A Rural Hospital in Kentucky Prepares for Medicaid Losses

Dan Gorenstein (DG): Big changes are coming to Medicaid under the budget bill Republicans pushed through Congress and President Trump signed into law this month.

The so-called ‘Big Beautiful Bill Act’ is expected to reduce Medicaid spending in the next decade by nearly $1 trillion. 

Republicans achieved those historic cuts by rewriting the rules for the program which today covers some 80 million low-income and disabled Americans.

Now, hospitals that rely on Medicaid to pay for patients’ care are on a deadline. 

They need to figure out how to operate with less money to stay ahead of the coming changes. 

In rural communities, where many independent hospitals already run lean or lose money, finding answers is even more urgent. 

Today, what the new big budget act means for one hospital out in north central Kentucky, the state where this legislation is expected to hit rural health care the hardest.

From the studio at the Leonard Davis Institute at the University of Pennsylvania, I’m Dan Gorenstein. This is Tradeoffs.

*** 

DG: David Asher is the chief of strategy for Harrison Memorial Hospital in Cynthiana, Kentucky. 

The hospital is small, but bustling. Delivering babies. Treating heart attacks. Triaging emergencies.

David’s job … raise money and lobby lawmakers for the 35-bed facility. 

David tracked the ‘Big Beautiful Bill’ through the House closely. 

He was ok with that version. 

But when it hit the Senate, forget about it. 

David Asher (DA): I mean, they just took that bill and cut it deeper, way deeper.

DG: The Senate made changes to the House budget plans, changes that would mean steeper financial losses for Harrison Memorial and rural hospitals across Kentucky.

David frantically began working the phones, calling Kentucky’s House members in Congress. 

DA: Just saying, hey, we’re going to have to cut women’s health services. We may have to cut cardiac services. We may have to close some of our primary care clinics, and this community is going to have to drive 50 miles to seek health care if this bill goes through.

DG: David’s alarm to Kentucky’s Congressional delegation failed to get them to block the Senate’s version. 

The House, despite some gripes … 

House Speaker Mike Johnson: On this vote, yeas are 218 the nays are 214. 

DG: … went along with the higher chamber’s plan. 

House Speaker Mike Johnson: The motion is adopted. (gavel) (cheers) (USA chants) 

DA: Obviously, we didn’t speak loud enough. We tried, but unfortunately, we didn’t succeed. 

DG: David, as you know, there is a lot of anxiety about what comes next for patients, but also the hospital employees. When you and I spoke a couple of days ago, you told us that the hospital CEO sent around an email. We asked you to bring it. Could you please read that email to us? 

DA: I certainly can. It is a little lengthy. And this is word for word, if you want me to do word for word. 

DG: Yes, sir. 

DA: All right.

DA: Dear team, I’m beginning to hear rumors throughout the community. And I know several of you have had questions about the recent news and changes in the healthcare landscape  … 

DG: The note — running about 500 words — is a blend of reassuring …

DA: We are not closing or being sold. Let me be clear: There are no current plans to close, sell or transfer ownership of our hospital.

DG … and realistic. 

DA: Several people may end up not qualifying for Medicaid any longer, and either assume private insurance through an employer or could possibly lose Medicaid benefits.

DG: Overall, the email makes plain, Harrison Memorial has challenging times ahead.

DA: It is imperative that we are fully transparent. And I’m committed to making sure we are communicating all concerns I have … 

DG: What did you think when you read that?

DA: First of all, a very good email. I think it speaks to an attitude of camaraderie. We’re in this together, and yes, there will be changes. We’re not sure what those changes will be, but we’re committed to providing for our employee family and our community. It’s what I took from it.

DG: As the email points out, lots of hospitals in Kentucky are up against it. 

An analysis from the health research group KFF has found this state’s rural communities will get hit harder than any other. 

A big part of that is because the state uses what are called provider taxes to leverage more money from Washington for its Medicaid program. 

And Kentucky uses some of that money to boost Medicaid reimbursement rates to rural hospitals like Harrison Memorial. 

So, David, given that as background, 25% of your patients are on Medicaid. Having those bigger reimbursements are why you all can be financially healthy, right? 

DA: Right. And that program was approved by the first Trump administration. So, we have to figure it out.

