Study: Rural Hospitals Fare Better in Medicaid Expansion States

September 9th, 2016

Hospitals in rural areas have faced increased financial strain and low amounts of compensated care. Seventy rural hospitals have closed since 2010, and more are at risk. A new study in Health Affairs shows that Medicaid expansion may help some of those hospitals: Rural hospitals in states that expanded Medicaid under the Affordable Care Act (ACA) saw lower amounts of uncompensated care and greater chance of turning a profit than those in states that did not expand.

Researchers looked at data from urban and rural hospitals in 14,000 annual cost reports between January 2011 and December 2014. Hospitals in all areas fared better financially under expanded Medicaid than those that were located in states that did not expand, according to the data. But not only were there disparities between Medicaid reimbursements and levels of uncompensated care between hospitals in expansion vs. non-expansion states, but there were differences between rural and urban hospitals as well.

Urban hospitals were not as likely to see an increase in Medicaid revenue as rural hospitals in expansions states, according to the data. Urban hospitals also saw lower levels of uncompensated care than rural facilities, though the latter has seen declines in such care when more in the local population are insured.

“[T]he increases in Medicaid revenue were greater among rural hospitals than urban hospitals, and the decrease in the proportion of costs for uncompensated care were greater among urban hospitals than rural hospitals,” according to the researchers.

Causes of the disparities were not explored in the study. One potential reason is that rural hospitals tend to serve a low-income population that may have recently gained coverage under expanded Medicaid – therefore showing more increased revenue than urban hospitals. Rural hospitals in general have lower profits than city facilities, which can affect the types of services offered to patients. Researchers pointed out that data are very preliminary and more time is needed to see if the disparities widen.

For more information on how hospitals can offer more care to medically underserved and Medicaid patients while cutting costs, see Case Management Advisor and Hospital Case Management.