A commenter asked why so many rural hospitals in Georgia are closing. It is a good question, and a decent chunk of the explanation is PPACA via the asshole Chief Justice et al and the remainder of the explanation is the economics of running a hospital or a Vegas hotel.
Let’s start with the Vegas hotel. I mentioned in September that hospitals have very high costs to open up the doors.
Time Magazine in August had a good piece on Las Vegas’s hotel and gambling industry that has an interesting nugget of explanation for hospital pricing:
A 5,000-room casino hotel that runs 24/7 has high operating costs, and it’s the gambling action that has covered them. The magic of a casino hotel is that once the costs are covered, profit mounts prodigiously–in accounting jargon, this is a business with very high operating leverage.
Hospitals and most other medical practices are the same way. Just opening the doors is extremely expensive as the fixed costs are very high. However, the marginal cost of treating the next patient for most situations (high end drug treatments excluded) are not that high. Hospitals with high census or heads in beds counts are able to use the high usage of their facilities to cover fixed costs and then operating costs.
A recent article on a hospital in Georgia closing illustrates this point:
Lower Oconee Community Hospital in southeast Georgia has closed due to financial problems, becoming the state’s fourth rural hospital to do so in the past two years.
The 25-bed “critical access” hospital in Glenwood, in Wheeler County, is looking to restructure, its CEO said in a statement….
The Wheeler County area had a 23 percent uninsured rate, and 10 percent of citizens are unemployed, according to the County Health Rankings from the University of Wisconsin and the Robert Wood Johnson Foundation.
Forty-one percent of the county’s children live in poverty.
“We just did not have sufficient volume to support the expenses,” O’Neal told WMAZ. “It’s a terrible situation, and it’s tragic, the loss of jobs and the economic impact.”
So how did this hospital survive so long despite serving a very poor and underinsured area?
The hospital most likely relied on Disprorpotionate Share Hospital payments. These payments are Medicaid reimbursement bonuses to hospitals that serve underinsured and overly poor areas. The goal of the DSH payments was to make up for some of the fixed costs that normally would be covered by private insurance’s higher reimbursement rates. PPACA reduced the pool of money committed to DSH payments. The policy logic behind the reduction was that the Medicaid expansion and Exchange subsidies should significantly reduce the number of people who are uninsured and receive care that is not directly paid for, therefore the need for DSH payments would decrease.
That logic is sound, and it works as long as there was the assumption that the Medicaid program and expansion was a single program that every state in the nation would take as the deal was too damn good to pass up. It is working in the Expansion states.
Thanks to the assholes on the Supreme Court and the sadists and sociopaths in the Republican Party, half the states have not taken up free federal money to cover their poor uninsured population via Medicaid Expansion. Throw in the fact that most Republican elites have engaged in massive resistance to Exchange implementation, with Georgia as a particularly egregious example, the compensating factors for the DSH payment cuts aren’t compensating as intended in Republican governed states.
So Obamacare implentation as it survived through the Supreme Court most likely pushed several of Georgia’s small rural hospitals over the edge as money they had used to barely make it work has been taken away, and the compensating factors of increased Medicaid reimbursement and increased insured rate to minimize bad debts have not come through. Throw in the typical population decline of rural areas AND the increasing costs of proving medical care, rural hospitals are systemically in trouble but PPACA probably has worsened things slightly.