Bloomberg News

Obamacare Cutbacks Shut Hospitals Where Medicaid Went Unexpanded

November 25, 2013

Obamacare Cutbacks Shut Hospitals Where Medicaid Went Unexpanded

A chain-link fence surrounds a closed medical center in New Orleans. Photographer: Lee Celano/The New York Times via Redux

Pam Renshaw had just crashed her four-wheeler into a bonfire in rural Folkston, Georgia, and her skin was getting seared in the flames. Her boyfriend, Billy Chavis, pulled her away and struggled to dial 911 before driving her to the nearest place he could think of for medical attention: an ambulance station more than 20 miles away.

The local public hospital, 9 miles from the crash, had closed six weeks earlier because of budget shortfalls resulting from Obamacare and Georgia’s decision not to expand Medicaid. The ambulances Chavis sought were taking other patients to the next closest hospital. It took two hours before Renshaw, in pain from second- and third-degree burns on almost half her body, was flown to a hospital in Florida.

At least five public hospitals closed this year and many more are scaling back services, mostly in states where Medicaid wasn’t expanded. Patients in areas with shuttered hospitals must travel as far as 40 miles (64 kilometers) to get care, causing delays that can result in lethal consequences, said Bruce Siegel, chief executive officer of America’s Essential Hospitals, a Washington-based advocacy group for facilities that treat large numbers of uninsured or low-income patients.

“Everyone in a community will be affected,” Siegel said. “We could see the end of life-saving services, and patients would bear the brunt.”

Hospitals have dismissed at least 5,000 employees across the country since June, mostly in states that haven’t expanded the joint state-federal Medicaid health program for the poor as anticipated under the U.S. health overhaul known as Obamacare. Hospitals like the Cleveland Clinic in Ohio (STOOH1:US), Vanderbilt University Medical Center in Tennessee (STOTN1:US) and Indiana University Health (79672MF:US) are among providers seeking cost savings in areas such as cancer treatment, mental health and infant care.

Medicaid Payments

The Obama administration anticipated that cuts in subsidies for treating large numbers of people who can’t pay for medical care would be balanced by more low-income patients being covered by Medicaid. A U.S. Supreme Court ruling last year allowed states to decide whether to expand Medicaid to individuals making as much as 133 percent of the federal poverty level. Half have said they would.

The hospital closures and service reductions are a setback for President Barack Obama’s Patient Protection and Affordable Care Act. The insurance marketplace, the core of the law, has been marred by flaws in the federal healthcare.gov website, and Obama has apologized that the act resulted in Americans losing policies that don’t meet coverage requirements.

Obama proposed delaying for a year the subsidy cuts for hospitals to give states more time to expand Medicaid. Congress didn’t go along with his proposal.

Blame States

Joanne Peters, a spokeswoman for the U.S. Health and Human Services Department, said governors who chose not to expand Medicaid are to blame for the hospital closures. The administration “strongly encourages” states to expand Medicaid, which would “dramatically reduce the amount of unpaid bills that hospitals are left with,” Peters said in an e-mail.

Georgia’s Republican Governor, Nathan Deal, has said the state can’t afford to expand Medicaid. Even though the federal government says it will initially cover the costs, the price tag will be too high in the future, he said.

The Obama administration shouldn’t have cut subsidies to hospitals that treat the uninsured, said Brian Robinson, a spokesman for Deal.

“There are numerous ways to go that don’t include a huge new burden on states, who unlike Uncle Sam can’t print money or run a deficit,” Robinson said.

Difficult Choices

Hospitals that treat the uninsured where Medicaid isn’t expanding are being forced to decide whether to close or eliminate care for “the people who use the transplant services, the people who need to be flown to the trauma center, or the infants who need the neonatal intensive care unit,” said Siegel, of the hospital group.

Patients who don’t get medical treatment within the first hour after a heart attack, stroke or certain other traumas are more likely to suffer long-term ailments or death, medical research has found. Those who live in rural communities face the greatest danger, said Ashish Jha, who teaches health policy at the Harvard School of Public Health in Boston.

“In an urban city if a hospital closes, there’s probably another one within 10 minutes,” he said. “In a rural community, that’s not true. So the consequences of shutting down are much bigger.”

Hospitals that treat a large number of uninsured will lose about $18.1 billion in Medicaid subsidies through 2020 under Obamacare, and as much as $22 billion in Medicare subsidies through 2019.

Bond Market

Weakening hospital finances in states where Medicaid isn’t being expanded is reflected in the $3.7 trillion municipal-debt market. Investors are demanding higher interest rates on bonds sold by hospital networks in those states.

Securities sold for Sparrow Health System in Michigan (STOMI1:US), which voted to expand Medicaid in August, traded on Nov. 13 at an average yield that was 1.3 percentage points more than benchmark AAA munis, data compiled by Bloomberg show. The spread on the debt, which matures in 2036 and is rated A1 by Moody’s, has narrowed by 15 percent in since Aug. 5.

During the same period, the spread on tax-free bonds issued for the Children’s Medical Center of Dallas increased about 3 percent, the data show. The securities, due in 2039, are rated Aa3 by Moody’s, one step higher than the Michigan bonds.

Hospital Closures

Three of the hospitals that closed this year were in Georgia. The others were in North Carolina and Virginia. Those hospitals, and more than a dozen others that have dismissed workers this year, cited the reduced federal subsidies and lack of Medicaid expansion.

As many as 15 more rural hospitals in Georgia may shut “within months” due to revenue pressures, said Jimmy Lewis, CEO of HomeTown Health LLC, a Cumming, Georgia-based network of rural hospitals.

In states like Tennessee, which hasn’t decided whether to expand Medicaid, hospitals are preparing to scale back. Almost half of the 61 rural hospitals in the state may face “major cuts or closure” without Medicaid expansion, according to Tennessee Justice Center, a Nashville-based health-care advocacy group.

The four-wheeler accident happened in southeastern Georgia, just north of the Florida border. The nearby hospital, Charlton Memorial, closed in August after 40 years. While the facility had only 25 beds, it boasted of a 24-hour emergency room.

Seeking Help

Renshaw, 51, an uninsured real estate agent, was engulfed in flames and trapped beneath her four-wheeler after it crashed on Oct. 14.

Chavis, who was working nearby, pulled her out of the fire and tried to call 911, he said. There was no answer, and he said he isn’t certain the call went through.

“I was in a mess,” he said. “My hands were hurting from the fire.”

Chavis carried Renshaw into his truck and sped down a dirt road and past the closed hospital.

When Chavis arrived at the ambulance station, no one was there. He said he drove across the street to the sheriff’s office and he was told both ambulances were 30 miles away, transporting patients. Charlton County administrator Al Crace didn’t return a phone call seeking comment on the ambulances.

Renshaw was eventually flown to Shands Hospital at the University of Florida in Gainesville, where she arrived in critical condition, said David Mozingo, director of the facility’s burn center, in an e-mail. He didn’t respond to questions about the impact of the delay getting to a hospital.

Renshaw has had seven skin-grafting surgeries and will probably need five more, Mozingo said. She has suffered multiple infections, a common complication in such injuries, he said.

Renshaw’s sister, Yvonne Hallman, said she keeps thinking about whether Renshaw would have suffered less had there been a closer hospital.

“I wonder if the time delay hasn’t caused some of her problems,” Hallman said. “If the hospital had been there, they would have had some solution to pour on her to clean her up quicker.”

To contact the reporter on this story: Toluse Olorunnipa in Tallahassee, Florida at tolorunnipa@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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