A plan by Gov. Nathan Deal to help Georgia’s ailing rural hospitals could be too little too late for some hospitals on life-support and may not do much good for others.
The plan, sparked by a recent spate of rural hospital closures, enables hospitals in danger of shutting down, or that have closed in the past year, to downsize into freestanding emergency departments to cut costs. The departments would stabilize patients, then send them to nearby full-service hospitals.
The governor calls the new state guidelines, announced in March, a key first step ensuring access to health care for rural Georgians.
Though industry leaders and consumer advocates applaud Deal’s efforts, they also call the fix financially unfeasible for struggling hospitals. Emergency departments have high fixed costs, with expensive equipment to maintain and staff on duty 24 hours a day, whether needed or not. And, by law, they must treat all emergencies and are often inundated with uninsured patients who can’t pay.
“I just don’t see an outpouring of all these rural hospitals converting to ERs,” said Monty Veazey, president of the Georgia Alliance of Community Hospitals.
Advocates argue a better way to help rural hospitals is to expand the state’s Medicaid program under the Affordable Care Act. Having a greater number of paying patients would bolster hospitals’ bottom lines — though it’s certainly no cure-all, they say. Deal has repeatedly rejected the expansion option as too costly for the state.
Thus far, no rural hospital has taken up the offer to downsize since Deal’s new rules took effect in April. State leaders emphasize, however, that the plan has laid a foundation to begin addressing the rural health care crisis.
Four rural hospitals have shut down in the past two years and a dozen have cash-flow problems right now, Veazey said. Their challenges are many and growing, including high rates of uninsured, poor and aging residents, increasing health care costs and declining reimbursements from Medicare and insurers. At Lower Oconee Community Hospital in Glenwood, the latest hospital casualty, a new owner is working to get it back up and running.
While Deal’s plan would help such hospitals cut costs, the newly created standalone emergency departments wouldn’t be eligible for “facility fees” the federal government and insurers pay hospitals to help them maintain ERs and other critical services.
They would, however, be able to bill for other services, such as basic OB/GYN care, the governor said.
“I recognize the critical need for health care infrastructure in rural Georgia, as these resources save lives and provide jobs,” Deal said in a statement to The Atlanta Journal-Constitution. “I feel confident that the licensure modification will help rural hospitals that are in danger of shutting down entirely.”
Hospitals are often one of the largest and highest-paying employers in a small community, so a closure can devastate the local economy.
Deal has set up a Rural Hospital Stabilization Committee tasked with exploring ways to ensure Georgians still have access to critical care. The group’s first meeting is June 9. How the standalone emergency departments get paid is likely to be one of the first, and most challenging, issues the group tackles.
Better than nothing
State leaders, consumer advocates and health care providers seem to agree on one thing: A freestanding emergency department is better than nothing.
Advocates, however, argue the new rules simply aren’t realistic and won’t stop the financial hemorrhaging that is killing rural hospitals. Medicaid expansion, they say, would help far more.
Expanding Medicaid — a key element of the Affordable Care Act — would add 650,000 low-income Georgians to the Medicaid rolls at a cost to the state of $2.5 billion over a decade, something Deal says Georgia cannot bear. The government health program already covers 1.7 million low-income children, parents, senior citizens and disabled residents.
But expansion proponents say its cost to Georgia would be offset by more than $30 billion in new federal funds funneled over a decade into a state with one of the highest rates of uninsured. It would allow rural hospitals to get paid for the uninsured patients they lose money on, said Beth Stephens with Georgia Watch, a nonprofit consumer advocacy group.
Deal, however, doesn’t see that as a logical solution to the rural hospital issue.
“If we accept Medicaid expansion, we have a new entitlement that grows no matter how state revenues or the economy are performing,” he said. “That means less money for our top priorities such as education, which is more than half of the state budget.”
Deal said the new rules are just a first step and he is monitoring the situation along with the Department of Community Health.
Even if Georgia were to expand Medicaid, experts say it wouldn’t be a magic remedy — in part because Medicaid doesn’t pay enough to cover the actual cost of care. Rural hospitals would still have financial challenges, they say, and need to work on becoming more efficient and improving quality. Some hospitals will look to partner with larger regional hospitals or health systems. Others will do away with their emergency departments and focus on more profitable services.
Still, a growing number of Republican governors have begun to reconsider Medicaid expansion as a way to improve health care access, even if they oppose the Affordable Care Act, better known as Obamacare. Indiana Gov. Mike Pence recently unveiled plans to expand its Medicaid program pending federal approval.
Arkansas is expanding. So is Arizona and some other red states. Georgia conservatives need to reconsider the option too, said Georgia state Sen. Chuck Hufstetler, a Rome Republican.
Medicaid expansion is “going to help these hospitals more than anything,” he said.
A first step
Hundreds of standalone emergency departments have popped up across the country in recent years. They are, however, typically run by entrepreneurs or large health systems and located in wealthy suburban communities filled with paying customers.
Georgia may be unique in using the concept to try to save rural hospitals.
Struggling rural hospitals in other states are actually doing the opposite — shutting down their ERs and focusing on outpatient surgeries and other profitable services, said Brock Slabach, senior vice president with the National Rural Health Association.
Flint River Hospital in the small south-central Georgia community of Montezuma closed its ER last year. Chief Executive Officer Michael Patterson said he is exploring whether the new rules would allow the hospital to reopen a smaller ER.
Proponents of the rules say it’s simply a first step in tackling a much larger problem.
“We’re trying to look at the issue of access to health care for rural areas across the spectrum — physician shortages, primary care, emergency services,” said Clyde Reese, head of the Georgia Department of Community Health.
Whether Deal’s new rules can help rural hospitals depends on what financial shape a facility is in, said Rep. Terry England, R-Auburn, who sits on the governor’s Rural Hospital Stabilization Committee.
“Some of them may be too far in the hole — didn’t see the signs early enough,” England said.
The unfortunate reality is that a community needs about 40,000 people for a rural hospital to break even, said Jimmy Lewis, CEO of HomeTown Health, a network of rural hospitals. Based that figure, rural Georgia needs closer to 45 facilities to care for its nearly 1.8 million residents. It has 63 right now.
“The realization has come to be that there are just going to be rural hospitals that close,” Lewis said.
Ultimately, states and the medical community will have to transform how health care is delivered in rural areas, Slabach said. Telemedicine is gaining in popularity, but it’s going to take more than that, he said.
“There are no easy answers,” he said.
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