Health Care

Kansas Medicaid decisions could close hospitals, raise costs for privately insured

An ambulance drives through Independence, Kan., where Mercy Hospital Independence’s closing puts it in the company of dozens of rural hospitals around the country that have not been able to withstand recent financial and demographic challenges.
An ambulance drives through Independence, Kan., where Mercy Hospital Independence’s closing puts it in the company of dozens of rural hospitals around the country that have not been able to withstand recent financial and demographic challenges. File photo

Some say the state’s decision to not expand Medicaid and Gov. Sam Brownback’s 4 percent cut to Medicaid reimbursement rates could contribute to more rural hospitals closing and could lead to more expensive health care for those who do have insurance.

“This decision to make these cuts is really a decision to balance the budget on the shoulders of providers and patients around the state,” said Cindy Samuelson, vice president for public relations at the Kansas Hospital Association.

Medicaid is the health insurance program for low-income and disabled residents funded by the state and federal government. Kansas privatized Medicaid in 2013 and dubbed it KanCare.

Right now, Kansans who make too much money to qualify for Medicaid, but don’t make enough money to qualify for federal subsidies, fall into a coverage gap.

When patients are uninsured and can’t pay, the hospitals get stuck with the cost. If the state expanded Medicaid, 150,000 Kansans could receive health insurance, according to the Kansas Hospital Association.

Financial woes

Brownback’s 4 percent reimbursement cuts take effect July 1. Brownback, who made the cuts to help fill the state’s budget hole, made some exemptions for rural hospitals and home- and community-based services for people with disabilities.

That means physicians, dentists, pharmacies and hospitals in urban areas, such as Wichita and Kansas City, will account for most of the $38 million cut to provider reimbursement rates.

Via Christi Health, the largest hospital system in the state, announced to its employees Tuesday that it would lay off 70 employees over the next two weeks. It also said it would leave 80 positions unfilled that were lost through attrition in the past three months. That’s 150 positions total, but Via Christi is also adding 80 bedside nursing positions.

The layoffs were due to a number of reasons, according to the hospital, including lower reimbursements.

Bruce Witt, director of government relations for Via Christi, said Via Christi estimates the reimbursement cuts will cost the hospital $4.3 million a year. That’s in addition to $14 million per year that Via Christi was losing from the state’s decision not to expand Medicaid.

He said Via Christi projects it will end its fiscal year with a 1.8 percent operating margin. To be sustainable long-term, national benchmarks suggest margins of about 4-5 percent, more than double Via Christi’s projection.

Via Christi has been vocal about its financial struggles in the past, too.

Via Christi, along with many other hospitals and health organizations, pushed for an expansion plan that it says would have not only remained budget neutral, but could have made money for the state.

“They chose to ignore that opportunity, and now were even getting cut further,” Witt said.

‘Impossible for us to continue’

At a series of public hearings around the state in May, Kancare recipients expressed grievances with the system and reported difficulty accessing care.

Health care analysts say the governor’s move to reduce funds could make it even harder for some to get medical care.

Sheldon Weisgrau, director of the Health Reform Resource Project, which is part of the Kansas Association for the Medically Undeserved, said providers would likely further limit the number of Medicaid patients they accept, or some could stop accepting Medicaid patients all together.

“You just can’t continue operating if you’re getting paid less, and less, and less than what it costs to treat the patient,” he said.

Weisgrau said rural hospitals would increasingly turn to the community for tax increases or other measures to make up for lost reimbursements.

“At some point, the communities can’t afford to do that and you see the hospitals go under,” he said.

A study published Thursday by Kaiser Family Foundation shows uncompensated care costs dropped nearly $6 million from 2013 to 2014 in states that expanded, but remained stagnant in non-expansion states.

Another study by Georgetown University found states that didn’t expand have more uninsured patients, greater uncompensated care costs, financially-pressured hospitals and more difficulties expanding specialty care access.

The study also said hospitals in non-expansion states are more often stuck trying to maintain the status quo of services rather than improve or expand them.

