Rural hospitals in NC have been 'struggling.' Could expanding Medicaid help keep them open?

RALEIGH, N.C. (WNCN) — Expanding Medicaid in North Carolina and elsewhere could have another effect: it could toss rural hospitals a financial lifeline.

Those hospitals generally found themselves in worse shape in states like North Carolina, where Medicaid coverage has not been expanded, than in other places that did, a new study from the Kaiser Family Foundation found.

"Rural hospitals have been struggling," Zachary Levinson, one of the study's authors, told CBS 17 News.

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Nearly a third of all of the nation's rural hospitals are located in the 11 states where Medicaid expansion has not taken place, and seven of those states are clustered in the Southeast: Tennessee, South Carolina, Mississippi, Alabama, Georgia and Florida.

That is in addition to North Carolina — where 53 of the state's 102 hospitals are considered rural, according to the Sheps Center for Health Research at the University of North Carolina.

Lawmakers from both parties are supporting legislation that would provide billions of federal dollars to the state and health coverage to about 600,000 state residents — most of whom would be working adults who make too much money to qualify for coverage but can't afford private insurance.

The KFF study looked at financial documents from 438 rural hospitals across the country from 2017-22 and found the most significant difference in the most recent period.

The median operating margins for rural hospitals in states that have not expanded Medicaid was 2.2 percent — nearly twice the median margin of 3.9 percent in expansion states.

And most rural hospitals in those non-expansion states "would have been in the red in recent months" if not for the infusion of federal relief funds provided to hospitals earlier in the COVID-19 pandemic, Levinson said.

When those relief funds were subtracted, those those median operating margins slipping to 1.2 percent in expansion states and were at minus-0.7 percent in states where coverage has not been expanded, the study found.

"We found that rural hospitals have been facing renewed financial challenges in recent months, and especially so in states that have not expanded Medicaid," he said.

Cynthia Charles, a spokeswoman for the North Carolina Healthcare Association — which represents the state's hospitals — says the report's findings line up with what is happening here.

"This is a time when elected officials should be especially careful in making policy decisions that could affect rural hospitals negatively," she said. "Decisions like that could affect whether they stay open or close."

It comes as those relief funds have dried up, and with labor and supply expenses rising, all hospitals have been facing more financial challenges, Levinson said.

Rural hospital closures slowed down during the pandemic, the Sheps Center says. The number of closures nationwide peaked at 19 in 2020 before dipping to three in 2021 and seven the following year.

There have been two already in 2023, one of which is in Texas — one of the states that has not expanded Medicaid: The one in La Grange is converting from a full-service hospital to a rural emergency hospital and cutting half its staff.

The issue of expanding Medicaid more strongly affects rural hospitals and their finances because it extends coverage to otherwise uninsured people who would have a hard time paying their medical bills or rely on the facilities for charity care.

But that leads to a bigger question. Why are rural hospitals more prone to struggling than urban ones in the first place?

"Part of this has to do with the fact that these are hospitals that are serving relatively small populations," Levinson said. "They have relatively low patient volumes. There are large upfront costs to running and keeping the doors open in the hospital and for those facilities that have low patients, the average costs of providing care are relatively high."

North Carolina soon could take itself off the list of states without expanded Medicaid, with the House two weeks ago approving legislation that would expand that coverage to hundreds of thousands of low-income adults through the 2010 Affordable Care Act.

The House measure would begin expansion in January as long as the General Assembly approves a state budget law this year.

The federal government covers 90 percent of the costs of expansion, with the remaining 10 percent coming from increased hospital assessments to the state.