Medicaid reimbursement rates in rural Washington are reaching a breaking point

In Washington State, Medicaid reimbursement rates don’t come close to covering the cost of care. This forces health systems to push more and more costs into the commercial market to make up for the low Medicaid reimbursements, says Confluence Health CEO Dr. Peter Rutherford. 

Rutherford says the issue is particularly challenging in rural areas due to the large percentage of Medicaid patients.

 

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Confluence Health is a safety net health system, which provides care to low-income and vulnerable populations including the uninsured and Medicaid enrollees. It operates as the largest health system in North Central Washington.

Safety-net health systems play an essential role in the US health care system, but even after coverage expansions under the Affordable Care Act (ACA) about 27 million Americans remain uninsured with millions more underinsured according to a study by KFF.

Rutherford says the average cost of Confluence Health’s major product, inpatient services, ranges from $18,000-$22,000 dollars. These services must be provided before determining how, or if, a patient is able to pay.

Only 26% of the patients coming into Confluence Health pay the actual negotiated charges.

According to Rutherford, roughly 22% of the services provided at Confluence Health are to Medicaid beneficiaries, representing about 10% of the revenue. Medicare patients are around 50% of the services, representing about 40% of the revenue. Commercial business is about 25% of the business but represents 40% of the revenue. 

For Medicaid patients, the system is reimbursed 47% below the costs of the provided services and 29% below the cost of care for Medicare patients. 

“We estimate that the shortfall between the cost to provide the services and the reimbursement for Medicaid at this point is somewhere in the $45 – $50 million a year range.

There is this incredible disparity between the cost of care and how much somebody gets paid, or how much we get as far as payment in the door…We must survive by managing our expenses in aggregate below net (cash) revenue levels.”

When asked about the breaking point, Rutherford had this to say:

“Our operating margin, in the near term, would likely continue to decrease and would reduce our capital budget. Soon we’re not maintaining our facilities the way we’d like and we’d be unable to add new services. Next, we’ll have to look at what services to quit providing, which will lead to inequity of access for health care services in certain parts of the state.”