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N.C. high on list of community hospitals vulnerable to closing

N.C. high on list of community hospitals vulnerable to closing

WSJ_0721_Yadkin_CAR2

Yadkin Valley Community Hospital has been shut down. CAH Acquisition 10 LLC shuttered the hospital in May 2015 in defiance of a temporary restraining order issued in Wake Superior Court that would have kept the hospital open at least three more months. The decision was made because of a lease dispute, along with Medicare and Medicaid funding responsibilities.

Thirty percent of North Carolina’s rural community hospitals, 15 out of 50, are considered as vulnerable to closing because of potential financial shortfalls, according to a national study released last week.

The report from the Chicago-based Chartis Center for Rural Health listed six N.C. hospitals as “most vulnerable,” while nine others are “at risk.”

The consulting group did not identify the 453 rural community hospitals nationwide it lists as vulnerable. Officials could not be reached about the N.C. hospitals on its list.

North Carolina is one of 14 states, all Republican-led at the legislative level, that has not expanded Medicaid since the 2010 passage of the federal Affordable Care Act, also known as “Obamacare,” and the rollout in January 2014.

“The rural health safety net is under pressure,” according to the study’s authors. “The accelerated rate at which rural hospitals are closing continues to unsettle the rural health-care community, and demands a more nuanced investigation into rural hospital performance.

“Rural communities face socioeconomic disadvantages and greater health disparities, while having less access to primary, dental and mental healthcare at the median.

“At the same time, many rural providers struggle with negative operating margins, uncertainty and the unintended consequences” of state Medicaid political policies.

The report represents another in an increasingly long list of national and state Medicaid expansion studies, some of which say expansion has the ability to bring stability to rural health care and additional federal money into non-expansion states.

A rural community hospital in the 36 Medicaid expansion states have a 62% lower chance of closing than those in non-Medicaid expansion states, according to the study.

Several community hospitals, including those in Danbury, Eden and Sparta, have agreed to a not-for-profit or for-profit management takeover as Medicare and Medicaid reimbursements shrink, putting pressure on their overall financial bottom lines.

Chartis determined non-expansion states contain 298 of the 453 vulnerable hospitals, including 75% of the 216 listed as most vulnerable.

Of the non-expansion states, North Carolina is 11th in terms of number of vulnerable rural hospitals. Texas ranks first with 77 of its 152 rural hospitals.

The study

The Chartis study determined vulnerable hospitals by comparing their financial status to the 115 hospitals that have closed, particularly which of nine performance variables “have the greatest impact on increasing or decreasing a rural hospital’s likelihood of closing.”

Those variables: age of hospital facilities; patient case mix index; level of local government influence/control over the hospital; percentage of capital efficiency; financially operating with a profit or loss; percentage of patient occupancy rate; percentage of revenue based on outpatient services; whether it is affiliated with a larger healthcare system; and located in Medicaid expansion or non-expansion state.

Most closed hospitals had “a rapid decline in performance in the 12 months prior to closing.”

“Our analysis shows that hospitals located in states that have not adopted Medicaid expansion have lower median operating margin and have a higher percentage of rural hospitals operating with a negative operating margin,” according to the study.

“Of the nine states with the highest levels of closures since 2010, none are Medicaid expansion states.” They are, in order, Texas (20); Tennessee (12); Georgia (7); Oklahoma (7); Alabama (6); Missouri (6); Kansas (5); Mississippi (5); and North Carolina (5).

In January, the Democratic governor of Kansas and its Senate Republican leader announced an agreement to expand Medicaid in the state.

“Over the course of the last five years, rural hospital operating margins have descended deeper into the red, moving from 39% to 47%,” Chartis authors said. “This, in conjunction with the closure crisis, underscores the pressure rural providers face.

“Many of the states hit hardest by the closure crisis also see the highest levels of vulnerability, which threatens to further erode the delivery of health-care services at the local level.”

Vulnerable

The non-expansion states had 65.5%, or 74 of the 115, of the rural hospitals nationwide that have closed since 2010, according to the Sheps Center for Health Services Research at UNC Chapel Hill. Nineteen hospitals closed in 2019 alone.

On the list is Yadkin Valley Community Hospital in Yadkinville, which was closed by its for-profit operator in May 2015 because of a lease dispute, along with Medicare and Medicaid funding responsibilities.

CAH Acquisition 10 LLC shuttered the hospital in defiance of a temporary restraining order issued in Wake Superior Court that would have kept the hospital open at least three more months. About 150 hospital employees lost their jobs.

