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Rural hospital tax credits needed
Hill Jack
Sen. Jack Hill

By now most everyone has read of the plight of many rural hospitals. Georgia’s Rural Hospital Tax Credit was passed in 2016 to encourage Georgians and corporations who owe state income tax to direct some or all of their state tax obligation towards rural hospitals either by direction to a local qualifying hospital or one of those listed as being in need.

The plight of rural hospitals

According to a report published by the Southern Legislative Conference, of the 6210 hospitals in the U.S. in 2017, 2250 of those were classified as rural or generally served populations of less than 50,000. This report observed that the average rural hospital showed 56% of revenues coming from two federal reimbursement programs (Medicare & Medicaid). In 2017, that rate was twice as high as in the previous five years.

Southern states had approximately 831 of those rural hospitals and almost 10% of those have closed since January, 2010. In fact, in the South, 27.8% of rural hospitals are considered to be at high financial risk. Alabama had the highest number of hospitals at high financial risk at 50% while Georgia was at 41.3%. Georgia was third highest in the South.

What factors squeeze 

rural hospitals?

Poverty is one of the indicators of an area where a rural hospital will struggle to survive.   Almost certainly, those hospitals will serve a higher percentage of Medicare and Medicaid patients and a lower percentage of patients with private insurance. Both programs reimburse rural hospitals less than the cost of the services provided.

Uncompensated Care or those services provided to those who cannot pay, called Uncompensated Care, runs into a lot of money. Nationally, Uncompensated Care totaled $619.6 billion in 2017.

Rural hospitals also have difficulty hiring medical professionals and attracting physicians. Larger hospitals have hired many physicians and specialists like hospitalists who free doctors for more regular working hours. This is an advantage for larger hospitals and a quality of life issue for physicians.

History of the rural 

hospital tax credit

Lt. Governor Geoff Duncan was the original author of the underlying bill which provided $60 million in state income tax credits which could be directed to qualifying rural hospitals.  In FY 2018, eligible hospitals reported receiving $59.5 million of donations funded through this tax credit and expended $50.7 million.

The Department of Revenue publishes a list each year of qualifying rural hospitals ranked by need. A taxpayer can dedicate their tax contribution to a specific hospital or choose from the ranked list. Hospitals are limited to $4 million in contributions.

Qualifications for 

the tax credits

The criteria to qualify as an economically vulnerable rural hospital include:

➤ Must be operated by an authority or be non-profit

➤ Must be located in a rural county

➤ Must accept Medicare and Medicaid patients

➤ Must provide amount equal to at least 10% of hospital revenue in Uncompensated Care

➤ Must develop a five year plan to expend the contributions

Contributions received by Fourth District qualifying hospitals

As of Oct. 31, 2019, receipts for Fourth District qualifying rural hospitals show:

➤ Candler County Hospital — $665,990.00

➤ Effingham Health Systems — $241,357.00

➤ Emanuel Medical Center — $434,650.00

➤ Evans Memorial Hospital — $161,264.49

How previous contributions have been spent

In 2018, the Fourth District qualifying rural hospitals spent the following amounts of contributions for the following purposes:

➤ Candler County Hospital — $764,000 on nurse and physician retention and recruitment

➤ Effingham Health Systems — $679,000 on surgery patient room renovations, monitoring technology and improvements to the Cancer Care Center

➤ Emanuel Hospital — $520,000 on equipment upgrades, replacing an outdated imaging unit, reducing accounts payable and staff retention

➤ Evans Memorial — $902,000 to purchase new radiology equipment and building upgrades, reducing accounts payable and staff retention

As of October 31, 2019, only $36.2 million of the potential total of $60 million in tax credits had been pre-approved. So anyone who is interested in making a contribution of state taxes to rural hospitals can still do so.