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VOL. 7 | NO. 38 | Saturday, September 13, 2014

Coverage Gap Leaves Rural Tennessee Hospitals on Life Support


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Four rural hospitals have closed and dozens are at risk of shuttering: That’s the fallout, some say, from Gov. Bill Haslam’s decision not to join the Affordable Care Act in 2013 and tap into millions in promised federal funds for Tennessee’s financially-strapped health care institutions.

Of some 125 hospitals statewide, three facilities closed in West Tennessee since the governor rejected conventional Medicaid expansion – Haywood Park Community Hospital in Brownsville, Camden General and Gibson General. Another in Scott County in East Tennessee shut down, before reopening, according to Tennessee Hospital Association Executive Director Craig Becker.

Jellico Community Hospital in northeast Tennessee is set to shut down unless it can find a new operator.

“That’s a real tragedy up in that place. There’s no easy way to get there,” Becker says of Jellico Community, a depressed coal production area split by Interstate 75 at the Tennessee-Kentucky line.

Hospitals are “stressed to the max” financially, Becker says, noting “there’s a marked difference” between the financial situation for Tennessee hospitals and those in states that accepted federal Medicaid expansion.

Numbers tell the story

A white paper by the Tennessee Justice Center, a nonprofit that focuses on health care for the poor, reports that 54 hospitals are at risk of closing.

And the closings mean more than simply a loss of health care.

The community’s economy takes a hit because so many of its jobs are tied to health care.

One study puts the number of uninsured Tennessee adults at 167,000 – those who fall into a coverage gap, with incomes at or below 138 percent of the federal poverty level – since the advent of the Affordable Care Act.


Medicaid is a health insurance program for low-income individuals and families who cannot afford health care costs. Medicaid serves low-income parents, children, seniors and people with disabilities. (www.medicaid.gov).

TennCare is Tennessee’s Medicaid program, providing health care for 1.2 million Tennesseans, according to www.tn.gov.

Affordable Care Act refers to two pieces of federal legislation, the Patient Protection and Affordable Care Act, and the Health Care and Education Reconciliation Act, and together these have expanded Medicaid cover to millions of low-income Americans. (www.medicaid.gov).

An analysis done for the Robert Wood Johnson Foundation shows Tennessee is expected to have 257,000 uninsured residents in 2016 who don’t qualify for coverage.

From September 2013 to June 2014, the number of uninsured adults decreased 9 percent in states that didn’t expand Medicaid and 38 percent in states that expanded the program.

Tennessee is projected to miss out on $2.3 billion in Medicaid funding for 2016, according to the study, and hospitals would go without $70 million in reimbursements in 2016 because the state isn’t participating in the Affordable Care Act.

Tennessee’s 10-year cost of expanding Medicaid is projected at $1.7 million by the study.

But because it’s among more than 20 states not participating, Tennessee is foregoing $22.5 billion in federal funding. Meanwhile, hospitals are losing reimbursements totaling $7.7 billion over that timeframe.

States that expanded Medicaid, on the other hand, are getting $13.41 in federal funds for every dollar they invest. Medicaid expansion also could generate state savings and revenues that surpass the cost of expansion, the study finds.

The view from out in the country

Jellico Community Hospital CEO Erik Wangsness says these are “challenging times” in the hospital business, especially for rural hospitals.

Located about a half-mile from Kentucky in northeast Tennessee, Jellico Community will close in May 2015 if it doesn’t find another hospital system to run it.

It has been run by faith-based, nonprofit Adventist Health System since 1974, housed in a city-owned building.

Patients wait to be called back in the waiting area of the Saint Thomas Family Health Center South.

(The Ledger/Michelle Morrow)

Jellico Community’s problems stem from “a function of health care in rural communities,” Wangsness says, along with reimbursement problems – because Medicaid doesn’t cover the full cost of care.

Not all of the hospital’s shortcomings can be attributed to Gov. Haslam’s decision, he notes, adding TennCare Executive Director Darrin Gordon has been supportive over the years.

Tennessee officials “do care. They’ve got tough jobs trying to run the government,” Wangsness says.

