Does ACA Insurance Coverage Expansion Improve the Financial Performance of Rural Hospitals?

Date
04/2016
Description

The implementation of the Patient Protection and Affordable Care Act (ACA) increased access to health insurance coverage for previously uninsured or under-insured populations. Since rural residents are more likely than urban residents to be uninsured, increased access to health insurance should, in theory, provide a new source of revenue for rural hospitals and, therefore, improve financial performance. To better understand how the ACA’s expansion of insurance coverage has affected uncompensated care, unreimbursed cost, and financial performance in rural hospitals, the NC Rural Health Research Program interviewed rural hospital administrators, state hospital associations, and State Offices of Rural Health (SORHs).

We interviewed 21 health care leaders (rural hospital administrators, state hospital associations, and SORHs) from 8 states about perceptions of changes in payer mix; changes in uncompensated care (bad debt and charity care) and unreimbursed cost (shortfalls between the costs of providing services and payments by public programs); and financial performance in their respective hospitals/state.

Key Findings: While some rural hospitals reported decreases in charity care, few reported a positive net financial impact as a result of the ACA’s expanded insurance coverage — primarily because respondents felt that bad debt from high-deductible health plans and shortfalls between payments and costs of care in Medicare and Medicaid were growing.

Most respondents in states that had not expanded Medicaid reported some growth in the numbers of individuals who gained insurance coverage either through new Medicaid enrollments or enrollments in Marketplace plans; however, respondents in these states viewed the lack of Medicaid expansion as a missed opportunity.

Respondents believed the expanded insurance coverage as a result of the ACA was the right thing to do for patients, but expressed concerns that the coverage may not be adequate to ensure access to care.

Downward pressure on reimbursement from Medicare and commercial payers, an increase in high-deductible health plans, below-cost reimbursement for growing numbers of Medicaid enrollees, and anticipated cuts to Medicaid Disproportionate Share Hospital funds all contributed to uncertainty about the long-term financial sustainability of rural hospitals.

Center
North Carolina Rural Health Research and Policy Analysis Center
Authors
Kristie Thompson, Kristin Reiter, Rebecca Whitaker, Sharita Thomas