Cash-strapped rural Texas hospitals have been closing at an alarming rate already, but health care advocates are warning that the trend likely will accelerate under a proposed rule change for federal Medicaid funding that’s also forecast to deal big financial blows to hospitals in urban areas like Austin.
Statewide, the Texas Hospital Association estimates that up to $11 billion in annual federal matching funds for Medicaid, the health insurance program for poor people, could be in jeopardy if the rule goes into effect.
“This is as scary as anything we have dealt with in my 20 or so years in rural health care,” said John Henderson, president of the Texas Organization of Rural & Community Hospitals.
The proposal, which would change how certain federal matching funds for Medicaid are calculated and result in reductions, is necessary “to strengthen the fiscal integrity” of the program in the wake of what has been a rapid increase in spending on it over the past few years, according to the U.S. Centers for Medicare & Medicaid Services.
It’s unclear when the federal agency might finalize the new rule, although a public comment period ended Feb. 1.
The proposal has been drawing opposition even from outside the health care sector, however. The U.S. Chamber of Commerce has said it risks “detrimental economic ramifications on communities across the country,” while the National Governors Association has urged that the plan be shelved for more study because of likely “significant and broad impacts” in many states.
In Austin, Ascension Seton is forecasting a combined drop of more than $120 million annually in federal Medicaid matching funds across its 12 regional hospitals if the proposed rule goes into effect. St. David’s Healthcare did not provide an estimate of Medicaid funding that could be in jeopardy at its hospitals in the area or make an executive available for comment.
“It has the potential to impact the health of our neighbors and our local communities,” said Geronimo Rodriguez, chief advocacy officer at Ascension Texas, which includes Ascension Seton. “We are working extremely hard as an industry, as a community, to try to make sure this (rule change) does not come to fruition.”
He said Ascension has not yet devised a strategy to cut back services or otherwise cope with the possible decline in Medicaid funding across its network. Instead, it’s concentrating for the time being on the ongoing effort by it and other health care proponents nationwide to try to prevent the rule change from happening, he said.
Henderson, of the rural hospital organization, said many standalone rural hospitals already operate at losses and lack resources to absorb the financial hit, meaning they’ll face stark choices if the change goes into effect. Increases to state or local taxes are probably nonstarters in tax-averse Texas, he said, so shutting down might be the only option for some.
Basically, the proposed new rule would restrict the categories of state and local funds that are used to calculate federal matching funds. Under the change, tax dollars would still be counted as “public funds” in the calculation, Henderson said, but not money from sources such as patient revenue, grants or lease income, resulting in a decline.
“I’m scared,” he said. “We would see an acceleration of rural hospital closures (if that happens), and Texas already leads the country in that regard.”
About 15% of the state’s rural hospitals — or more than two dozen — have shut down since 2010, Henderson said, and “roughly half” of the remaining 158 operate at losses.
Carrie Williams, a spokeswoman for the Texas Hospital Association, said the proposed new Medicaid rule “jeopardizes the health care safety net” in the state.
“With $11 billion at stake for Texas hospitals, this regulation would hurt patients,” she said. “Taxes will go up, rural hospitals will close, services would be cut and access to care would suffer. The stakes are incredibly high, and we are pushing for the rule to be withdrawn.”