In addition to a shortage of health care providers, Alabama’s hospitals are struggling on the business side due to the convoluted structure of insurance.

Ryan Kelly, executive director of the Alabama Rural Health Association, says one issue is hospitals not being paid for every service they provide.

“Someone might come in with chest pain, and their left arm is tingling, so they're running every protocol for a heart attack. They're running every test possible, and then it just turns out that they have a stomach ulcer or something like that. They still ran all the tests, but a select insurance company may down code that from like a level three to a level one because it was a non-issue. But the hospitals still spend all their resources, all their time, just to make sure that it wasn't," Kelly told 1819 News. But they're still not going to be paid.”

Aside from not paying for all services rendered, Kelly says it is common for insurance companies to deny claims entirely.

“Insurance companies are playing way too many games when it comes to accepting claims or denying claims, which then means that the hospital or the clinic has to go through the process of appealing the denial," he outlined. "And most of the time, the providers end up winning those.”

According to Kelly, the percentage lost on claims ranges from “a couple of percentage points up to twenty percent."

"Some hospitals, honestly, especially the smaller ones, don’t even know how much they lose,” he added.

Hospitals’ razor-thin profit margins make even small losses significant.

Kelly says this contributes to rural hospital closures and makes “the value proposition of owning and running hospitals very limited.” Even “the non-profit hospitals still struggle to maintain even just a steady cash flow.”

The problem, according to Kelly, is not Medicaid. He says hospitals are struggling both in states “that have and have not expanded Medicaid.”

Kelly added that “everyone would love” a cash payment hospital system or “hybrid models that could use insurance on catastrophic care but still pay cash for everything under that."

"[T]hat’s a great model," he said. "I think it works really well.”

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