25% of Ky. rural hospitals facing serious financial strain

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FRANKFORT, Ky. (KT) – One-fourth of Kentucky’s 68 rural hospitals are at a high risk of closing if financial conditions don’t change drastically, according to a study.

“Nationally, they found 21 percent of rural hospitals are at a high risk of closure if their financial conditions did not improve,” said Nancy Galvagni, president of the Kentucky Hospital Association, quoting a study by the consulting group Navigant. “In Kentucky, they found that almost 25 percent of rural hospitals are at high financial risk of closure.”

Galvagni testied in front of the General Assembly’s Medicaid Oversight and Advisory Committee on Monday about the dire circumstances. She told lawmakers one of the issues they face is the federal reimbursement rates for such programs as Medicare and Medicaid are below what it costs to provide the services, which especially affect the viability of rural hospitals.

She said another recent study found the percentage of rural hospitals in Kentucky at risk of closure rose from 7.1 percent in 2015 to 9.2 percent in 2019. “In Kentucky they have identified eight hospitals at high risk of closure and 12 at mid-high risk,” she said.

Galvagni noted there are 13 Kentucky hospitals most at risk of closure. “If those hospitals were to go away, that would be a loss of 2,500 jobs, wages of more than $240 million, and nearly 1,000 in-patients each day would have to find care elsewhere.”

According to Galvagni, Medicare, which is important to rural hospitals, only pays 90 percent of actual costs. “If you think about that, Medicare-for-all would, of course, be very disastrous to our hospitals.”

However, she said the Kentucky Hospital Association favors the expanded Medicaid program instituted under former Gov. Steve Beshear, because although Medicaid only pays 81 percent of hospital costs, those patients would have no insurance, meaning the hospitals would have to cover every cost.

Some of the recommendations from the Kentucky Hospital Association include:

--Implementing legislation passed by the 2019 General Assembly that increased Medicaid reimbursement, which is currently awaiting federal approval.

--Reduce administrative costs from the five managed care organizations in Kentucky by reducing the number of MCOs from the current five.

--More standardization by insurers and MCOs

--Preserve Kentucky’s Certificate of Need program, which approves expansion of medical services.

--Preserve Medicaid expansion

--Tort reform, how medical-related lawsuits are handled in Kentucky.

--Continue reducing the regulatory burden on providers.

Charles Lovell, CEO of Barbourville Appalachian Regional Healthcare, echoed much of Galvagni’s testimony, but added, “When rural hospitals close, towns struggle to stay open. Rural hospitals are the beating heart of a local economy.”


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