-expansion states in general.

It should be noted that it’s not just rural hospitals that stand to gain financially from expansion. According to impact research from the Kansas Hospital Association, the state stands to see an across-the-board reduction of uncompensated care. Expansion alone leads to a one-third decrease in this hospital cost.

Expanded Medicaid Is Critical, But Not a Silver Bullet

The question at the core of all of this is: For vulnerable hospitals in Kansas, particularly in rural parts of the state, does the money saved as a result of increased Medicaid coverage mean the difference between remaining open, and closing their doors?

It’s a difficult question to answer, but it’s one that has become even more pressing in the last few years in Kansas.

In 2015, Independence, Kansas, a small city with less than 10,000 residents deep in farm country in the southeastern portion of the state, lost its only hospital. When Mercy Hospital closed, Independence lost jobs and access to doctors.

At the time, the closure in Independence added fuel to an already hot debate over Medicaid, with residents wondering if expansion could have been enough to save Mercy Hospital.

Non-expansion certainly wasn’t the only factor at play at the time of the hospital’s closure, according to an examination by The Kansas City Star in 2015. Mercy was struggling for a number of reasons—among them, the constant turnover of physicians and a growing number of patients who preferred to get their health care in big city environments.

In 2014, the hospital, which at its peak had more than 90 inpatient beds, was only staffing 45 beds. And, at any given time, only a quarter of those beds were filled.

But, while increased Medicaid coverage couldn’t have single-handedly saved the hospital, it would have helped its financial situation significantly.

At the time, the Kansas Hospital Association estimated the hospital would have gained nearly to $1.7 million in extra revenue each year had more people been eligible for coverage by Medicaid.

What is clear to people like Brock Slabach is that it’s important for Kansas lawmakers to do whatever they can to prevent more cases like Independence.

“Rural hospitals really are the organizing principle for large areas of the state,” Slabach said. “If the hospital goes away the organizing principle for all of the health care services disintegrates.”

“These are resources, that once they leave, the likelihood of them ever coming back is very small and the cost would be far more expensive to try to replace [a hospital], than to sustain it.”  

Editor's Note: This article has been updated to include news about Gov. Sam Brownback's veto on Thursday.

Quinn Libson is a Staff Correspondent for Government Executive’s Route Fifty based in Washington, D.C.

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