Medicaid expansion doesn’t appear to bolster finances or operations at critical access hospitals, study finds

Changes in operating margin, staffing ratios and quality metrics didn’t hinge on whether a critical access hospital was in a state that had expanded Medicaid.

As policymakers consider ways to boost healthcare quality and access in underserved areas, they shouldn’t view Medicaid expansion as a primary solution, according to results of new research.

For a study (login required) published in the December issue of Health Affairs, researchers sought to examine the degree to which Medicaid expansion could boost critical access hospitals (CAHs) financially and operationally. They found little correlation between any such improvements and whether a state had expanded Medicaid eligibility as allowed by the Affordable Care Act (ACA).

A dozen states have declined to expand Medicaid to a larger segment of low-income residents as authorized. The COVID-19 relief legislation known as the American Rescue Plan provided for additional federal coverage as a further enticement, but no holdout state has gone for expansion.

Meanwhile, despite receiving cost-based reimbursement from Medicare, “critical access hospitals still face resource and quality challenges while operating with very low margins,” wrote researchers with the University of Pennsylvania and the Washington University School of Medicine.

Limited effect on finances

To investigate the impact of Medicaid expansion, the researchers looked at data for 1,158 CAHs, including 648 in expansion states and 510 in non-expansion states. Improvements for CAHs after expansion were not statistically significant compared with changes among CAHs in non-expansion states based on measures of Medicaid inpatient days, reductions in uncompensated care and operating margin over the eight-year study period.

A possible reason for the muted effect on operating margin, the researchers wrote, is that “Medicaid reimbursement rates might not be high enough to affect margins when substituted for uncompensated care.”

In addition, “critical access hospitals also face myriad other financial challenges, such as high fixed costs in the context of growing demands for medical technology and growing market pressure in the wake of market consolidation, which are largely independent of policies designed to improve insurance coverage.”

Staffing and quality metrics not impacted

Medicaid expansion also appeared to make little difference in staffing ratios among CAHs as measured by changes in the number of employed physicians and nurses.

On measures of patient experience, the researchers likewise found little difference based on expansion status. And on quality, there were no significant differential changes between CAHs in expansion and  non-expansion states in rates of readmission and mortality.

“Given our findings of no change in hospital finances, it may be unsurprising that we did not observe significant improvements in staffing or quality,” the researchers wrote.

Amid nursing shortages and constraints on access in markets served by CAHs, “It may be that any financial benefits of Medicaid expansion were not sufficient to motivate broad changes in staffing. Furthermore, many of these challenges have been exacerbated by the financial strain introduced by the COVID-19 pandemic, suggesting that critical access hospitals may need additional support beyond Medicaid expansion to be able to meaningfully invest in personnel in ways that preserve access to care and provide employment for people who live in rural and other underserved communities.”

The big picture

Previous research examining the impact of Medicaid expansion has shown improved finances among hospitals generally, the researchers noted, as well as a decreased likelihood of closure among rural hospitals.

The researchers posited that “because critical access hospitals are supported by distinct payment mechanisms and represent a financially and geographically heterogeneous group of hospitals, it is plausible that they might respond differently to Medicaid expansion than other groups of hospitals.”

Regardless, the new research suggests expansion is not a “panacea,” the researchers wrote.

“Given the multiple challenges related to limited access and growing comorbidity burden, additional strategies beyond Medicaid expansion will be essential to supporting healthcare delivery for rural and underserved communities,” they concluded.