Beshear says Ky. rural hospitals ‘have a positive cash flow’ but he can’t prove it; industry says it sees ‘some improvement’

By Al Cross
Kentucky Health News

FRANKFORT, Ky. — Gov. Steve Beshear says Kentucky’s rural hospitals are profitable again, thanks to his expansion of Medicaid, but he offers little evidence to support his claim, and the hospital industry disputes it.

In a long, joint interview with Colorado Gov. John Hickenlooper at the Brookings Institution in Washington, D.C., Feb. 20,
Beshear said, “Our rural hospitals have
a positive cash flow for the first time in a long time, so it’s working,
it’s going to work, and my job is just to get it so embedded that nobody can do
anything about it.”
Kentucky Health News asked Beshear’s office for evidence of
rural Kentucky hospitals’ positive cash flow, but the office cited only a news story about Carroll County Memorial Hospital in Carrollton, which said it turned a small profit in 2013 (thanks to federal health-reform grants for digitizing medical records) and a much larger one in 2014.

“Some of them have improved and some of them have not,” said Mike Rust, president of the Kentucky Hospital Association. As a result of Medicaid expansion, he said, “Some have benefited greatly but others are still struggling.”

The association’s vice president of health policy, Elizabeth Cobb, said, “In general we’re seeing some improvement in rural hospital finances,” largely from a decline in the number of charity cases as a result of previous patients having coverage. “We were already taking care of most of those,” she said.

State figures show Medicaid payments to rural hospitals rose 20 percent in the state fiscal year that ended June 30, 2013, but only 6 percent in the next year, when the Medicaid expansion began; and that the payments to urban hospitals rose 4 percent and 10 percent the last two years.

Based on claims from July through September, the state forecasts that Medicaid payments to rural hospitals in the current fiscal year will increase 26 percent, and payments to urban hospitals will rise 15 percent. (The state has estimates for each hospital.)

Cobb said the expansion hasn’t generated as many new patients as might be expected for rural hospitals because of the shortage of primary-care physicians who admit patients: “We’re not seeing a huge expansion of utilization as a result of Medicaid expansion.”

That keeps patients coming to hospital emergency rooms for care, some of which is deemed non-emergency by managed-care organizations, the insurance-company subsidiaries that have overseen the care of Medicaid beneficiaries since 2011. Two MCOs pay only a $50 “triage fee” in such cases, regardless of what diagnostic tests the hospital performs; that was the topic of a legislative hearing last week.

And that is just one part of hospitals’ problems with the MCOs. “What we’re seeing
generally is that while hospitals are receiving payment for some patients who
may have been uninsured previously and are now insured by Medicaid, we’re still seeing the challenges
of hospitals being paid by managed-care organizations,” Cobb said. “There’s an increase in the administrative burden for small hospitals to work with five different MCO plans that all have
very different rules and criteria.”

Clinton County Hospital Administrator J.D. Mullins cited MCO problems is explaining his facility’s decision to file for bankruptcy last year, mainly to restructure payments on the federal loan for a $14.7 million addition completed a few years ago, the Clinton County News reported.

“These companies’ polices have restricted access to the hospital’s services and reduced our reimbursement even more,” Mullins told the Albany paper. “When the idea of a new hospital facility was first proposed, no one could have foreseen the condition of health care today.”

The hospital is in the district of Sen. Max Wise, R-Campbellsville, who told fellow members of the Senate Health and Welfare Committee Feb. 26, “I would love to take the governor’s report to the six of my seven counties out in rural Kentucky that are struggling right now in their hospitals. . . . What I’m hearing from them is the system is broken and it continues to be broken.”

Wsie was referring to Beshear’s recent report that Medicaid expansion is generating more money, jobs and tax revenue than forecast. Another committee member, Sen. Ralph Alvarado, R-Winchester, said, “Almost every senator here has received letters that say: This stinks, we are not getting paid, we are going under.”

Cobb said some rural hospitals are reporting cuts
in jobs and services. That is probably reflected in U.S. Bureau of Labor Statistics data compiled by Paul Coomes, emeritus economics professor at the University of Louisville. It shows hospital employment trending down while other health-care jobs have been going up.

While Carroll County and others are benefiting from federal digitization grants, “That funding’s going to go away,” Cobb said, and “Every year you’ve got to pay for upgrades, and the requirements continue to increase at the federal level.” Federal officials say digitization should make hospitals more efficient.

Of the Carrollton hospital, Cobb said, “That’s a special situation. That’s not a typical one.” She said the facility “put in place a lot of measures to try to improve their management” and has partnered with larger hospitals to offer more services, such as cardiology, “and that’s breathed some life back in.”

Rural hospitals in Nicholas and Fulton counties have closed in the last year, and state Auditor Adam Edelen, who is preparing to issue a report on rural hospitals, has warned that others are in danger, threatening to put new obstacles between rural Kentuckians and health care. “Not acknowledging the looming access issue is a disservice to the low-income and elderly Kentuckians who are depending on an intact provider network,” Edelen spokeswoman Stephenie Hoelscher said.

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