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Proposed Medicaid Reimbursement Rate Cut Squeezes Rural Oklahoma Hospitals

Okeene Municipal Hospital CEO Shelly Duncan on March 30, 2016.
Jacob McCleland
Okeene Municipal Hospital CEO Shelly Duncan on March 30, 2016.


Shelly Dunham walks through the halls of Okeene Municipal Hospital in northwest Oklahoma on a slow Wednesday afternoon.

“It’s not a busy place. We don’t have a lot of patients, but we’re the safety net for patients,” Dunham said.

Dunham is the CEO of this 17-bed hospital that offers the basics in care - like an emergency room, a laboratory, therapy, X-rays, and  CT scans.

“We have to be open to take care of people who come in with emergencies and get them to higher levels of care when they need that,” Dunham said.

Three doctors and two physician assistants split their time between the small hospital and an adjoining clinic, offering services for this small town of about 1,100 people.

Last week, the Oklahoma Health Care Authority announced it would slash the Medicaid reimbursement rate it pays to medical providers by 25 percent. The decision comes amid the state’s revenue crisis that will lead to an estimated $1.3 billion budget shortfall next year. Those lower Medicaid reimbursement payments will put some rural hospitals in a bind.

About 10 percent of Dunham’s patients are uninsured, and another 10 percent are on SoonerCare, Oklahoma’s version of Medicaid. The proposed 25 percent cut in the reimbursement rate means her hospital will lose about $75,000 per year. That amount won’t put Dunham out of business, but it’s enough to squeeze her tight budget.

“In a small community, we already work at a skeleton crew,” Dunham said. “We don’t have additional staff than what we really need, and we don’t provide services that aren’t really necessary.”

A study by iVantage Health Analytics finds 42 of Oklahoma’s rural hospitals are considered vulnerable. This year, the hospital in Sayre closed its doors, and the one in Frederick shut down its ER and inpatient care.




Oklahoma Hospital Association president Craig Jones says rural facilities face an uphill climb from a business standpoint, even before a reimbursement rate cut. They don’t have a lot of patient volume, it’s hard to compete with big, urban hospitals for physicians, and many of their patients are low income.


“When we look at the rural areas, they tend to be more heavily concentrated by Medicare and Medicaid patients, so they’re relying upon governmental programs that already are not fully reimbursing them at their full costs,” Jones said.

Jones said rural hospitals that deliver babies will feel an immediate impact from the rate cuts because SoonerCare covers nearly 60 percent of births in Oklahoma.

“I don’t think there’s any doubt that there will be some obstetrical services at some facilities that will close because the percentage of their obstetrical business is high and they just won’t be able to sustain it,” Jones said.

Nico Gomez is the CEO of the Oklahoma Health Care Authority, the agency in charge of the state’s Medicaid program, and he sees the reimbursement rate cuts as a last resort. He said his agency has slashed nearly $1 billion from its budget since 2010..

“We’ve actually been able to mitigate a lot of damage to the program by being very thoughtful and targeted with the cuts leading up to this point,” Gomez said.

Gomez said he can’t put further limitations on who qualifies for the program because they already restricted the qualifications as much as possible. He can’t cut benefits because all that’s left are the mandatory ones.

“So really now we’re left to rates. That’s been our priority to protect and that’s the last thing we want to cut, but those are the cuts that we have left,” Gomez said.

And if Oklahoma’s general revenue continues its deep slide, more rate cuts could be on the horizon.

Shortly after Gomez announced the rate reduction proposal, he unveiled a separate plan to use federal money to provide insurance for low income Oklahomans. His plan also restores the reimbursement rate to nearly 87 percent, but that would require additional state funding.

To Okeene Municipal Hospital’s Dunham, having a healthy local hospital is crucial to the well-being of a community. Driving 25 miles to another emergency room can be a matter of life or death, regardless of whether or not a patient can pay for it.

“It’s just a tough situation and we want to do all we can to continue to provide care but where else can you expect somebody to provide services and say, ‘But we’re only going to pay you 70 percent of what it costs you to do that,’” Dunham said.

But if the rate cuts are approved, that’s exactly what she’ll have to do.

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Jacob McCleland spent nine years as a reporter and host at public radio station KRCU in Cape Girardeau, Mo. His stories have appeared on NPR’s Morning Edition and All Things Considered, Here & Now, Harvest Public Media and PRI’s The World. Jacob has reported on floods, disappearing languages, crop duster pilots, anvil shooters, Manuel Noriega, mule jumps and more.
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