House passes bill to loan money to struggling rural hospitals; funding is still in the works, but sponsor appears confident

Rep. Danny Bentley

By Melissa Patrick
Kentucky Health News

FRANKFORT, Ky. — Spurred to action when the hospital in his county said it was closing, state Rep. Danny Bentley filed a bill to create a loan program for financially distressed rural hospitals. It went from the House to the Senate without dissent Feb. 28, and Bentley voiced confidence that it will be funded.

House Bill 387 would allow the state Cabinet for Economic Development to provide loans to struggling hospitals for three purposes: to maintain or upgrade their facilities; to maintain or increase staff; or to provide health-care services not currently available.

Loans could run 20 years and would be available to hospitals in counties with fewer than 50,000 people.

Bentley, R-Russell, said more than 60 hospitals would qualify for the loans, and 13 of them are vulnerable to closure. One is already closing: Our Lady of Bellefonte Hospital in his home town, a Greenup County suburb of Ashland.

Most questions about the bill dealt with funding. Bentley told Kentucky Health News that it will be funded. The next day, he said that while funding details are still in the works, “Let’s put it this way: It’s too important not to be funded.”

The bill has a powerful co-sponsor, House Speaker David Osborne, R-Prospect. He told The Associated Press that funding could come from state bonds.

“It’s the goal to help turnarounds when turnarounds are possible,” Osborne told reporters. “That doesn’t mean that we can save every hospital that is failing, just like we can’t save every business that’s failing. But there are some, when given the opportunity, that can succeed, and that’s our goal … to help those that can.”

Osborne told the AP that the idea stems from discussions about the state’s proposed $35 million loan to the University of Louisville to help it buy Jewish Hospital and other KentuckyOne Health facilities that were at risk of closing. He said concerns were voiced about how the state could also help struggling rural hospitals. The House has passed HB 99, which would approve the loan.

On the House floor, Bentley pointed to the closing of the only hospital in his county as an example of how devastating the loss of a rural hospital can be. Our Lady of Bellefonte will close on April 30, according to a press release from the Catholic group that owns it.

Bentley said that will kill about 1,000 jobs and about $700,000 in annual tax revenue, and make care less accessible. He added, “If they close a rural hospital on us, they will never re-open them. So we’ve got to be concerned.”

If passed and signed into law, HB 387 would take effect immediately. Many rural hospitals in Kentucky are struggling to keep their doors open.

Kentucky Health News reported in October that a Navigant Consulting Inc. study concluded that 16 of Kentucky’s rural hospitals, or about one-fourth of the total, are at high risk of closing unless their finances improve. Another study at the University of North Carolina said eight rural Kentucky hospitals are at high risk of financial distress and 23 more are considered to have mid-high risk. The Kentucky Hospital Association, using 2017-18 data, concluded that 35 of the 70 hospitals it considers to be rural are in poor financial health, with 14 of them “very vulnerable.” The numbers vary because the studies measure financial distress differently.

Five rural Kentucky hospitals have closed since 2009, four of them since 2014, according to a UNC report.

Bentley said one reason rural hospitals struggle to make ends meet is because most of their patients are on Medicare or Medicaid, which pay less than the full cost of care.

But that’s just part of the problem. The Navigant report pointed to other issues, including: a shift from inpatient to outpatient care, which has left hospitals overstaffed and underused; shrinking populations that tend to be older and poorer, meaning that there are more Medicaid and Medicare patients; and not enough money in their budgets to invest in updated, innovative technology.

The hospital association also says changes in federal reimbursement policies have also hurt Kentucky hospitals. It supports Bentley’s bill.

KHA President Nancy Galvagni said in an e-mail. “We do not expect HB 387 to be a panacea for the challenges facing some rural hospitals, but it will be an important support for both the hospitals and for our rural communities.” She added, “Kentucky’s hospitals are not just buildings where people seek health care; they are also crucial economic players in our communities across the commonwealth.”
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