January 10, 2018

The stark difference in hospital closures between states that did—and didn't—expand Medicaid

Daily Briefing

    Hospitals in states that expanded Medicaid under the Affordable Care Act (ACA) were less likely to close than hospitals in non-expansion states, according to a study published Monday in Health Affairs.  

    Learn more: Get profiles of state-level health care transformation

    Study details

    For the study, researchers at the University of Colorado Anschutz Medical Campus examined hospital closure and financial performance data from 2008 to 2016. The researchers compared how hospitals performed from 2008 to 2012—the four years before the ACA's coverage expansions took effect—with how the hospitals performed from 2015 to 2016—the year after the ACA's coverage expansions took effect. The researchers also analyzed local market conditions and national hospital data.

    Findings

    According to the study, hospitals in Medicaid expansion states were more likely than hospitals in non-expansion states to experience an improvement in finances. As such, the researchers found that hospitals in Medicaid expansion states were about six times less likely to close than hospitals in non-expansion states.

    The researchers found that the effects of states expanding Medicaid were more pronounced for health care providers that had a larger share of uninsured patients before the ACA's coverage expansions took effect. For example, the researchers found that, in Medicaid expansion states:

    • Rural hospitals that had an uninsured patient rate of at least 30% before the ACA's coverage expansions took effect were 91% less likely to close than they had been before the coverage expansions; and
    • Urban hospitals that had an uninsured patient rate of at least 30% before the ACA's coverage expansions took effect were more than 92% less likely to close than before the coverage expansions.

    Overall, the closure rate per 100 hospitals rose from 0.39 for 2008-2012 to 0.81 for 2015-2016 in non-expansion states, while the closure rate per 100 hospitals fell from 0.51 for 2008-2012 to 0.18 for 2015-2016 in expansion states, according to the study. In addition, the researchers found that total margins for hospitals in non-expansion states improved by 0.005 in non-expansion states, while total margins for hospitals in expansion states improved by 0.011. Further, hospitals' Medicaid and uncompensated care margins—which is defined as hospitals' net income related to treating Medicaid and uninsured individuals divided by the net revenue they receive from treating such patients—decreased by 0.12 in non-expansion states, and increased by 0.106 in expansion states.

    Discussion

    Richard Lindrooth, the study's lead author and a professor at the Colorado School of Public Health, said hospitals saw more patients with Medicaid coverage after the ACA's coverage expansions took effect, which increased Medicaid payments to the hospitals and helped them perform better financially. Lindrooth said, "It's not as though Medicaid is an extremely profitable form of reimbursement, but it is something," adding "On the margins, it certainly helps the hospitals' cash flow." Lindrooth continued, "We found that really about half of the closures that did occur in non-expansion states could have been averted through the expansion."

    Jason Cleckler—CEO of Delta Memorial Hospital, which is located in a rural part of Colorado, which expanded Medicaid—said Delta Memorial's Medicaid population increased from 10% in 2011 to 20% in 2016—which resulted in less uncompensated care and saved the hospital more than $3 million. "I think that really speaks to what the researchers found," Cleckler said, adding, "So Medicaid doubled, our bad debt decreased significantly, and the uninsured rate decreased significantly."

    Brock Slabach, SVP of the National Rural Health Association (NRHA), said the study's results correlate with data NRHA has reviewed. He said, "If state legislatures and Congress want to cure the rural hospital closure problem, expanding Medicaid and not block-granting this important program would be the answer" (Daley, "Shots," NPR, 1/8; Gooch, Becker's Hospital CFO Report, 1/8; Ross Johnson, Modern Healthcare, 1/8; Baker, "Vitals," Axios, 1/9; Lindrooth et al., Health Affairs, January 2018).

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