State Directed Payments: A ‘Lifeline’ for ECU Health

As a marketing manager at association member ECU Health, Kelly Herr works to educate her community about the services the Greenville, N.C., health system provides.

Five years ago, that mission became personal. While pregnant with her second son, the Edenton, N.C., resident began experiencing concerning pains and knew something was wrong.

Herr and her husband rushed to ECU Health Chowan Hospital, where she was diagnosed with a 50% placental abrasion. Within an hour, she received an emergency cesarean section, and her son Hawkins was safely delivered.

Doctors told Herr that had she waited 45 more minutes before going to the hospital, the outcome of her birth could have been vastly different. She notes that without Chowan, the closest hospital where she could give birth would be about 35 minutes away.

"There would be a lot of unfortunate outcomes without our birthing center," Herr says. "Our small rural hospitals are just so valuable for our communities to have access to specialty care close to home."

Herr's story illustrates the importance of ensuring access to timely and lifesaving care in rural communities. Essential hospitals like ECU Health rely on a patchwork of funding to provide these services, including Medicaid state directed payments (SDPs).

First established in 2016, SDPs help states close gaps in payment between Medicaid and other payers, such as private insurance, by requiring health plans to pay providers according to state-specified rates and methods. Without SDPs, Medicaid managed care payments to hospitals would be less than half of the rate paid by other payers, which is not enough to sustain access to the essential services that hospitals provide, such as maternity, trauma, and behavioral health care.

Because most Medicaid beneficiaries now are enrolled in Medicaid managed care, SDPs have become a critical source of support for essential hospitals. They allow states to target Medicaid funding to support state goals and are a vital tool for ensuring access to quality care for Medicaid beneficiaries.

North Carolina's SDP program, the Healthcare Access and Stabilization Program, was a "lifeline" for the system following the COVID-19 pandemic, says Jason Lowry, executive director, government and public affairs.

Today, however, SDPs are under threat due to the July 4 passage of H.R. 1. The law requires the Centers for Medicare & Medicaid Services to add regulatory limits on SDPs for inpatient and outpatient hospital services, nursing facility services, and qualified practitioner services at academic medical centers.

ECU Health, which is integrated with the Brody School of Medicine at East Carolina University, serves a vast region of 29 rural counties. Lowry says that, without SDPs, the system would have been forced to close some of its hospitals after the COVID-19 pandemic, including those offering labor and delivery services and other life-saving care.

"If you put money into rural eastern North Carolina, you can build economies," says Lowry. "If you take health care out of those communities, they're going to collapse."

To build strong and healthy communities, the health system goes beyond its walls to provide health education and preventive care in eastern North Carolina.

"We're always out educating on various health topics [and] providing free wellness screenings," says Herr. "Without rural hospitals here, those educators would not be here to go out in the community and try to better the health and well-being of our communities."

Amid impending cuts to SDPs and Medicaid at large, these preventative measures would be first to go, further taxing the health system's already struggling emergency departments.

"The population that gets Medicaid will go down in North Carolina, so what they end up doing is ending up in our emergency departments," explains Lowry. "Our emergency departments, like everybody's, are massively overrun, particularly in Greenville. We're at 99% capacity on any given day."

Protecting SDPs and Medicaid funding would ease this pressure.

"It's a return on investment," says Lowry. "This is an opportunity for them politically on both sides to spike the ball on doing what's right for eastern North Carolina."