Rural hospitals under financial crunch
April 23, 2023
Dr. Brent Hoehns types on a computer at the Knoxville Hospital and Clinics in Knoxville, Iowa on Tuesday, March 14, 2023. Hoehns has been a doctor for 28 years and sees the benefits of working in a smaller hospital. “It’s big enough that you can have eight or 10 partners, but small enough that you get to know the administration. You get a lot more say in how things are run than if you’re one of a thousand physicians in a system,” Hoehns said.
Iowa Hospital Association President and CEO Chris Mitchell said stagnant Medicaid reimbursement rates are hurting rural hospitals and leaving them in financial jeopardy. As legislators attempt to steady the financial headwinds for rural hospitals, Medicaid reimbursement rate increases have not gained bipartisan support.
Most of Iowa’s rural hospitals are losing money on providing patient care, but some hospitals remain financially afloat because of local tax levies and federal grants, according to the National Center for Healthcare Quality and Payment Reform. More than 9 percent of Iowa hospitals are operating in the red, according to the CHQPR.
Mitchell said stagnant Medicaid and Medicare payment rates to hospitals are affecting their ability to stay in the black on operating costs. Iowa’s Medicaid reimbursement rates for providers haven’t increased in a decade, Mitchell said.
Mitchell said 10 percent of Iowa hospitals have unsustainable operating margins, where the total cost of patient care is more than the amount of revenue from insurance payments.
According to Kaiser Health, 20 percent of Iowans are covered by the state’s Medicaid program.
The stagnation of Medicaid reimbursement rates is coupled with rising costs increased financial stress on Iowa’s hospitals. Approximately 61 percent of Iowa hospitals operate with a negative patient services margin, meaning they lose money on providing care, Mitchell said.
The Iowa Department of Health and Human Services announced in March that it would begin reevaluating Medicaid enrollees in the state and requiring them to reapply to keep services after this practice was paused because of COVID-19. Under the new program, 100,000 Iowans will be eventually unenrolled from the state’s Medicaid system, leaving many without insurance, according to the Des Moines Register.
“That is a direct result of the lack of reimbursement from the three major payers [Medicaid, Medicare, and private insurance],” Mitchell said. “When hospitals are facing these sorts of [financial] pressures, there’s not a whole lot of levers they have to pull.”