Alabama hospital operators and the state hospital association called for more federal funding to mitigate ongoing operating losses during a news conference Thursday.
Alabama needs a “significant infusion” of American Rescue Plan Act dollars to prevent service cuts and closures, Dr. Donald Williamson, president of the Alabama Hospital Association, said during a telephone briefing with reporters.
The median operating margin across Alabama hospitals declined 79% from 2019 to 2022, according to an analysis from consultancy Kaufman Hall that factors in state and federal COVID-19 relief funds. Half of Alabama hospitals finished last year with negative operating margins.
“What we desperately need is a significant infusion of ARPA funds, enough to serve as a bridge so we can address some of the other fundamental challenges in the reimbursement system and keep our hospital infrastructure in place,” Williamson said. “This data shows that Alabama hospitals face an existential crisis.”
The hospital association did not specify how much additional ARPA funding would suffice. About $8.5 billion of the 2021 law’s $1.9 trillion is earmarked for rural providers, which about half of Alabama’s hospitals are. Alabama has received more than $2.1 billion from ARPA, according to Treasury Department data.
“We will all continue to explore any and all opportunities to support our systems, but there is no other immediate access to cash like the ARPA funds,” said Joseph Marchant, CEO of Bibb Medical Center in Centreville, Alabama, and chairman of the Alabama Hospital Association.
Alabama hospitals’ median operating margin relative to 2019 steadily decreased from 2020 to 2022 as labor and supply cost inflation outpaced revenue increases. Labor expenses jumped 30% last year compared with 2019, while discharges declined 3% and length of stay increased 6%.
Alabama has the lowest Medicare reimbursement rates in the country, which influences commercial insurers to also pay less, said Erik Swanson, senior vice president of Kaufman Hall’s data analytics practice.
Most of the state’s hospitals are in the bottom quartile of Medicare wage index reimbursement, which uses labor data from Medicare cost reports to set payments. While the lowest earners in the Medicare wage index pay framework received 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 have fared better financially than those in states that didn’t, including Alabama. Alabama Republicans oppose broadening Medicaid eligibility. Hospitals in non-expansion states tend to carry more bad debt and provide more charity care, research has shown.
Just over 15% of Alabamians aged 19-64 were uninsured in 2021, compared with 12.2% nationwide, according to census data compiled by the Kaiser Family Foundation. Alabama has the eighth-highest uninsured rate for this population among the states.
“In addition to the ARPA funds, we have to look at long-term solutions,” Williamson said. “We have to try to address how do we close coverage gaps.”
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