HJAR Mar/Apr 2023

12 MAR / APR 2023 I  HEALTHCARE JOURNAL OF ARKANSAS  The legislative session has begun! During the session, things tend to start slowly and then gather steam as we move into March. This legislative session has officially been extended to April 7, which is still an ambi- tious end date considering the number of issues on the horizon as this article goes to press. As hospitals prepare for the changes to come with the end of the public health emergency, the financial and operational difficulties our hospitals are facing today cannot be easily untangled from the pres- sures and obstacles of the past three years and the COVID-19 pandemic. That’s why the AHA’s priorities for this legislative session are Medicaid payment reform and address- ing the healthcare workforce shortage. Though it feels like the world has now moved on from the restrictions and chal- lenges of the pandemic, the last major surge was just in January 2022. At that time, hos- pitals expended maximum effort and resources to treat COVID patients. Then, in the months that followed, they saw sharp increases (30%) in the cost of labor, supplies, and pharmaceuticals — which, together, has led to expenses outpacing revenues. Of course, all businesses are experienc- ing pressures of rising costs to some extent right now, but unlike other businesses, hos- pitals cannot simply raise prices to pass those increases in expenses along to con- sumers. Hospitals are paid by Medicare, Medicaid, and commercial insurance, and those reimbursements, for the most part, have remained stagnant, while labor and supply costs have significantly increased. Payment reform Because Medicare is a federal program, Congress and/or the Centers for Medicare and Medicaid Services are the entities that have the power to change hospital reim- bursement rates for that program. Commer- cial insurance rates are privately negotiated, and it would be very tricky to legislate those rates. That leaves us with Medicaid, which can only be increased by the state legislature and the state Medicaid program appropriat- ing more funding. Hospitals have not received an increase in the rate of reimbursement for provid- ing care to Medicaid patients in decades. In fact, the last time Medicaid outpatient rates were changed was in 1992 — and that was a reimbursement decrease. That is 32 years without a favorable rate adjustment, despite the reality that costs — and the shift toward utilizing outpatient care — have increased considerably over this time. Rates of reim- bursement for inpatient care have not been increased since 2007, when it was raised to $850 a day. This daily rate includes all care, such as costly procedures like a heart bypass or hip replacement, and Medic- aid reimburses most hospitals $850 a day rather than the full cost of the procedure. Medicaid and the Arkansas General Assembly must appropriate more funding to hospital rates to correct the inequity of paying hospitals significantly below the cost of providing care. As we consider the ramifications of expenses exceeding revenue without reforms, hospitals have tough choices to make on the services they will provide in a community. Underlining these difficult choices is a simple fact: hospital costs con- sist largely of salaries. More than 50% of a hospital’s expenses go to compensating the healthcare workers who provide care to patients, so staffing is the primary place that a hospital can look to reduce costs. How- ever, if a hospital were to reduce the number of nurses employed, for example, that would mean fewer beds available for patients. Other possible reductions would include eliminating unprofitable lines of service, such as labor and delivery or the staffing and operating of a rural health clinic. Cuts like these have an overwhelming detrimen- tal impact on healthcare access for Arkan- sans. Arkansas currently has fewer than 40 hospitals operating labor and delivery departments, and that number continues to decrease. Driving hundreds of miles to deliver a baby or to access prenatal care will inevitably have a negative impact on the health of mothers and newborns. Clos- ing rural health clinics may save money in the short run, but cuts like these actually limit preventive care, which in turn would cause sicker patients, whether they are deal- ing with diabetes, heart disease, stroke, or other illnesses. Rural Emergency Hospital designation Federal legislation created a new provider type for hospitals called the Rural Emer- gency Hospital (REH), andArkansas needed its own legislation to allow the licensure of this new category of hospital. The state leg- islature has approved the bill creating this designation, and Governor Sanders signed it into law on Feb. 13. “Federal legislation created a new provider type for hospitals called the Rural Emergency Hospital (REH) ... Small, rural hospitals may now convert to this designation, which will allow an alternative to hospitals that have been struggling with maintaining their current model of care.”