Remember how the private option was going to save rural hospitals? Remember how hospital lobbyist Bo Ryall explained to the state legislature that the private option was crucial if we want “rural hospitals to survive?” As one argument after another for the private option failed, its advocates regularly retreated to their final defense: at least the private option would keep the doors of rural hospitals open.
Over in West Memphis, however, the flood of new subsidies just wasn’t big enough to keep the promises that private-option advocates offered: Crittenden Regional Hospital just announced that it would be closing its doors in early September.
From Arkansas Business:
Crittenden Regional Hospital of West Memphis will close its doors on Sept. 7, citing “the challenges of a struggling economy and continued declines in patient volume and reimbursement.
The hospital’s board of trustees made the announcement Monday. It said it made the decision after “exploring all possible options with legal and financial advisors.” The hospital will stop admitting patients today. CRH clinics and home health and hospice services will close Sept. 5.
“We are deeply saddened to have to make this decision after all the attempts that have been made to preserve the hospital for our community,” CEO Gene Cashman said in a news release. “With counsel from national health care consulting firms and the passage of a county-wide sales tax, we had identified a long-term strategic plan that had set our organization on a path to improvement.”
More than 400 people work at the 140-bed hospital.
The Advance Arkansas Institute demonstrated that the private-option talking point about “saving hospitals” was bogus in a policy paper in February.
From the paper:
Even if we assume that some Arkansas hospitals are facing a financial crisis, Medicaid expansion is a cure that is worse than the disease. Not only does Medicaid expansion fail to address bad debt issues, but it is practically certain that any Medicaid expansion will increase undercompensated Medicaid expenses. The magnitude of emergency rooms’ uncompensated care problem is tiny in contrast to the 800-pound gorilla of undercompensated care that is driven in large part by Medicaid – and Medicaid expansion will only worsen this problem. Health care analyst Avik Roy has noted that:
Hospitals are losing money, not because of uncompensated care due to EMTALA, but rather because of under-compensated care due to Medicaid and also Medicare. While uncompensated care may indeed account for tens of billions of dollars per year, under-compensated care accounts for hundreds of billions of dollars per year, a number that Obamacare will increase. The true “free-rider” isn’t the uninsured. It’s the government.
(Shortly after we published that paper, the Arkansas Hospital Association then proceeded to ridicule our financial analysis of the private option. Although the AHA’s rebuttal provided little in the way of a substantive response, it did quote Ray Davies and Clint Eastwood extensively.)
The private option was far from the only subsidy that the West Memphis hospital received. In addition to the “hospital saving” private option, Crittenden Regional Hospital received the bounty of a recent tax increase and approximately $3.9 million in government grants, according to Form 990s for 2011 and 2012.
In short, the private option obviously isn’t the savior for hospitals that some made it out to be. For more on the program’s broken promises, read former AAI analyst Nic Horton’s recent work on the counterfeit medical savings accounts brought to you by the private option.