Expanding Medicaid coverage in the state would provide a $335.2 million annual revenue boost to hospitals in the Triad and Northwest North Carolina, according to a report from a left-leaning advocacy group.

Authors of the N.C. Budget & Tax Center report, titled “Strong medicine,” said Medicaid coverage expansion for between 450,000 and 650,000 residents “is not just a moral imperative.”

“It could provide a much-needed tonic for the fiscal ailments that many rural hospitals face in North Carolina.”

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

About 1.6 million will be enrolled in Medicaid through a new managed-care program that is projected to be rolled out between November and February. That rollout, however, is dependent on $218 million in start-up funding in the stalled 2019-20 state budget.

Five community hospitals have closed since 2013, including Yadkin Valley in Yadkinville in May 2015 that put 150 employees out of work.

Several more hospitals are listed in the report as experiencing financial difficulty, foremost Randolph in Asheboro. The list, based on third-quarter 2017 operating data, includes Alleghany Memorial Hospital in Sparta and Wilkes Regional Medical Center in North Wilkesboro.

Most rural community hospitals struggle with an increase in uncompensated care costs. It’s a major reason why most community hospitals and their local officials have turned to being owned or managed by a for-profit or not-for-profit group.

Alleghany agreed in February 2018 to a management partnership with Wake Forest Baptist Medical Center and Hugh Chatham of Elkin, while Wake Forest Baptist acquired Wilkes in July 2017.

“The overwhelming majority of U.S. rural hospitals forced to close their doors were in states that have not expanded (Medicaid) eligibility,” said Patrick McHugh, the center’s senior policy analyst and report co-author.

“Seventy percent of N.C.’s 80 rural counties are already designated at ‘medical deserts’ for their lack of primary care availability.”

The authors said rural hospitals would receive $665 million in new Medicaid payments each year, “which would improve rural hospitals’ net fiscal strength by nearly $140 million.”

“By dramatically reducing uncompensated care costs for many rural hospitals in North Carolina, Medicaid expansion is likely the single fastest way to put these facilities on more solid economic ground while addressing a gaping hole in our health-care system,” the authors said.

Beneficiaries

From a revenue perspective, urban hospitals and academic medical centers would be the biggest beneficiaries from Medicaid expansion, according to the report.

For example, Wake Forest Baptist is projected to gain $111.9 million in revenue, as well as a $22.9 million net fiscal impact. It would rank fourth in both categories among the 97 hospitals cited in the report.

To put those revenue totals into context, Wake Forest Baptist had $2.5 billion in core revenue and excess revenue of $107.9 million in fiscal 2018-19. In a not-for-profit organization, “excess revenue” is analogous to “profit” in a for-profit organization.

“The higher revenue increase and net fiscal impact does not strictly relate to (Wake Forest Baptist’s) status as an academic medical center,” said Suzy Khachaturyan, policy analyst with the center.

“It is tied to the increased volume of patients the hospital is projected to serve under Medicaid expansion, which is tied to both the current share of state Medicaid recipients they serve and their Medicaid revenues.”

Forsyth Medical Center would gain just under $35 million in annual revenue and have a $4.8 million net fiscal impact — most among eight Novant Health Inc. hospitals in N.C. included in the report. Forsyth was first for annual revenue and second in net fiscal impact. The Clemmons and Kernersville hospitals were not listed.

Novant had $4.98 billion in core operating revenue and excess revenue of $94 million.

The report determined the eight Novant hospitals would gain a combined $106.1 million in additional revenue and $20.1 million in net fiscal impact.

Hot topic

Medicaid expansion has been the state’s hottest button socioeconomic and political issue the past two years.

Democratic Gov. Roy Cooper has placed Medicaid expansion among his top-three legislative priorities, along with higher raises for public-school teachers, school construction and halting the next round of corporate tax-rate cuts.

Many Republican legislative leaders, foremost Senate leader Phil Berger, R-Rockingham, oppose all attempts to expand Medicaid.

That includes a bipartisan House Bill 655 containing two elements key to expansion in Republican states: a work or community volunteer for some recipients; and pay 2% of their monthly household income.

Today represents Day 60 of the state budget stalemate with the veto override on the House floor agenda for a 27th consecutive session and HB655 for a 25th consecutive session.

House speaker Tim Moore, R-Cleveland, has said there will be no action on HB655 until the state budget is signed into law.

It’s estimated that it costs $42,000 a day for the General Assembly to operate. As of Monday’s session, it will have cost $1.13 million in taxpayer money. The clock on the additional expenses began when GOP House leadership first put a veto-override vote on the calendar for the July 8 session.

The HB655 work requirement has been halted or blocked from being implemented by federal judges in at least three states.

Most left-leaning advocate groups say that while they support Medicaid expansion, the work and premium requirements are too onerous overall compared with the potential benefit.

Accusations

Since Cooper vetoed the GOP’s 2019-21 state budget compromise, which lacked Medicaid expansion, on June 28, the two parties have spent most of their time trading ultimatum accusations that the other side is failing to negotiate in good faith.

McHugh said Medicaid expansion in North Carolina “has been blocked by a hardened ideological agenda” from Republican legislative leaders.

Berger bases his opposition primarily on concerns that the federal government could end its 90% funding of administrative costs tied to Medicaid expansion. He has said expansion would cover “able-bodied adults” that would be better served in the federal healthcare insurance exchange.

Rep. Donny Lambeth, R-Forsyth, and primary sponsor of HB655, told a House committee in July that the 90% federal government match is sustainable and would take an act of Congress to change.

The financial plight of the Asheboro hospital have yielded a potential Republican legislative solution in House Bill 704, which would allowing struggling rural hospitals to apply for a financial lifeline-type loans from UNC Health Care. It is not clear how much the hospital could chose to borrow if approve.

Meanwhile, the Budget & Tax Center report had the Asheboro hospital gaining $7.6 million in additional annual revenue and a $1.5 million net fiscal impact.

Looking ahead

The report’s authors said the work and premiums requirements in HB655 “would undermine the benefits of expansion.”

“These requirements in other states have pushed down enrollment, reducing the new Medicaid reimbursements that hospitals would receive, and forcing them to cover more of the costs of providing care to uninsured patients.

“With North Carolina’s uninsured rate among the highest in the nation, rural hospitals in our state struggle more than their peers in many other states to cover the cost of uncompensated care.”

There’s also a quality-of-life aspect to rural areas sustaining a community hospital.

“Two of the issues that face rural communities are not just attracting new industries,” Reidsville mayor Jay Doneker said. Cone Health operates Reidsville’s Annie Penn Hospital.

“Medical care is very important for all stages of raising a family and afterward.

“So, if we don’t have that hospital, it’s hard to attract employees. It’s also hard to attract people to come back here and spend their retirement years here.”

The authors of the N.C. Budget & Tax Center report said in their conclusion that “Medicaid expansion could, in one stroke, profoundly improve the physical and economic health of rural communities.”

“It’s past time to make full expansion a reality and end the needless suffering imposed on rural hospitals and the patients they serve.”

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rcraver@wsjournal.com 336-727-7376 @rcraverWSJ

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