Keeping care close to home will take all of us.
By Carl Vaagenes, CEO, Alomere Health
For more than 70 years, Alomere Health has kept a simple promise to our community. Our doors are open to everyone, no matter what. We are a nonprofit hospital, owned by the community we serve. We have no shareholders, only patients, and every dollar goes back into care right here.
Today, that promise is under strain across Minnesota. In October, the Minnesota Hospital Association and hospital leaders from across the state released a report called A Statewide Crisis of Care. It describes real and serious financial pressure on hospitals in every corner of our state, as some hospitals have had to close services, and others could close altogether. Only 48 of Minnesota’s 98 rural hospitals still deliver babies. This means families now drive farther and wait longer for services that used to be close to home.
A large part of the crisis is related to reimbursement rates of government programs not paying a fair share toward the cost of care. At Alomere Health, Medicare, Medicaid, and self-pay make up 49% of our revenue, and yet Medicare pays only 77 cents of the cost of care we provide, and Medicaid pays about 47 cents of the cost of care. Therefore, hospitals have had to rely on commercial insurance reimbursement to offset the underfunding of Medicare and Medicaid. To compound the crisis, approximately 11,000 people per day across the U.S. are turning 65 and aging into the Medicare program. This is affecting hospital financial performance as this population goes from being covered by commercial insurance at higher rates of reimbursement to Medicare reimbursement rates. At the same time, the population of patients with commercial insurance who have historically subsidized these government programs is becoming a smaller percentage of total patients to adequately fund the underfunding of the Medicare and Medicaid programs.
The math no longer works and the crisis is about to get worse. The “Big Beautiful Bill” includes federal changes to Medicaid enrollment eligibility requirements, and many people who have relied on government sponsored Medicaid insurance will no longer have coverage. Yet, there will still be a need for medical services among this population, so hospitals are expecting to see an increase in uncompensated care, which will add even more financial pressure. At Alomere Health, we estimate the impact of this new federal cut to be $1.5M and $2M in 2027 and 2028 respectively. This does not include the fact that the cost of delivering care has gone up more significantly since 2019, driven by drugs, supplies and other costs hospitals do not set.
The crisis is real, but I also want our community to know that Alomere Health is on solid ground. Margins of 4 to 5% are what is necessary for our hospital to reinvest in the care we are able to provide, but that does not provide a lot of room to absorb large negative impacts. That’s why, for years, we have worked to manage costs and use every dollar wisely. When we invest in buildings, equipment or technology, we choose the projects that will do the most for our patients and our future. We have also grown with purpose, adding services where our community needs them most, which has included recruiting many physicians, advanced practice providers, and specialists to our area. In some cases, we are required to subsidize these services to serve our communities. We do this because the demand is real, and people across our region count on specialty care.
Challenging times certainly demand that we lead differently, which is why Alomere Health’s strategic focus and growth has been on positioning ourselves as a strong collaborative partner to other hospitals in our region. We know that patients will still need that care, and we want to be ready to serve them, from women’s health to other specialties, close to home. As rural hospitals, there is tremendous opportunity to explore ways to be more innovative and collaborative, working closely together to maintain the quality of services while improving efficiencies and costs. This can lead to joint planning and development of effective models of care to grow services and prevent our hospitals from having to cut services that go against our ability to keep care close to home.
Every community is impacted by the reimbursement challenges, but the demographics of each community is a critical distinction in terms of the impact. We are fortunate to live in a region with a strong and varied economy. Manufacturing, health care, education and small businesses all do well here. Because of that, many of the people we care for have health coverage through their jobs. That gives us steadier footing than many rural hospitals in Minnesota have today, and we do not take it for granted.
It’s important that we speak up on these important issues because health care in Minnesota is connected. When capacity is limited due to closure of services, there is a ripple effect. No hospital can fix how care is paid for on its own. We are asking our lawmakers for help in some practical ways. An important start would be addressing the Medicare and Medicaid reimbursement rates and eligibility requirements, protect the 340B drug program in Minnesota, finish the state’s Medicaid funding work with federal regulators, and cut paperwork that pulls caregivers away from patients.
You can help too. Learn more about this statewide effort at protectmnpatients.org. Talk with the people who represent us, and ask how they will help keep care close to home.
At Alomere Health, we will keep doing our part. We will keep planning carefully, bringing great providers to our region and keeping our doors open to everyone. Protecting access to care for every Minnesotan will take all of us.