Still, Kentucky’s expansion of Medicaid cut the number of uninsured patients coming into Jellico Community’s emergency department, he points out. A slight increase in Medicaid funding would give it a better chance at surviving, he adds.

He says he understands the arguments by the Republican-controlled Tennessee Legislature against it: fear that federal government won’t follow through on its promises.

In the first three years, the federal government guaranteed 100 percent funding for Medicaid expansion followed by a 90-10 percent split afterward.

“I disagree with their decision,” he says of the governor and Legislature. “I believe Medicaid should be expanded, but I’m not going to lay all the blame at their feet. It would help us if they would expand Medicaid.”

Roughly 5 percent of Jellico’s patients would use expanded Medicaid if it were available, he estimates. Anywhere from 6 to 10 percent have commercial insurance, leaving Medicare and Medicaid to pay for most of the remainder.

Self-pay often means patients don’t pay, Wangsness says.

State Rep. Craig Fitzhugh, a Democrat from Ripley in West Tennessee, says the closing of three hospitals in his part of the state makes it clear that refusal to expand Medicaid is causing pain, even if the number falls short of the 50 hospitals that officials estimated early in the debate.

“It’s not 100 percent because of that, but I think they could have stayed open if they’d had that influx of money,” Fitzhugh says, noting the hospital where he was born in Brownsville was among those that “just flat-out closed.”

Fitzhugh believes more rural hospitals will follow, adding he knows of at least two that are struggling mightily to stay open.

St. Thomas absorbs costs

As an advocate for the poor and vulnerable, St. Thomas Health, with five hospitals and six community clinics in Tennessee, backs “100 percent access and 100 percent coverage,” says Nancy Anness, vice president of Advocacy, Access and Community Outreach.

“We truly believe in health care that leaves no one behind,” she says, noting Ascension-owned St. Thomas Health urges the governor to expand Medicaid to cover Tennesseans who are falling into the insurance gap.

Uninsured Tennesseans go without proper preventive care and usually wind up seeking treatment at emergency departments, she notes.

In fiscal 2014, St. Thomas Health provided $70 million in charity care and community benefit, some $35.5 million of which was made at its five hospitals. Expansion would partially offset the latter figure for uncompensated care costs, according to hospital officials.

At some of its clinics, which are located in Davidson County, Rutherford County and Hickman County, up to 85 percent of its patients are uninsured and 40 percent would be covered under expanded Medicaid.

At others, 40 percent are uninsured and 39 percent would have access to expanded Medicaid.

At St. Thomas Midtown in Nashville, 10 percent of its patients are uninsured. “We’d see a significant decrease in that number as well,” Anness says.

Since the health-care marketplace opened in January, St. Thomas has seen about 1,000 new patients using products from the exchange. That often means they’re coming in with decades-old health problems that were never diagnosed, she says.

Because it’s part of a wider network, St. Thomas can compare its hospitals in Tennessee to others across the country.

Ascension-owned hospitals in Michigan, for example, are doing much better as the result of their participation there with the Affordable Care Act, Anness says.

“It’s been a huge turnaround for the poor population around Detroit,” she notes.

If Tennessee continues to avoid a plan that takes advantage of federal dollars, that money will continue to go to Michigan and the 26 states that participate, enabling them to expand health-care coverage and treatment while Tennessee continues to struggle, she says.

Session showdown

Gov. Haslam recently told reporters he is preparing to unveil some sort of Medicaid plan this fall, adding he has communicated with Health and Human Services Secretary Sylvia Mathews Burwell.

Previously, Haslam decided against expanding traditional Medicaid – and he still stands by that – in favor of a method that would use federal funding to help people buy health insurance on the private market.

“This is an ongoing conversation about leveraging available federal dollars to cover more working Tennesseans to control costs and improve health outcomes,” the governor’s spokesman, Dave Smith, says. “The General Assembly is critical to the process and has to ultimately approve any plan the state would pursue.”

The governor contends that people should make co-payments as part of his “Tennessee Plan,” as opposed to TennCare, the state’s version of Medicaid, which requires no patient co-payment.

