The U.S. Capitol Building in Washington D.C. pictured on Monday July 3, 2023
Jeremy Long / WITF
Republican Medicaid cuts could close some Pennsylvania hospitals, bruise others
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Kiley Koscinski/WESA
Jeremy Long / WITF
The U.S. Capitol Building in Washington D.C. pictured on Monday July 3, 2023
President Donald Trump’s sweeping spending and tax cuts package returned to the House Wednesday, after the Senate narrowly passed a new version of the bill with steeper cuts to social safety-net programs like Medicaid.
Congressional Republicans argue an 18% reduction in Medicaid funding over the next decade is necessary to improve the stability of the program, which provides insurance for low-income households. But for health care providers — many of whom already face soaring drug and labor costs, staff shortages and insufficient reimbursement rates — the cuts leave a hole big enough to sink a community hospital.
“Every hospital is going to feel the effects of this,” said Nicole Stallings, CEO of the Hospital and Healthsystem Association of Pennsylvania (HAP), a statewide organization that represents 235 hospitals. “Services will be reduced, and some won’t be able to survive.”
More than half of the state’s hospitals are already operating in the red, according to HAP. About one-third of Pennsylvania hospitals have consistently posted losses in the last three years.
Stallings said that’s because Medicaid’s reimbursement to hospitals only amounts to 82 cents for each dollar of care the facility provides. In rural communities, where there are fewer patients, the reimbursement is just 74 cents on the dollar.
Under the Senate plan, Stallings said reimbursements could drop as low as 53 cents for every dollar of care provided.
“It’s not sustainable,” she said. “An already struggling hospital won’t be able to absorb a cut of this magnitude.”
Some Pittsburgh-area providers say the hit would come even as hospitals are still recovering from the financial damage of the COVID-19 pandemic.
Among the providers feeling the squeeze is the East Liberty Family Health Care Center, a federally qualified health center. FQHCs offer a range of primary-care services regardless of a patient’s ability to pay.
Arsenial Runion, CEO of the East Liberty center, said his staff of 100 were critical front-line health care workers during the pandemic, treating the underserved and uninsured during a time of strapped resources and soaring costs.
“Things have just now started to rebound a little bit,” he said. “And here comes another setback.”
About 30% of the 10,000 patients the center serves each year are on Medicaid, Runion said. Though the center receives other federal support, a large drop in Medicaid payments could leave a significant funding gap. He said it’s too early to say whether any of the center’s four clinics would close or if staff would be laid off, but those actions are under consideration.
“Everything is on the table,” he said. “I would say that’s the consensus for a lot of FQHCs.”
Two recent studies — one commissioned by Congressional Democrats and another by the Pennsylvania Health Access Network — found that if the cuts take effect, dozens of Pennsylvania hospitals could face a significant risk of closing or reducing services.
The Congressional evaluation listed five rural Pennsylvania hospitals, all on the western side of the state, as at-risk sites due to their volume of Medicaid patients or as a result of having posted three consecutive years of operating losses.
Four of the rural Pennsylvania hospitals listed in the congressional report are owned by UPMC: Jameson Hospital in New Castle, Northwest Hospital in Seneca, Kane Hospital in Kane, and Horizon Hospital in Greenville.
UPMC declined to answer financial questions about specific hospitals but acknowledged that rural and underserved communities will face a greater impact under Medicaid cuts.
“UPMC is closely following the proposed Medicaid changes, which could have a disproportionate impact on hospitals serving rural and other underserved communities,” a spokesperson said in a statement. “We remain committed to supporting access to essential care for all our patients across the communities we serve.”
A fifth hospital deemed at risk in the Congressional report is Highlands Hospital in Connellsville, Pa. Penn Highlands Healthcare, which owns the hospital, did not respond to a request for comment.
The Senate bill poses other financial challenges as well.
The nonpartisan Congressional Budget Office estimates that nearly 12 million people will lose health insurance if the Senate plan, and its $1 trillion in Medicaid cuts, becomes law. That would leave hospitals treating more uninsured patients, and not being reimbursed for the cost of care.
State officials estimate that the bill’s passage could mean roughly 500,000 Pennsylvanians would lose their coverage. And Gov. Josh Shapiro warned earlier this week that Harrisburg would not be able to make up for the federal funding losses.
Hospitals will also be impacted by a reduction in federal matching dollars that some states use to leverage their contributions to the Medicaid program.
Pennsylvania and other states levy a tax on Medicaid providers to help cover the cost of the program, and those revenues have been matched by the federal government. In Pennsylvania, the provider tax funds roughly 5% of the state’s Medicaid program, according to health research group the Hilltop Institute.
Pennsylvania’s tax rate is 5.9%, but the Senate bill would cap the tax nationwide at 3.5% by 2028. The change is estimated to save the federal government $183 billion, but it means less revenue for states.
The House version of the budget sought to freeze provider tax rates rather than lower them. Under the Senate plan, HAP estimates that Pennsylvania hospitals will see billions fewer dollars over the next 10 years.
In the Pittsburgh region, the tax-rate cut would mean a loss of $476.7 million to facilities in Congresswoman Summer Lee’s district, which includes the region’s flagship hospitals. Congressman Chris Deluzio’s district in Beaver County and Pittsburgh’s northern suburbs would see a $14 million revenue loss.
“Not only are there going to be more uninsured, but there’s going to be less money to go around to pay for the kinds of care that we need to provide,” said Patrick Keenan, policy director for the Pennsylvania Health Access Network.
And as hospitals are forced to operate with fewer resources, Keenan suggested that some hospitals may see doctors leave for bigger systems. He warns that could result in longer wait times for the providers who remain in rural areas.
At the same time, Runion said health care costs will be driven up as more patients rely on emergency rooms for care. Without insurance, he said patients will be reluctant to seek preventative care, delaying treatment until an issue becomes an emergency.
“Individuals are going to start flooding the emergency departments,” Runion said. “And a bill that may cost you less here could cost you a fortune there.”
Runion says the Senate bill’s passage would have broad and “devastating” effects. But, he said, “I’m committed as the leader of this organization to lay it all out on the field and do whatever I have to do to make sure that this operation continues to move forward.
“At the end of the day,” he added, “we are called to serve the people.”
Julia Zenkevich contributed to this report.
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