(Austin)  Texas is facing an epidemic of rural hospital closures, but Lubbock Senator Charles Perry said he hopes that putting a long-standing budget policy into state law will help keep these critical providers open for the rural Texans that rely on them.  Since 2013, 21 hospitals in rural areas have closed in Texas. A major reason for that, said Perry, is an underpayment for Medicaid reimbursements, which cost these facilities hundreds of millions of dollars in uncompensated care every biennium. There are 38 such hospitals in his district alone, more than any other legislator.  “It’s safe to say that 10 of those will no longer be open by the time we come back next session, possibly more, if we don’t do what the state has said it’s supposed to do for years now and that reimburses Medicaid at cost,” said Perry. “It’s just time that we step up and honor that.” His bill, SB 170, was considered before the Senate Health and Human Services Committee on Tuesday and would enshrine what has been a regular budget provision into state law, directing the state health commissioner to develop a method to ensure that rural hospitals get full Medicaid reimbursement.

While most Texans today live in urban or suburban regions, 3 million people live in one of the state’s 170 rural counties.  They tend to be older, poorer and less healthy than urban populations, according to a 2018 paper released by the Texas A&M Rural and Community Health Institute.  Often, rural hospitals are the only regional healthcare providers that accept Medicaid and may be the only medical providers at all for miles. Eighty rural counties have fewer than five physicians; 35 have none at all.  Despite the need, Texas has had more rural hospital closures than any other state.

Funding for rural hospitals has been aided by a provision placed in the state budget every session since 1993, requiring reimbursement for the full allowable cost of service for Medicaid patients.  This worked well until the state handed over the administration of Medicaid to managed care organizations in 2012. Because the contracts between the state and the MCOs omitted the budget provision, says the Texas Organization of Rural and Community Hospitals (TORCH), rural hospitals have seen their Medicaid reimbursements decline.  Perry believes it’s more than just that. In his opinion, the legislature bears some responsibility. “We have not put the money for it to pass through,” he said.

Complicating this process has been difficulty getting various agencies to agree on what the rural hospitals are owed.  HHSC has been skeptical of the use of annual Medicare cost reports required by federal agencies, saying they fail to account for a number of variables across various populations, according to agency testimony at Tuesday’s hearing.  Perry pushed back. “MCOs have a methodology and we have a methodology. There should be one methodology,” he said. “What I hear is the state has a desire to make sure that Medicaid cost reimbursement in rural healthcare is at cost regardless of who’s the payer source,”   Perry asked that the agency continues to work with him on determining the best way to accurately assess the true cost of the Medicaid shortfall to rural hospitals.

The shortfall causes not only hospital closures, said TORCH’s Don McBeath, but also a reduction in critical services, notably obstetrics. Across Texas, he said, about 50 percent of infants are delivered to patients covered by Medicaid; in rural regions, the rate is seventy percent. “Obviously when you have an underpayment, that’s disproportionally amplified in the rural areas,” he said.  This gap in delivery services was particularly concerning to New Braunfels Senator Donna Campbell, who has worked as an emergency room physician in rural Colorado County for the last 25 years. “I can’t tell you, members, how important it is for us to find the resources to keep our rural hospitals open…I want [infants] delivered in labor and delivery rooms, not the emergency room where I work,” she said.