While Kentucky is the first Southern state to expand Medicaid under the Patient Protection and Affordable Care Act, many of its hospitals are struggling financially due to health system changes, according to a new report released by the Kentucky Hospital Association.
Here are eight things to know about Kentucky hospitals' struggles, according to the report.
1. The 15-year (2010-2024) reduction in payments to Kentucky hospitals due to the PPACA is estimated at $4.6 billion, according to the report.
2. The cuts due to the PPACA are in many forms. For instance, beginning in 2012, hospitals that readmit patients within 30 days of discharge at higher-than-expected rates for any reason have had all of their Medicare payments reduced, according to the report. This penalty increased each year, reaching a 3 percent level in 2014 where it will stay. In addition, beginning this year, one-fourth of all U.S. hospitals will have all Medicare payments cut if their rates of hospital-acquired conditions increase, and disproportionate share hospital payments will be significantly reduced under the PPACA.
3. An analysis by national consulting firm Dobson/DaVanzo estimated that Kentucky hospitals will lose more money under the PPACA than they will gain in new revenue from expanded coverage.
4. The report notes that hospitals are also experiencing a number of other cuts not directly associated with the PPACA, including automatic across-the-board federal cuts, known as sequestration, and other cuts in Medicare imposed by federal regulations.
5. Overall, the total, including cuts that are related to the PPACA and those that aren't, is nearly $7 billion in federal cuts to Kentucky hospitals from 2010 through 2024.
6. A recently released state audit found rural hospitals are hit hardest by federal cuts. According to the audit, which assessed the financial health of Kentucky's rural hospitals using the Financial Strength Index, 68 percent of Kentucky's rural hospitals scored below the national average on the FSI assessment, and 34 percent scored low enough to be considered in poor financial health.
7. A September 2014 survey of Kentucky hospitals conducted by the Kentucky Hospital Association examined actions taken by hospitals in the state to reduce costs in 2013 and 2014. The survey found that more than 65 percent of 109 Kentucky hospitals responding to the survey had taken action to reduce hospital staff, eliminating slightly more than 7,700 positions through layoffs, attrition or abolishing positions. That represents more than a 10 percent reduction of Kentucky's statewide hospital workforce reported in 2013.
8. "Three years ago we had one payer for Kentucky Medicaid patients and now, after movement to a managed care model, we have five insurance plans, plus some patients remaining on Kentucky Medicaid indemnity," Owensboro (Ky.) Health CFO John Hackbarth said in reference to financial challenges facing Kentucky hospitals, according to the report. "This has increased costs in many areas such as contracting, compliance, billing, IT and case management because we are dealing with five times the amount of rules and hoops to jump through for a slower payment and ultimately less reimbursement."
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