DG: Yeah, and under the new bill, Congress clamped down on both the provider taxes and the state using that money to juice reimbursements.

These changes are projected to cut $15 billion from Kentucky hospitals’ over a decade. 

What’s the number, David, you feel like you’re going to have to make up beginning in 2028 when these policies start up?

DA: I would say we’d have to start reducing around $2 million a year initially. I mean, 45 to 50% of our budget is salaries. So we don’t want to go that route. But salaries and supplies are your biggest, uh, line item expense, and drugs. So we’re going to have to really take a hard look at our service lines. Because at the end of this ten year period, we’re going to be $19 million out of budget.

DG: And, yeah, that doesn’t even include all those patients who are going to lose their Medicaid.

Under the Big Beautiful Bill, some adults in the program must work, volunteer or go to school 80 hours a month to keep their coverage.

Some people, though, are expected to lose their insurance because they’re going to have a hard time with the paperwork proving that they do work. 

David, in Kentucky, we’re talking about maybe 200,000 people who could lose their Medicaid by 2034. 

I’m going to use some colorful language. Are you shitting in your boots? 

DA: Um yes. Kind of. 

DG: What do you mean kind of?

DA: I mean, I’m not to the panic mode yet, and. I mean, me personally, I have, I hope to retire in four more years, but that doesn’t take … that does not take away my concern for this hospital.

DG: I’m sure it doesn’t. So what’s your concern? Like walk me through why it matters to the hospital that your patients have Medicaid? 

DA: So, when Medicaid expanded 11 years ago in Kentucky, we added 500,000 lives. So we went from 10 to 20% self-pay, no insurance, down to one, two, 3%. So that was a huge win for us. That just really boosted us, enabled us to add providers, add quality providers, add staffing that we needed. So, we’ve grown this little jewel here. We’ve remained independent. We’ve been around since 1906, celebrating our, what, 120 year anniversary this coming year. But I am concerned about the future.

DG: Are you saying that you’re now afraid the opposite will happen, I mean, basically, you’ll lose the gains in coverage that you saw after Medicaid expanded under the Affordable Care Act? 

DA: Pretty much, pretty much. Yes sir.

DG: At the end of the day, if low-income patients lose Medicaid, they often end up with bills that are unaffordable. And that, David says, will cut into the hospital’s bottom line.

When we come back, David explains his hopes for the $50 billion relief fund Republicans included in the budget for rural healthcare and where else Harrison Memorial might turn to boost its finances. 

MIDROLL

DG: Welcome back. 

We’re talking with David Asher, the strategy chief at Harrison Memorial Hospital in Cynthiana, Kentucky. 

Before the break, David explained how Republicans’ big changes to Medicaid are expected to cost his rural hospital millions of dollars and leave more patients uninsured. 

Now we are diving into where Harrison Memorial is looking to make up some of those losses. 

Ok. David, you have some time, but not much. Cuts will really get underway in 2028. What are you doing right now to prepare?  

DA: So, as far as any major decisions, we’re not to that point yet, but at the same time, I anticipate within the next 6 to 8 months we will really dive in, because we’re going to have to really tighten down, see what services are making money, what services can survive without these additional Medicaid payments and go from there.

DG: Imagine it is now July 2029. So we’ve begun to see these cuts. Harrison Memorial has adapted to the best of its ability. Describe for me what the hospital looks like.

DA: What the hospital looks like. Going out on a limb here, and this is my personal opinion, I think one of the first things that we would face losing would be our women’s and children’s OB services, the ability to birth babies. And then we got to look at our cardiac program. I mean, you got to have a heart to survive, right? And I would hate to have to cut into our cardiac program.

DG: Babies and hearts.

DA: Babies and hearts. I mean, how sad is that? That is sad.

DG: So, this scenario, hospitals closing services, or closing entirely, it’s why Congress put $50 billion in the budget for rural healthcare.

In our reporting for this episode several people said it’s unclear how this money would be spent. If it were up to you, David, what would you do?

DA: The criteria I’d like to see for the $50 billion would be first quality. I think that’s the most important. I would also like to see it distributed among regions where there’s a health care shortage area, which Harris Memorial qualifies for, where we do have a shortage of primary care and other specialty physicians. As well as assist in the maintaining service lines that are vital to our region.

