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Rural Kentucky Hospitals Struggling Because of Decline in Private Insurance, State Audit Says


An increase in Medicaid services and a decline in the private insurance market in rural Kentucky has hit rural hospitals hard, according to State Auditor Adam Edelen.

More than two-thirds of Kentucky’s rural hospitals are below the national average on a financial strength rating system, and more than one-third are considered to be in poor financial health, according to areport released Monday.

At a press conference, Edelen said rural hospitals used to assume that many clients would be covered by private insurance, which reimburses hospitals more handsomely than Medicaid.

“That helps you balance out your government-insured customers,” Edelen said. “When that disappears it becomes very difficult to keep these hospitals open.”

About 400,000 Kentuckians have become covered by Medicaid since the state expanded the government health insurance program in 2013.

The American Hospital Association reported that in 2012 Medicare paid only 86 percent of the cost of hospital services, and private insurance paid 149 percent.

Despite the painting a dire picture for rural hospitals, Edelen said that the report isn’t a criticism of the Affordable Care Act, which has insured about 400,000 Kentuckians through the expansion of Medicaid.

“Big pie in the sky arguments about ideology don’t do anything to keep the hospital network in Kentucky sustainable,” Edelen said. “You cannot fix and create sustainable network of rural hospitals if you don’t understand the individual condition of those rural hospitals.”

Rural hospitals surveyed by the auditor reported that 72 percent of their clients receive Medicare or Medicaid benefits and 22 percent were covered by private insurance.

In 2013, about 58 percent of rural hospital patients received Medicaid or Medicare benefits, according to the Cabinet for Health and Family Services.

Edelen said hospitals that were geographically isolated generally fared poorly; those that were part of larger healthcare provider networks fared better.

Financially below-average hospitals in rural Kentucky serve about 838,000 Medicaid and Medicare patients in the state every year.

Gov. Steve Beshear cautioned that the hospitals that responded to the auditor relies on 2013 data; the report doesn’t take into account $506 million in federal funding that hospitals received in 2014.

“The administration is well aware of how health care delivery changes are impacting rural hospitals, and we have partnered with those hospitals for the past several years to help them navigate the new health care economy,” Beshear said in a statement. “We’re pleased that the Auditor’s report supports our continuing work.”

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Ryland Barton is the Managing Editor for Collaboratives for Kentucky Public Radio, a group of public radio stations including WKMS, WFPL in Louisville, WEKU in Richmond and WKYU in Bowling Green. A native of Lexington, Ryland most recently served as the Capitol Reporter for Kentucky Public Radio. He has covered politics and state government for NPR member stations KWBU in Waco and KUT in Austin.
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