Georgia’s hospitals look to avoid financial catastrophe

Rural and urban hospitals form an unlikely alliance to find an alternative to Medicaid expansion
Hutcheson Medical Center
Hutcheson Medical Center in Fort Oglethorpe, Georgia

Courtesy Hutcheson Medical Center

You don’t have to look far to see the impact of Georgia’s hospital crisis. Five rural medical centers have closed since 2013 and nearly two thirds of the rest were in the red in 2014. Hospital executives have tried just about everything to right their respective ships: Fort Oglethorpe’s hospital restructured; Elijay’s cut services; and Sandersville’s went so far as to hand over the keys to the owner of the local Ford dealership. (Spoiler: It wasn’t a good test drive.)

For Georgia, what’s already become a major problem could worsen. At the end of 2017, the state will reach the edge of a fiscal cliff that could shutter small rural hospitals—as well as force larger urban hospitals to close key clinics. The problem has spurred hospital officials, state lawmakers, and health-care advocates to form a statewide alliance to resolve the potential funding gap before it’s too late.

The situation in which Georgia finds itself was brought about by an unintended consequence of legal challenges to the Affordable Care Act. For years, many Georgia hospitals relied on federal reimbursements—known as Disproportionate Share Hospital (DSH) payments—to offset the cost of treating the uninsured. But the ACA called for those payments to be phased out under the assumption that those patients would now have insurance.

However, things didn’t go according to plan. In 2012, the U.S. Supreme Court struck down a key provision of the ACA that required states to expand Medicaid. Like many Republican governors, Nathan Deal rejected the expansion, claiming it would cost Georgia too much. (If the governor expanded Medicaid, the state would have had to spend $2.5 billion over a 10-year period, but would’ve received $33.7 billion in federal cash.) As a result, the state still has more than 400,000 uninsured residents.

With federal DSH payments scheduled to end January 1, 2018, more of Georgia’s rural hospitals could be forced out of business if the state still hasn’t expanded Medicaid to cover currently uninsured patients. For many small communities, Hometown Health CEO Jimmy Lewis says, such closures could mean driving more than an hour to reach an emergency room.

“A very large part of the rural hospital population is losing money and is financially distressed,” Lewis says. “The loss of DSH in Georgia won’t be a good thing.”

Large safety-net hospitals like Grady Memorial Hospital and Savannah Memorial Hospital, which are required to care for indigent patients regardless of their ability to pay, could also be harmed. If DSH payments disappear, hospital officials could be forced to consider closing entire departments. Grady CEO John Haupert, who helped restore the hospital’s fiscal health after it faced closure in the mid-2000s, has said the hospital’s mental health clinic—the state’s second largest after the prison system—could be on the chopping block if it is unable to offset the loss of DSH payments.

Tim Sweeney, deputy director of policy for the Georgia Budget and Policy Institute, says the easiest way forward is to fix the problem by expanding Medicaid as intended. “The sooner Georgia acts, the better off it’ll be,” Sweeney says. “It addresses the coverage issue and it brings $3 billion into state’s healthcare system. If hospitals weren’t getting paid to deliver care, this would pay them. In the long term, it’s delivering care in lower cost settings than hospitals.”

However, the divisive politics surrounding Obamacare make a straightforward expansion of Medicaid virtually impossible. Two years ago, Deal, who once had sole authority to expand the federal program, signed a bill that passed the buck to the General Assembly. By giving a larger group of Obamacare opponents a voice in the matter, he made it even harder to expand Medicaid.

So how do you effectively expand Medicaid without calling it Medicaid expansion? The influential Georgia Chamber has hired two old Deal staffers, former spokesperson Brian Robinson and ex-health policy adviser Blake Fulenwider, to work on a Georgia solution. Their pitch: It’s in the state’s best interest to expand healthcare access.

“This affects businesses and individuals,” Robinson says. “If a hospital closes and it’s a lot farther to get treated for a stroke, it’s significantly harder to attract major economic developments for those regions. Employees don’t want to go where they can’t get health care.”

Robinson, who until last year had peddled anti-Obamacare rhetoric for the governor, seems an unlikely candidate for the gig. But he envisions a broad coalition coming together to solve the DSH dilemma—much in the same way both parties rallied behind Deal’s criminal justice reform efforts during his first term.

“It’ll depend on buy-in from every region, Democrat and Republican,” Robinson says. “It can’t be politicized.”

Since last fall, the Georgia Chamber has also looked at the economic impact of closing the coverage gap and studied Medicaid expansion workarounds that wouldn’t hurt the state’s bottom line. The group expects to make a series of formal recommendations later this year. Once they pick one of those plans, supporters plan to build momentum around it heading into next year’s legislative session. By that time, the nation will have elected a new president, and the polarizing debate around healthcare likely will have calmed down. That leaves a yearlong window to stop hospitals from falling off a fiscal cliff.

“If we don’t have a plan in place, we don’t know the full extent of the DSH cuts,” Robinson says. “This gets us ready for any potential situation.”

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