Rural hospitals bracing for effects of Obamacare repeal

Marengo Memorial Hospital in Marengo, Iowa on Thursday, Jan. 26, 2017. (Dave Franzman/KCRG-TV9)
Marengo Memorial Hospital in Marengo, Iowa on Thursday, Jan. 26, 2017. (Dave Franzman/KCRG-TV9)(KCRG)
Published: Jan. 26, 2017 at 4:02 PM CST
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Repealing Obamacare, or the Affordable Care Act, could have a big impact on thousands of Iowans insured through the program and hospitals that provide the care. And many small, rural hospitals in Iowa are watching the repeal and replace efforts with interest because those changes could carry a financial risk.

Rural hospitals nationwide operate on very thin margins. Alan Morgan, CEO of the National Rural Health Association that represents 2,000 small hospitals, says 80 smaller hospitals nationwide have closed since 2010. So anything that could reduce income or increase expenses for rural hospitals is a concern.

Marengo Memorial in Iowa County is one of those hospitals watching the political activity in Washington very carefully.

Matt Murphy, the hospital’s chief financial officer, says before the ACA took effect, about seven percent of all the patients coming to that 25-bed facility in Marengo had no insurance. With the ACA insurance exchanges, mandates and subsidies that figure has dropped to about one to two percent of patients more recently.

Murphy says back in 2013, before the full impact of Obamacare, the hospital had to write off $900,000 that year as bad debt or charity due to patients who couldn’t afford to pay.

Last year, that figure had dropped to $600,000.

Joanna Shade, a hospital social worker who deals with patients, says she’s starting to hear concerns again about coverage based on the repeal and replace debate. One comment came from a woman undergoing cancer treatment at the hospital.

“She was spending her whole income for insurance for herself and her husband and then with the ACA they were able to change to another plan and it’s helped them greatly. She was very afraid about what would happen if the ACA was repealed,” Shade said.

That’s not to say the experience at Marengo Memorial with the ACA is all positive.

Murphy says the hospital employs 160 people as one of the larger employers in the city and coverage mandates have increased hospital expenses like for many employers.

But he said a bigger issue right now is not the ACA repeal efforts but getting prompt payments for Medicaid payments. About 17 percent of patients coming to Marengo are on Medicaid—up from 13 percent before Obamacare and the related federal expansion of Medicaid programs.

Iowa switched to a managed care system run by private companies and Murphy says that’s led to constant payment hassles.

Still, the biggest issue overall may simply be uncertainty and planning for what’s ahead.

“That’s what we’re concerned about the most people who are unsure where they will get their care, how that will be provided and what mechanism is coming down the road next,” Murphy said.

The amount billed for patient care at Marengo is about $30-million dollars a year. Murphy says the $300,000 saved on charity care or bad debt because more people have health insurance is just one percent of that total.

But with the profit margin for a small hospital typically just one to two percent of revenue any change that leads to less money coming in is a concern.