No matter what the governor proposes, it is likely to set up a showdown in the 2015 legislative session, especially since the General Assembly passed a measure this year giving it final authority over a health care plan.

“This is nothing new,” Lt. Gov. Ron Ramsey says of the governor’s recent talk.

“Gov. Haslam is doing his due diligence on this issue and the legislature has been clear in its opposition to Obamacare. While an acceptable compromise remains doubtful, it is the governor’s prerogative to exhaust all possibilities.”

Ramsey’s office declined to say whether the lack of Medicaid expansion is hurting hospitals. Nor would the governor’s office address the question.

Ketron puts blame on Obama

But state Sen. Bill Ketron, R-Murfreesboro, believes the Legislature and governor don’t deserve blame for hurting hospitals.

“Make no mistake about it, the problem of declining funds for hospitals in Tennessee is the result of Obamacare, not inaction by Tennessee to be irresponsible in agreeing to a plan we know is not fiscally sustainable,” Ketron says.

Ketron points out health care costs made up about 30 percent of the state’s budget in 2005, and projections showed them reaching 40 percent if something wasn’t done.

Former Gov. Phil Bredesen worked with the legislature on TennCare reform to cut costs, “which were eating every penny and more of the state’s new revenue,” Ketron says.

Thousands of people were removed from TennCare rolls at that time, leaving it primarily to cover single mothers and children.

“Under the current federal rules, in addition to the fiscal irresponsibility, Obamacare expansion in Tennessee would be a step back even beyond that 2005 level, threatening our future hopes of investment in jobs, education and public safety in Tennessee,” Ketron says.

Arkansas and Pennsylvania recently received approval from the federal government to participate in the Affordable Care Act using their own Medicaid coverage plans.

“The governor has said he is looking at the state’s options, especially in light of alternatives either granted or being discussed by Health and Human Resources in other states,” Ketron says.

“We will have to wait and see how this develops, but if there is not an acceptable compromise agreement that is beneficial for our state, I think you will find little support in the General Assembly.”

Post-election solution?

Fitzhugh, who needs to build on 24 Democratic votes in the House to pass a health care measure, says he hopes the governor will make a proposal as soon as the Nov. 4 election ends – one that is reasonable enough to help him gain the necessary votes.

Fitzhugh says he also hopes Ramsey won’t stand against “health care for 300,000 people.”

“Obviously, it makes moral sense, but it makes mathematical sense, too,” Fitzhugh says.

Noting that “everybody hates Obamacare,” Becker says the Tennessee Hospital Association will be working with the governor “on something that’s not Obamacare, something that’s unique to Tennessee.”

National polls average about 55 percent disapproval for the Affordable Care Act.

The governor’s plan likely will include requirements such as patient co-payments as part of Medicaid expansion, Becker says. Low state revenues are another factor in the debate, making federal funds to reimburse hospitals even more enticing.

“We think we can make a case for it. And we’re hoping it won’t turn into a political struggle,” Becker says.

Similar to the study for the Robert Wood Johnson Foundation, Fitzhugh predicts Medicaid expansion in Tennessee would create “a trampoline effect” by boosting hospitals financially, creating health care jobs and cutting families’ health-insurance expenses.

Injecting $1 billion into a state such as Tennessee would cause a “pretty good bump,” Fitzhugh says. “I just hope the governor takes every advantage of following through with what he said and putting a plan out that the public can see.”

Eventually, the public could persuade “recalcitrant” legislators “to get on board,” he says.

Not the end

With Jellico Community on the brink of closing or getting a new operator, Wangsness says other changes must be made to the nation’s health-care system.

“There’s no easy answer. There’s no villain,” he says. “Everybody can agree the model was broken. Growth in hospital care costs was outstripping everything else. We haven’t agreed what we’re going to do about it.”

Those decisions must be made over the next few years because the health care system the nation built is no longer affordable.

He says another question remains: Can small, rural hospitals exist?

Because Jellico’s clientele is made up largely of Medicare and Medicaid patients, it depends on the federal government for reimbursements, which requires it to be more efficient and operate at lower costs than other hospitals.

“We have to be smart enough to crack the code,” he says, “and we hope someone else can do that because they need health care here.”

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