How hospitals survive in states without Medicaid expansion

In the 23 states that have not expanded Medicaid under the Patient Protection and Affordable Care Act, hospitals are forced to find creative ways to help absorb some of their shortfalls in providing uncompensated care, according to a Healthcare Payer News report.

The PPACA originally required states to expand their Medicaid programs to cover those earning as much as 138 percent of the federal poverty level. However, a 2012 Supreme Court decision made Medicaid expansion optional.

In March 2013, Virginia's governor sent a letter to HHS stating the state's General Assembly had decided not to expand Medicaid, even though Virginia hospitals absorbed shortfalls of $339 million in Medicaid services in 2012, according to the report.

The choice to forgo Medicaid expansion in Virginia dealt a serious blow to some hospitals in the state and has caused many providers to make tough decisions to help curb some of the costs.

Sean Connaughton, president and CEO of the Virginia Hospital & Healthcare Organization, said trying to cut administrative costs, revising scheduled maintenance and capital projects can help off set some of the costs. However, those measures can only go so far.

Mary Washington Healthcare, a two-hospital system based in Fredericksburg, Va., had to eliminate 66 jobs due to the financial crunch. The system lost $22 million in 2012, and although the system's financial results slightly improved in 2013, it still lost $13 million. Fred Rankin, president and CEO of Mary Washington Healthcare, said the additional costs have also caused the system to re-examine which services and procedures it offers.

According to a recent Urban Institute study, Virginia hospitals stand to lose approximately $6.2 billion by 2022 by not expanding Medicaid, and other states have even more on the line. Florida hospitals will lose approximately $22.6 billion by 2022 due to the state forgoing Medicaid expansion, while Texas will lose $34.3 billion.

Although hospitals in non-expansion states may attempt to make changes to curb costs that do not have serious effects on patients, in the end, even forgoing facility upgrades or cutting costs on maintenance will have a negative effect on patients, according to Healthcare Payer News.

In states that chose to expand Medicaid, nonprofit hospitals and health systems have already begun to realize the benefits of increased insurance coverage, according to a recent Fitch Ratings report. However, the rating agency stated, "We expect providers in states that have chosen not to participate in expanded Medicaid eligibility to face increasing financial challenges in 2014 and beyond."

More articles on Medicaid expansion:

Moody's: 3 key trends affecting hospitals and health insurers this year 
10 non-Medicaid expansion states with largest coverage gaps 
New poll finds majority of Virginians support Medicaid expansion