Weisgrau said the more uncompensated care provided in an area, the higher health care costs for those that are insured.

Weisgrau offered an example: If an uninsured patient receives $1,000 worth of care from an emergency room, everybody else in the hospital has to pays more to make up for it.

If the person has Medicaid, and it covers $800 of the $1,000, the rest of the patients pay to make up for the $200 difference in the cost of care – rather than the full $1,000.

With Medicaid cuts, the difference paid by privately insured patients goes up. With Medicaid expansion, more patients would have at least the $800-coverage scenario, rather than nonexistent coverage, Weisgrau said.

“All we’re doing here is passing an indirect tax to everyone else,” he said, adding that it might not be a tax from the state but would come from increased health-care costs and higher sales taxes to support local hospitals.

Weisgrau said he’s confident Kansas will expand Medicaid at some point.

“Eventually, the economics of this are going to make it impossible for us to continue to resist it,” Weisgrau said. “But my worry is that if we have to wait a few more years for that to happen, there’s going to be a lot of damage that cannot be repaired. And that will likely include the closure of hospitals.”

Rep. Dan Hawkins, R-Wichita, who chairs the House health and human services committee, said he still doesn’t support Medicaid expansion, but said if re-elected, he would attempt to reverse Brownback’s Medicaid reimbursment cuts. He said he didn’t yet have a funding stream identified, but said it would not come from the general fund.

Brownback shielded some small hospitals from the 4 percent reimbursement cuts. But those shields only apply to the hospital itself, not the providers that work within the hospital – those doctors will still take a hit.

Hawkins said it would be wrong “to bury you head in the sand and say that’s not going to be an issue for hospitals – it certainly will.”

But, he said, if the state couldn’t cut K-12 education, the next largest area is health.

Rural hospitals at risk

At least 1 in 3 rural Kansas hospitals are at risk of closure, according to a hospital vulnerability report from iVantage Health Analytics, a for-profit research group based in Maine.

“Cutting their (hospitals’) rates is going to put them in even deeper trouble and it’s going to put them closer to the financial edge,” said Weisgrau, of the Health Reform Resource Project.

Here’s what some are doing to survive:

▪ On May 26, a nonprofit organization that operates St. Francis Health in Topeka announced it no longer wants to manage the 378-bed hospital because of health care reform and the state’s lack of Medicaid expansion, according to the Topeka Capital-Journal. It is soliciting proposals from health care providers interested in operating the hospital.

▪ Hamilton County Hospital, in Syracuse, has also been struggling and recently signed a contract with a consulting group that specializes in rescuing rural hospitals to operate the Hamilton County Hospital, according to KMUW.

▪ Voters in Arkansas City on May 24 passed a 1 percent citywide sales tax increase for the next 10 years to pay off debt for the South Central Kansas Medical Center. The tax hike passed 1,885-467.

Clayton Pappan, chief marketing officer for the medical center, said in February, the hospital started cutting $750,000 of its costs for the year. The cuts included a 15 percent pay cut for administration, some service reductions and not filling some vacant positions.

But Pappan said the hospital also hopes to offer more specialty services to increase revenue.

“You can’t cut your way out of it,” he said. “It’s just too great.”

Gabriella Dunn: 316-268-6400, @gabriella_dunn

Rural hospitals trying to stay afloat

At least 1 in 3 rural hospitals are at some risk of closure in Kansas, according to a hospital vulnerability report from a research group called iVantage Health Analytics. Here’s what some are doing to survive:

▪ St. Francis Health in Topeka is soliciting proposals from health care providers interested in managing the 378-bed hospital. The nonprofit that operated the hospital no longer wants to because of the state’s lack of Medicaid expansion.

▪ Hamilton County Hospital in Syracuse recently signed a contract with a consulting group that specializes in rescuing rural hospitals to operate the Hamilton County Hospital.

▪ South Central Kansas Medical Center in Arkansas City will have its debt paid off by residents through a 1 percent sales tax hike for the next 10 years that passed 1,885-467. The hospital also started cutting $750,000 from its costs for the year.

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