A state legislative committee focused Tuesday on health care struggles in rural areas, where residents often have a hard time finding local doctors and hospitals are at risk of closing.
The cuts to Medicaid in the One Big Beautiful Bill Act, sometimes called HR1, that Congress passed last year will hit rural hospitals particularly hard because rural hospitals are more likely to rely on Medicaid to cover their costs.
Nationwide, 700 rural hospitals are at risk of closing because of serious financial problems, according to the Center for Healthcare Quality and Payment Reform.
The policy organization found nine of 56 rural hospitals in North Carolina at risk of closing, with six at immediate risk.
Executives with FirstHealth of the Carolinas, a system of four not-for-profit hospitals that serves counties in central and southwestern N.C., told the Joint Legislative Oversight Committee on Health and Human Services that its health network is facing a decline in operating income over the next five years, and is projected to be operating at a loss in 2032. Medicare and Medicaid pay nearly 70% of its patients’ hospital bills.
“HR1 doesn’t just affect our finances, but it affects what services are going to remain locally,” said Autumn McFann, FirstHealth’s chief financial officer.
Revenue losses could force reductions in obstetric, oncology, behavioral health and emergency services, McFann said.
The hospital system faces significant challenges recruiting nurses and other staff, and as operating income declines, it will be harder to offer competitive salaries.
The FirstHealth representatives asked legislators to avoid policies they said would further destabilize their finances, such as Medicaid rate cuts, cutting property tax exemptions for hospitals, unfunded mandates, and relaxing certificate of need regulations.
A separate legislative committee, the House Select Committee on Property Tax Reduction and Reform, is considering a proposal that would reduce nonprofit hospitals’ 100% tax exemption to 50%.
The state’s certificate of need law requires healthcare providers to obtain state approval before adding new services or some equipment. Hospitals tend to support the law, but Senate Republicans oppose it.
Sen. Amy Galey (R-Alamance) pushed back on the request to keep certificate of need protections for rural hospitals.
“What’s your basis for saying that will have a negative impact on rural care?” she asked. “Many people say there’s no demonstrative link between CON repeal and the closure of rural hospitals — that you end up with more providers overall, especially in urban and suburban areas.”
Legislators have been talking for years about the hurdles rural residents must jump to find doctors and get to hospitals.
The UNC system is using $40 million from federal COVID-19 rescue plan funds to expand the state’s nursing workforce. Katherine Restrepo Martin, UNC’s vice president of health affairs, told the committee that money was allocated to all 12 of the UNC system’s nursing programs.
“We are a key producer of nurses,” she said. There are other shortages of health care providers, she said, but “we wanted to go all in on nursing.”
“The nursing shortage is the most severe,” Martin told lawmakers.
NC has plenty of doctors and nurses to deliver babies, but rural counties still go without
The effort is expected to produce a net increase of 700 people with nursing degrees in four years, with an estimated 77% of those nurses remaining in North Carolina to work.
The federal law that cut Medicaid also created the Rural Health Transformation Program that’s sending money to states to improve health care access.
North Carolina received about $213 million for the first year, or $13 million more than it asked for. States will be eligible to receive more money over the next four years.
“Our goal is to ensure that these dollars translate directly to expanded primary care access, stronger behavioral health services, a more resilient workforce, and more sustainable rural health systems,” said Dr. Devdutta Sangvai, N.C. Department of Health and Human Services secretary.
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