DG: So what I hear you saying is you would like to see some sort of formula that prioritizes quality outcome metrics for patients and takes into account whether or not a health system is serving sort of a some kind of like desert. And also takes into account a hospital’s size and their, their overall financial well-being. That’s the kind of formula you’d like?

DA: Absolutely. Absolutely.

DG: But there are many people who say the $50 billion fund will only go so far. 

Medicaid spending in rural areas is projected to fall by $150 billion. 

What are the chances, do you think David, that Kentucky uses state tax dollars to pick up the slack?

DA: Yeah, I don’t see that. Yeah. Okay. Yeah, I don’t think that’s going to happen. Right now, I mean, 23% of our state budget is currently, as it is today, tied to Medicaid.

DG: I guess there’s another way the state could help out, right? I mean, Kentucky could also try to make it easier for people to prove they’ve got a job in order to comply with new Medicaid eligibility rules. 

Otherwise, these people, Harrison Memorial’s patients, lose coverage and potentially their ability to pay for their care. 

DA: Yeah, we need a process to identify those who could be affected by work requirements. And I’m hoping that’s what the state can assist us with so we can be proactive and prevent it from happening. I mean, if we want to survive, we’re going to, unfortunately, we’re going to have to be the hand holder, the cheerleader. And why should we have to bear that burden, too? And so that’s another layer added to us, another expense that we’re going to take on, just so that we can get 80 cents on the dollar eventually.

DG: So, to sum up your options before these Medicaid changes: Cut back services, maybe some extra money from the new rural relief fund, seek help — financial or otherwise — from the state. Do I have that right? 

DA: And I’m also looking at bigger private foundations. I’m trying to make connections with people who know people and telling them our story of rural health care and how we have succeeded for 120 years and we want to be around for 120 more.

DG: What about this, David, Harrison Memorial getting scooped up by a bigger health system with deep pockets?

I mean, Harrison Memorial is a solo, stand-alone hospital. Why, in this moment David, stay independent? I mean, it sounds like you all might not be able to afford to do that. 

DA: Our board is very adamant. Our community is adamant. And people are tired of going to the big systems. Ease of access. Same or better quality of care here. So, people like that hometown hospital feel.

DG: Help me understand this potential dilemma. You’re talking about why people value a hometown hospital. It feels more personal. It’s your neighbors running the hospital, taking care of patients. But as a small hospital out here on your own you don’t have the cash reserves to get through tough times without hard choices. Closing units. Layoffs. 

DA: That’s the big advantage of being part of a system is that you have access to corporate funds, potentially, that you don’t have being an independent. One of the fears I have is that they would strip us of our most significant services and move them to their bigger systems and use this as kind of a triage station. 

DG: Right. If you sell, you lose control. That’s one of the risks. 

David, I’d like to come back to where we started. The uncertainty that has gripped Harrison Memorial’s employees and the note from the hospital’s CEO. 

We’re talking over video and when you were reading the email, I could see you becoming emotional. 

Why were you getting choked up? 

DA: That we’re going to have to make these decisions. That we cannot continue to operate how we have been operating. That, yes, there’s going to be lives affected. There’s going to be families affected. There’s going to be patients affected. And, I’m going to be a part of that process. Hell, I may be affected. So am I concerned? Yes. Am I fearful? Not at this point, but certainly that’s in the back of my mind.

DG: The University of North Carolina has identified 340 rural hospitals across the country that are at risk of closing because of this bill, including 35 in the Bluegrass State, in Kentucky. That’s more than any other state in the country. What does that mean to your state’s health and economy?

DA: I mean, it could potentially put approximately 20,000 employees out of a job. That’s 20,000 families that are going to be affected by this, potentially.

DG: Right, and in your area, Harrison Memorial is a large employer. 

DA: We’re the biggest employer. We’re 650, 655 employees currently. When I started back in 2010, we had 350 employees. So that’s how much we’ve grown, grown in 15 years.

DG: You’re really part of the fabric of your city.  

DA: Yes sir.

DG: David, thanks so much for taking the time to talk to us on Tradeoffs.

DA: Thank you sir. It’s been a pleasure.

DG: I’m Dan Gorenstein, this is Tradeoffs.