Thirteen of Kentucky’s 71 rural inpatient hospitals are at risk of closing, and six of those are at immediate risk of closing, according to the latest analysis of Hospital Cost Reports by the Center for Healthcare Quality and Payment Reform, a policy center that says it works toward patient-centered, affordable healthcare.
The report does not name the 13 hospitals, but it does offer a wealth of financial information about most rural hospitals in Kentucky and every other state, including critical access hospitals and rural emergency hospitals that are not designated as rural.
The center says its analysis is based on financial data from the most recent cost reports that hospitals must submit annually to the Centers for Medicare and Medicaid Services. The financial report shows rural hospitals’ operating margins, profits and losses on patient services and revenues and costs on patient services and those that are not directly tied to patient care.
Low reimbursement rates from Medicare and Medicaid are often blamed for why rural hospitals have such ongoing financial troubles, but the center expands that list to all types of insurance, saying in the report, “losses on private insurance patients are the biggest cause of overall losses” in at-risk hospitals.
“The only way to prevent more closures of services and hospitals is for all health insurance plans, including Medicare Advantage plans, commercial insurance plans, and Medicaid programs, to pay rural hospitals enough to cover the higher costs of delivering services in rural areas,” the center says in a news release.
The center also states that the federal Rural Emergency Hospital program, which forces rural hospitals to eliminate inpatient services in order to receive large federal grants, “is not a solution to these problems” because it eliminates much-needed services in a community. Kentucky has one such hospital, Crittenden Community Hospital in Marion, Ky.
Instead, the center calls for change in how rural hospitals are paid and proposes a method of payment that calls for all payers to start providing “standby capacity payments” to rural hospitals to cover the fixed costs of essential services such as emergency care, inpatient care and maternity care.
What the numbers show
According to the center’s “Data on Rural Hospitals” financial status report, using data from the three most recent years for which Hospital Cost Reports are available, 15 rural hospitals in Kentucky lost money (defined as “negative total margin”); 19 others lost money on patient services, but not overall; and 10 lost money on patient services and overall.
The 15 listed with negative total margins are in Fulton, Pineville, Irvine, Carlisle, Madisonville, Shelbyville, Albany, Manchester, Owenton, Mount Sterling, Marion, Burkesville, South Williamson, Campbellsville, and Russellville.
The 10 cited that lost money on patient services and overall are in Pineville, Irvine, South Williamson, Marion, Mount Sterling, Shelbyville, Albany, Owenton, Manchester, and Fulton.
The 19 listed that lost money on patient services, but not overall are in Martin, Columbia, Prestonsburg, Benton, Hazard, Paintsville, Danville, Greenville, McDowell, Harlan, Salem, Middlesboro, West Liberty, Carrollton, Russell Springs, Monticello, Tompkinsville, Hardinsburg (Breckinridge Memorial Health), and Whitesburg.
The report explains several ways that a hospital could lose money on patient services, but not overall.
“Many hospitals have managed to remain open despite losses on patient services because they receive local tax revenues or state government grants,” says the report. “However, there is no guarantee that these funds will continue to be available in the future or that they will be sufficient to cover higher costs.”
For example, the report notes that the federal assistance many hospitals received during the pandemic has ended, which has resulted in more than one-third of rural hospitals losing money overall in 2022-23.
It also says that some hospitals have financial reserves to offset the loss of inpatient services, adding that “the hospitals at greatest risk of closing have more debts than assets … to offset their losses on patient services for more than a few years.”
What’s Kentucky doing?
The previous report said 16 rural Kentucky hospitals were at risk of closing and 10 of those at immediate risk of closure, higher than this year’s 13 and six, respectively.
More information is needed to know why the number of at-risk hospitals in Kentucky is lower than they were in last year’s report, but what is known is that Kentucky legislators have passed laws to help support them.
For example, in 2020 they created the Kentucky Rural Hospital Loan Program, a revolving loan fund for distressed rural hospitals, and in 2021, funding $20 million.
The original bill allows the Cabinet for Economic Development to provide loans to struggling hospitals to maintain or upgrade facilities; maintain or increase staff; or provide health services not currently available. The low-interest loans can run up to 20 years and are available to hospitals in counties with fewer than 50,000 people.
So far, eight Kentucky hospitals have been approved for projects, with $7.2 million in funds authorized. They are Pineville Community Health Center, Baptist Health Deaconess Madisonville, Rockcastle Hospital & Respiratory Care Center in Mount Vernon, Trigg County Hospital in Cadiz, Crittenden Community Hospital in Marion, Ohio County Hospital Corporation in Hartford, Deaconness Union County Hospital in Morganfield, and ARC Health Systems in Ashland.
Of this list, the hospitals in Pineville and Madisonville and the Rural Emergency Hospital in Marion have negative total margins.
Laws have also been passed to allow Kentucky hospitals to get more money from Medicaid, basing payment on the “average commercial rate” instead of the current Medicaid rate, which is often below that amount. This legislation was passed under two bills — the first in 2021 that addressed higher rates for inpatient care and the second, passed in 2023, that addressed higher payments for outpatient care, which is the one that is most beneficial to rural hospitals.
(Photo: Ohio Co. Hospital)
By Melissa Patrick, Kentucky Health News
