Alabama hospitals warn of imminent closure without increased funding

Alabama hospital operators and the state hospitals association called for more federal funding to mitigate current operating losses during a news conference Thursday.

Alabama needs a “significant infusion” of dollars under the American Rescue Plan Act to prevent service cuts and closures, Dr. Donald Williamson, president of the Alabama Hospital Association, said during a phone briefing with reporters.

Median operating margins at Alabama hospitals declined 79% from 2019 to 2022, according to analysis by consulting firm Kaufman Hall, which takes into account state and federal COVID-19 relief funds. Half of Alabama’s hospitals ended last year with negative operating income.

“What we desperately need is a significant infusion of ARPA funds, enough to serve as a bridge so that we can address some of the other fundamental issues in the reimbursement system and keep our hospital infrastructure in place,” Williamson said. “These data show that Alabama’s hospitals are in an existential crisis.”

The hospital association did not specify how much additional ARPA funding would last. About $8.5 billion of the $1.9 trillion mandated by the 2021 law is for rural healthcare providers, which are about half of Alabama’s hospitals. Alabama has received more than $2.1 billion from ARPA, according to the Treasury Department.

“We will all continue to explore every opportunity to support our systems, but we have no other direct access to cash than ARPA funds,” said Joseph Marchant, CEO of Bibb Medical Center in Centerville, Alabama, and chairman of the Alabama Medical Center. . Hospital Association.

The average operating margin for Alabama hospitals compared to 2019 steadily declined from 2020 to 2022 as labor and supply costs rose faster than revenue growth. Payroll costs rose 30% last year compared to 2019, layoffs fell 3%, and length of stay increased 6%.

Alabama has some of the lowest Medicare reimbursement rates in the country, making commercial insurers pay less, said Eric Swanson, senior vice president of Kaufman Hall’s data analytics practice.

Most of the state’s hospitals are in the bottom quartile of the Medicare Payroll Reimbursement Index, which uses workforce data from Medicare expense reports to determine payments. While the lowest revenues in the Medicare payroll index got a boost in 2020, Alabama hospitals are still at the bottom of the barrel, Williamson said.

Nationally, hospitals in states that expanded Medicaid eligibility under the Affordable Care Act performed better financially than hospitals in states that did not, including Alabama. Alabama Republicans oppose expanding Medicaid eligibility. Research has shown that hospitals in non-expanding states tend to have more bad debts and provide more charitable care.

Just over 15% of Alabama residents ages 19 to 64 were uninsured in 2021, according to census data compiled by the Kaiser Family Foundation, compared to 12.2% nationally. Alabama ranks eighth among the states in terms of uninsured population.

“In addition to ARPA funds, we must look for long-term solutions,” Williamson said. “We have to try to figure out how to close the coverage gaps.”