Updates in State Medicaid Funding to Benefit Smaller Hospitals and Communities

McKenzie Health System, along with other Critical Access Hospitals (CAH) throughout the state, will greatly benefit from the supplemental state budget, which is expected to be signed by Gov. Gretchen Whitmer before the holidays. As a result of a great deal of research and hard work on the part of McKenzie Health System CFO Amy Ruedisueli and CEO Steve Barnett, others began joining forces to address the needed changes.

The supplemental state budget for the fiscal year 2020 provides $5.1 million in general funds to increase reimbursement to these organizations while maintaining access to high-quality care in communities across the state. When combined with an increased federal match, this will equate to about $36 million in Medicaid funding for critical access hospitals such as McKenzie Health System.

A recent article reported that nearly 700 rural hospitals across America are at a high risk of closing. The $36 million in 2020 funding that McKenzie’s administration helped secure for Michigan’s 37 Critical Access Hospitals (CAH) may help those hospitals who had been at risk of closing, keep their doors open.

In 2017 (the most recent data available), Michigan’s CAHs:

• Conducted 2.4 million outpatient visits,
• Treated 331,000 people in emergency departments,
• Admitted 22,000 people for care and treatment, and
• Provided more than 10,000 direct jobs in Michigan.

That puts into perspective how crucial this funding is.

Medicaid funding can be complicated to understand. The bottom line is that larger hospitals have generally been reimbursed for a greater percentage of the cost of services provided to patients. For example, a large hospital in Michigan on average was paid 95% of the cost of care while a small hospital on average was paid 72% of the cost of care. Recognizing this significant disparity, CAH leaders across the state, including the Michigan Health and Hospital Association board and staff and partners such as the Michigan Center for Rural Health, came together to address Medicaid reimbursement for CAHs. Barnett served as chair of the special task force that worked to determine a better path forward for smaller hospitals.

“This Medicaid funding improvement will have a profound impact on our organization and our community,” said Barnett. “This took an enormous amount of time and hard work by our own CFO, Amy Ruedisueli, and I am extremely proud of what she accomplished.”

Non-Medicaid patients will also benefit as some of the funds previously needed to cover the shortfall of Medicaid reimbursement will now be available to help purchase equipment, upgrade technology and provide other services that benefit all patients in our community.

The Michigan Health and Hospital Association advocacy and policy teams worked closely with state legislators and the Michigan Department of Health and Human Services to develop the strategy to significantly increase Medicaid funding for all of the state’s 37 critical access hospitals.

“Although the federal Centers for Medicare and Medicaid Services need to approve some of the solutions, I am optimistic that will be done. It was an honor to work with statewide healthcare leaders to examine this critical Medicaid funding issue and to come up with a solution that will support so many hospitals and communities across the entire state,” Barnett added.