Some Virginia hospitals are eyeing consolidation as they struggle to stay afloat financially in the face of continued Republican opposition to Medicaid expansion and reduced Medicare rates.
A year ago, Mary Washington Healthcare in Fredericksburg announced it would eliminate 66 jobs and cut hours for other employees. Now the hospital is operating in the black, said Dr. Michael McDermott, its CEO.
But McDermott still has concerns about legislative Republican leaders' refusal to expand Medicaid under the Affordable Care Act, a major goal of Democratic Gov. Terry McAuliffe. McDermott said he would like to have his hospital expand services and care sites in more rural parts of its market, but he's held back.
“Even though my operating margin might not be negative, I'm measured and competing against hospitals in (Medicaid expansion) states when I need to go to the bond market for funding,” McDermott said, noting that bond analysts view Medicaid expansion as good for hospital finances. “Our ability to invest in facilities and providers is limited by our resources.”
If Virginia were to expand Medicaid, as many as 400,000 Virginians with incomes up to 138% of the federal poverty level could gain coverage, and the state could receive up to $14 billion in additional federal funds by 2022, the Urban Institute estimated last year. McAuliffe is likely to make another push for Medicaid expansion in 2016, but his chances will depend on the outcome of the November legislative elections, in which Democrats have a shot at gaining control of the state senate.
Last week, the Virginia Hospital & Healthcare Association launched a multimedia campaign to highlight the key role of hospitals in the state's economy, the financial struggles its members are facing, and the need for legislative relief. The association reported that one-third of the state's acute-care hospitals had negative operating margins in 2013, the last year for which data are available. In rural Virginia, 17 of 37 hospitals operated in the red. Hospitals provided $627 million in free or discounted care in 2013, up 57% since 2008.
Hospitals' financial woes are only expected to worsen because federal budget sequestration cuts require a continuous 2% drop in Medicare payments for the foreseeable future. Those cuts come on top of the Medicare disproportionate-share cuts required by the Affordable Care Act. Still, Virginia hospital leaders have pulled back from explicitly calling for Medicaid expansion, at least for now.
Some hospitals have turned to mergers as a way to survive. Earlier this year, Mountain States Health Alliance and Wellmont Health System announced plans to combine after Wellmont closed Lee Regional Medical Center in the southwestern part of the state.
Chuck Carr, CEO of Carilion Stonewall Jackson Hospital in Lexington, said other rural providers may consider similar consolidation moves. His facility was purchased by Carilion Clinic, a Roanoke, Virginia-based not-for-profit health care organization, more than a decade ago. That partnership has been a lifeline, he said. “We needed to partner with a system to stay afloat.”
When a hospital closes, there are few local healthcare options for uninsured, low-income people. Many of these patients already get their care at community health centers, which charge means-based fees and can't turn anyone away. But those centers mainly offer primary care and usually need to refer to nearby hospitals for tests, procedures and specialty care. Fewer hospitals mean fewer places these patients can go to get potentially lifesaving treatment, said Rod Manifold, executive director of Central Virginia Health Services, which operates 14 community health centers around Virginia.
Free clinics are in a similar boat in terms of having to refer out for specialty care. Even for primary care, it may take months for a person to get an appointment, said Dr. Wendy Klein, medical director of Fan Free Clinic in Richmond. Of the estimated 60,000 uninsured people living in the Richmond metro area, the clinic only has the capacity to see about 2,000 a year.