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Hospitals Brace for Another Blow as Thousands Lose Medicaid EligibilityLock Icon

5 min read

Arkansas hospitals are bracing for another financial blow related to COVID-19: a rise of uninsured patients starting this month as thousands of people lose their Medicaid eligibility. 

On April 1, the Arkansas Department of Human Services began reassessing the eligibility of beneficiaries who throughout the pandemic were guaranteed a place in the federal-state health care insurance program for low-income residents. 

Arkansas and other states halted Medicaid eligibility verification procedures under national emergency and public health emergency declarations, but the Biden administration announced in January that the public health emergency will end May 11.

Beneficiaries whose coverage was extended during the pandemic could begin losing coverage this month, Gavin Lesnick, a DHS spokesman, said in an email to Arkansas Business. 

Bo Ryall

DHS estimates that 420,000 of the state’s 1.15 million total Medicaid beneficiaries had their coverage extended because of the public health emergency, and that 15% to 30% of those people will not qualify after the redeterminations. 

“We do expect a great number of people to lose their coverage, which would impact hospitals, because they’re uninsured when they come into the hospital facility for treatment,” said Bo Ryall, president and CEO of the Arkansas Hospital Association.

“So we expect our uncompensated care to rise over the next six months.” 

The Medicaid redeterminations come as hospitals are struggling with stagnant reimbursement rates for services — a concern for years — and increased costs for labor and supplies. 

“It’s tough right now to be a hospital,” said Ron Peterson, CEO of Baxter Health of Mountain Home. “Legislators really feel hospitals are doing fine. … I don’t know how else to get the message out. I mean, a 24% increase in wages and 1.2% increase in reimbursement doesn’t add up for long-term success.”

Ron Peterson

Peterson said he expects to see Arkansas hospitals closing in this year and next as a result of the COVID benefits ending.  

Pandemic relief revenue from the government resulted in Baxter Health’s hospital having a 1.5% operating margin in 2022, but it would have had a loss of $4.8 million without the money, he said. “The problem is there is no COVID money now going forward.” 

Last year was the worst financial year for U.S. hospitals since the start of the pandemic, according to Kaufman Hall of Chicago, which advises health care and education organizations and collects data from more than 900 American hospitals.

About half of U.S. hospitals finished the year with a negative margin as growth in expenses outpaced revenue increases, according to the company’s January news release.

U.S. hospital margins in February were down slightly from January, according to a Kaufman Hall report released last week. “Relatively flat margins are likely to continue in the near term,” it said. 

Ryall said that “certainly hospitals are experiencing financial difficulties that they have not seen in a very long time, and increasing uncompensated care is something that will impact hospitals’ bottom line tremendously.”

COVID Funding 

As part of the public health emergency, the federal government increased match rates to states for their Medicaid programs. And as part of accepting the increased match funds, states couldn’t redetermine eligibility and terminate eligibility for beneficiaries. 

Federal law allows a year to do all redeterminations, but the Arkansas Legislature passed legislation in 2021 that requires DHS to do it in six months. 

DHS began sending out its notification letters in February. 

“The Medicaid population has grown both under the traditional plan, which includes ARKids and nursing home support and other services, as well as the expansion population,” said Dr. Joe Thompson, president and CEO of the Arkansas Center for Health Improvement.

And as the public health emergency ends, the redetermination is certain to identify some beneficiaries who are no longer eligible for Medicaid. 

The loss of coverage for some of those people could be as a result of a change in family size or an increase in income. 

Losing Medicaid coverage, however, would be considered a qualifying life event that would give people 60 days to enroll in a health insurance plan under the Affordable Care Act. 

“So obviously, from the hospitals’ and providers’ perspective, the best scenario is to have the most people covered under an insurance mechanism, whether that’s Medicaid or whether that’s a subsidized plan on the health insurance marketplace, or an employer-sponsored plan through a place of employment,” Thompson said. 

About half of Arkansans have a chronic condition, and other residents might have an accident that requires an emergency room visit. A healthy person might discover a condition that requires treatment, Thompson said, mapping out scenarios.

About 85% of Baxter Health’s patients have a government health insurance plan. Peterson said about 2% of the health system’s patients are uninsured, and he anticipates that number will climb to about 5% after the reassessments are done. 

In 2019, the year before COVID-19 hit Arkansas and the nation, 9.1% of Arkansans were uninsured. 

Chad Aduddell, CEO of CHI St. Vincent, said that instead of seeking treatment in an outpatient setting, the least expensive and most effective place to see patients, uninsured patients will most likely go to the emergency room, the most expensive place to see patients. 

Chad Aduddell

“That’s what we hope doesn’t happen,” Aduddell said. “That’s what we’ve seen happen historically, when folks didn’t have access to more preventive access points like our clinics.”

Baxter Health’s Peterson said that with more people coming off the Medicaid program, he also expects to see an increase in visits to the emergency room.

“We’re definitely anticipating an increased volume in our ER, even though we are already seeing an increased volume,” he said. 

Aduddell said he’s not sure what the impact will be on CHI St. Vincent, which has four hospitals in Arkansas. 

CHI’s percentage of uninsured patients has been about 3% during the Medicaid expansion, and Aduddell expects that number to climb. 

He said CHI’s mission for the past 135 years has been to take care of everyone, especially the poor and vulnerable in its communities, and that will continue.

But CHI, like all hospitals, has had a difficult financial year. Aduddell expects CHI to have a loss of about $60 million for its fiscal year that ends June 30. For the fiscal year that ends midyear 2024, the loss will be about $30 million.

Aduddell said CHI and other hospitals are reducing their reliance on travel nurses and instead building up their own workforces, which will help slash expenses.  

“We’re making improvements from where we were, but it’s still not what I would call a sustainable position for the health care delivery system,” he said.

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