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Medicaid expansion helped hospitals survive by boosting revenue

If future policies are adopted that eliminate Medicaid expansion and slash the number of insured Americans, experts say many hospitals will fail.

Beth Jones Sanborn, Managing Editor

Medicaid expansion significantly boosted the survivability of state hospitals and helped shore up local economies that would have suffered under hospital closures, according to researchers from the University of Colorado's School of Public Health.

The results have serious policy implications moving forward as Congress continues its efforts to unravel the ACA. Hospital closures jeopardize access to care and the public's health overall by increasing the distance patients must travel for services, especially in emergency situations.

[Also: Why Medicaid expansion helps doctors detect cancer sooner]

Moreover, if future policies are adopted that eliminate both Medicaid expansion and also slash the number of insured Americans, hospitals' financial positions would suffer and more doors would close, the authors proposed. Rural hospitals in expansion states would certainly require other subsidies to stay open. Possible alternatives include increased DSH payments and expanding the critical access hospital program, authors proposed.

The University of Colorado researchers looked at hospital data from the CMS Provider of Services file as well as local market conditions. For four years before the ACA went into effect, from 2008-2012, and then years right after its launch, 2015-2016. They defined closure as a hospital's ceasing to deliver short-term general hospital services and verified the closures through multiple sources, authors said.

[Also: Practices seeing fewer uninsured due to Medicaid expansion]

The biggest uptick in coverage under the Affordable Care Act was childless adults, and increased health insurance coverage led to more revenue for hospitals and reduced expenditures on uninsured patients by hospitals in expansion states, the researchers wrote in Health Affairs.

Hospitals in states that expanded Medicaid were 84 percent less likely to close than hospitals in non-expansion states. It also showed that financial performance got a healthy boost in expansion state hospitals, especially rurals. They saw an average 1.3 percent uptick in their total margins and a three percent raise in their operating margins.

While closures declined in both expansion and non-expansion states directly following the recession in 2008-2009, they began to diverge after 2012. It was also around this time that states were given the option of whether or not to expand in 2014. After 2014, the closure rate in expansion states declined, but remained "relatively high" in non-expansion states.

Local economic characteristics also influenced the probability of closures. Higher local unemployment rates were associated with a higher probability of hospital closure in both the full sample and the rural hospital subsample, whereas increased median income was associated with a reduced probability of urban hospital closure, the study said.

In general, the financial benefits of Medicaid expansion for hospitals, and decreased risk of closure, were bigger in areas that had higher rates of uninsured citizens.

"The finding that the relationship was stronger at hospitals in areas with higher uninsurance rates strongly supports the link between hospitals' financial viability and increased rates of health insurance coverage as a consequence of the ACA's Medicaid expansion," the study said. "If patients do not have access to other hospitals, as is the case in many rural markets, access to healthcare will suffer, regardless of whether a person has health insurance."

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