Yadkin County officials indicated in 2015 and 2016 it could cost more than $6.2 million to reopen the hospital.

Three more Triad and Northwest North Carolina hospitals were vulnerable to a similar fate over the past 10 years.

  • In February 2017, for-profit LifeBrite Hospital Group LLC of Lilburn, Ga., paid $400,000 to buy Stokes County’s hospital and other facilities from for-profit Pioneer Health Services, which filed for Chapter 11 bankruptcy protection.
  • In January 2018, UNC Healthcare of Chapel Hill acquired Morehead Memorial Hospital in Eden, re-branding it as UNC Rockingham. The Eden hospital filed for Chapter 11 bankruptcy protection in September 2017 and drew seven bidders.
  • In February 2018, Wake Forest Baptist and Hugh Chatham Hospital of Elkin agreed to take over Alleghany Memorial Hospital in Sparta through a 50-50 joint venture Alleghany Health LLC.

Alleghany’s new co-owners said a primary goal with the hospital “is to ensure fiscal stability” by partnering with the larger health care systems, as well as provide residents with expanded access to specialized care and expertise.

Randolph Health’s financial status has become dire enough in the past year that state legislature passed a bill in 2019 that made the hospital eligible for a $20 million loan through the Rural Health Stabilization program. Randolph County has sent an application to UNC Health for review and recommendation.

Randolph is required to secure a financial sponsor (which would be Randolph County), a commitment to a transition organization that would operate the hospital for up to three years, and a new management or ownership group in which Cone has expressed on-and-off interest.

Budget battle

The Chartis report comes as Democratic Gov. Roy Cooper and Republican legislative leaders are at loggerheads over the state budget, in large part because of Cooper’s requirement of Medicaid expansion to get his approval of the 2019-20 budget.

Medicaid already serves 2.14 million North Carolinians, representing about 21% of the state population.

Of that population, about 1.6 million could be enrolled into a new managed-care program. Startup funding for that initiative has been held up by Cooper’s vetoes of the state budget and mini-budget legislation House Bill 555.

A Kate B. Reynolds report from 2019 determined that expanding Medicaid would create more than 37,000 jobs, including 20,600 in the health-care sector, by the end of 2022, as well as bring in an additional $11.7 billion in federal Medicaid funding from 2020 to 2022.

For Forsyth County, the 2019 report projects that 1,772 jobs would be created — the fifth most in the state — and the local economy would gain a $423.7 million benefit by 2022.

N.C. Senate leader Phil Berger, R-Rockingham, has claimed for years that the federal government may not be able to sustain its commitment of paying 90% of the additional Medicaid expansion administrative costs.

The other 10% would be covered by an assessment that hospitals, providers and health insurers have pledged to finance.

GOP legislative leaders, led by Berger, have chosen not to take up bipartisan Medicaid expansion legislation House Bill 655 sponsored by state Rep. Donny Lambeth, R-Forsyth. The bill has a work requirement; federal judge have blocked a similar requirement in other states.

On Feb. 14, a U.S. Appeals Court upheld a block on a work, education and/or public service requirement for certain Medicaid recipients to qualify for benefits. The ruling from the D.C. Circuit Court, while addressing Arkansas’ Medicaid expansion program, casts a shadow on in North Carolina.

Medicaid expansion

Alamance County Sheriff Terry Johnson has expressed support for HB655 as a means for helping his office meet funding requirement for providing health care to those in the county jail.

The News & Record of Greensboro has described Johnson as a conservative firebrand best known for his controversial views on immigration.

There have been local elected officials in rural parts of eastern and western North Carolina, including some Republicans, who are voicing their support for Medicaid expansion to their legislators.

For example, The Mountaineer of Waynesville reported last week that community leaders are calling on state legislators to expand Medicaid, including a bipartisan resolution passed by the town council.

“The best way to save health care dollars is to keep people healthy. So we want them to go to the doctor before they are in crisis mode,” said Rep. Joe Sam Queen, D-Hayward. “It is proven this saves money.

“It’s time the citizens understand what’s at stake and make their case to elected officials to do the will of the people,” Queen said.

Waynesville Alderman Jon Feicther told the newspaper the issue of Medicaid expansion is “inextricably linked” to another issue the town is currently grappling with: how to fix a growing homeless population.

Other rural N.C. communities supporting Medicaid expansion with resolutions includes the boards of commissioners in Franklin and Graham counties.

rcraver@wsjournal.com

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@rcraverWSJ

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