Bill to help Pikeville hospital turned into a law that will help other rural hospitals after UK saw it as a threat and rewrote the bill

By Melissa Patrick
Kentucky Health News

State Sen. Phillip Wheeler of Pikeville says one of the most consequential pieces of legislation passed by state lawmakers this year is a bill he sponsored to funnel more money to rural hospitals in Kentucky.

Senate Bill 280 allows certain rural hospitals that get at least 35% of their revenue from Medicaid to get the same enhanced Medicaid reimbursement rate as the University of Kentucky or the University of Louisville.

The hospitals are defined as those that have a trauma center and offer clinical rotations for doctors, nurses and other medical professionals who are in training.

“It kind of levels out that playing field,” Wheeler told Kentucky Health News. “And it does this without placing any additional liability for matching funds on the General Fund by allowing local communities to assess a provider tax against the medical provider.” Such taxes are applied to revenues of health-care facilities, typically to get more government matching money.

Asked if his bill will keep rural hospitals from closing, Wheeler said, “I wouldn’t be so bold as to say that this is the only solution. I think you need to take a multifaceted approach and providing these hospitals with the ability to compete and the funding they need to develop this specialized care is one piece of the puzzle.”

Wheeler, a Republican who represents Elliott, Johnson, Lawrence, Martin and Pike counties, said the higher reimbursements will allow rural hospitals to provide a higher level of care, especially when it comes to specialty services. And this, he said, will increase access to care for rural communities.

“Not only does that make a huge difference to the patients being served, but it also will result in a much larger increase in investment in health care in those communities,” he said. “And . . . especially in a lot of rural areas, including where I live in the 31st Senate District, health care has essentially become our largest industry. I mean, the largest employer in my district, by far, is Pikeville Medical Center with over 3,000 employees.”

Wheeler said he didn’t think anyone would be harmed by this law, noting that he resolved concerns voiced by UK HealthCare, which has clinical rotations at King’s Daughters Medical Center in Ashland, which it recently purchased.

Path to “good public policy”

Mark Birdwhistell, UK HealthCare’s vice president for health system administration and chief of staff, explained that UK and UofL receive enhanced Medicaid reimbursements because they are Level I trauma centers that agree to care for the “sickest of the sick” patients in the state and also house the state’s primary educational programs for medicine and dentistry.

He said the impetus of SB 280 and its companion bill SB 281, which was not heard in committee, came about when UK bought King’s Daughters, which allowed the Ashland hospital to get the higher Medicaid reimbursement.

The original SB 280 would have given Level II trauma centers — Pikeville has the only one in the state — the same enhanced Medicaid rate as UK and UofL. SB 281 said UK and UofL could only take that enhanced Medicaid reimbursement in clinics or hospitals that operated in the county of the educational facility, limiting UK’s enhancement to Lexington.

“Both of these had unintended consequences,” Birdwhistell said, so UK could not support the bills in their original form. He said they would have left UK with lower Medicaid payments for services provided in any hospital that it has an agreement with to provide care, such as Hazard Appalachian Regional Healthcare. In addition, he said UK has practices in other counties, such as Bowling Green and Manchester, that get enhanced Medicaid payments.

“That would have been devastating if that had come to fruition,” said Birdwhistell, who was state health secretary in 2006-07. Later adding, “It would have significantly reduced funding and would have eventually compromised good patient care in the commonwealth.”

That’s because the state has to get ongoing approval from the federal government for the special Medicaid payment plans, one for public universities and another for private hospitals. And, he said, if these two pieces of legislation had passed in their original format, it would have triggered an amendment to the current plans, possibly putting them at risk.

Driven by this concern, Birdwhistell said he suggested that the bill keep the existing enhanced Medicaid plans but have a different solution allowing a third way for hospitals to get the enhanced payments.

“We moved it from a potential where we would not be able to get as much federal Medicaid money in the state to a new program that has the potential of pulling in additional reimbursement and an incentive to focus on access and improved outcomes, improved patient outcomes,” he said.

The revised bill that passed allows an opportunity for hospitals to get comparable reimbursement to what the universities get if they meet the criteria to do so, and Birdwhistell. And this, he said, accomplishes the goal of creating a more “level playing field.”

Further, he said SB 280 allows the opportunity for additional Medicaid payments for care provided by other health-care workers, such as advance-practice registered nurses, dentists and social workers. It also says that pediatric teaching hospitals are able to get the additional Medicaid reimbursements for services to patients under 18.

“So I think we ended up with good public policy that has the potential of improving access and  patient outcomes for the Medicaid population,” Birdwhistell said.

He added later, “I think it is transformative because it has the potential of aligning people’s incentives around an increased increased physician workforce, opening up additional access, appointment availability. And thirdly, aligning around access and quality.”

Birdwhistell said six or seven hospitals will likely qualify for the enhanced Medicaid payments in the first wave of hospitals. He said the goal is to get the plan submitted to the Centers for Medicaid and Medicare Services by Aug. 1 and for payments to be approved by January 2025.

A news release from the governor’s office said it estimates that 43 Kentucky hospitals meet the requirements of the new plan, dubbed the Kentucky Medicaid Assistance Program. The plan is contingent upon approval from CMS. Wheeler said they have “very good indicators” that it will be approved.

Why SB 280 is important

Donavan Blackburn, president and chief executive officer of Pikeville Medical Center, said he’d been working on this bill for the last year and a half “to address the inequality and disparity between us and urban hospitals,” which have a greater share of patients with commercial insurance, which pays higher rates.

He pointed out that his Level II trauma hospital accepts patients from 48 other hospitals in the region who need a higher level of care and that 77% of them are either on Medicaid or Medicare. He said Pikeville Medical Center “serves the sickest of the sick and the most financially challenged in the nation.”

And while he said his hospital could be likened to UK or UofL when it comes to the services it provides, it is not a state-owned hospital or a teaching hospital. The hospital has an agreement with the University of Pikeville and four nursing schools to provide clinical rotations.

In particular, he said it’s his mix of payers that makes SB 280 so important because this extra money will allow the high level of care provided by the hospital to continue.

“And what that extra payment means is, is that programs like our children’s hospital, like our trauma center, like our specialties and subspecialties, endocrinology, rheumatology, all those different specialties that we’re able to offer here in our community can stay in our community,” he said. “Which means that not only people have access to care, but it prevents a diagnosis that if it goes untreated, becomes advanced, which costs actually the state and federal government even more.”

Further, he said it will allow the hospital to retain jobs in health care, which is the top economic driver in the region.

Blackburn said the success of SB 280 will be evident if they are able to “keep those service lines open and to keep making investments and advancements and to be able to keep up with all the other markets. . . . It’s about advancement and sustainability.”

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