Serving Barnwell County and its neighbors since 1852
With cuts to Medicaid payments looming, one rural South Carolina hospital is asking legislators to ensure they have alternatives should finances turn dire.
Allendale County Hospital is financially stable and not at risk closure. But if payments from government-funded health care programs were to dip too far, the independent hospital wants to be ready just in case, said CEO Lari Gooding.
The potential answer: A new Medicaid provider designation called a “rural emergency hospital.” Amid a national hospital closure crisis, some on the brink of insolvency have turned to it as a way to keep going.
For that plan to work in South Carolina, rural hospitals first need the new hospital designation added to state law. Doing so gives state health regulators the authority to draft licensing and staffing rules for the new designation, keeping the state in line with federal Medicare and Medicaid requirements.
“We’re not there yet,” Gooding said.
But the hospital’s governing board knew it needed to be prepared.
“We started looking at what future options might be for us,” he said. “What we realized is the state statute didn’t have a definition [for the new designation] so we couldn’t even if we wanted to.”
A state Senate panel on Wednesday voted unanimously to advance a bill to change that.
Not without downsides
Since 2010, more than 150 hospitals nationwide have closed or converted to out-patient only. That includes six hospitals in South Carolina according to a 2023 legislative study.
To avoid total closure, 44 others have switched to the new designation, according to researchers at the University of North Carolina at Chapel Hill.
These hospitals receive a higher payment rate from Medicare — about 5% more — plus a $3.2 million annual stipend. To get the additional funds, the hospitals must make changes. They must pare down their operations to emergency care and some outpatient services, only treating patients who stay for no more than 24 hours.
No hospital in South Carolina has sought that designation yet. But if one ever does, Gooding expects Allendale would be the first.
Allendale is already designated as one of three “critical access hospitals” in the state, receiving an added 1% on Medicare reimbursements compared to traditional hospitals. Abbeville Area Medical Center and Edgefield County Healthcare, both affiliates of Greenwood-headquartered Self Regional Healthcare, are the two others.
They feature 25 or fewer inpatient beds, 24/7 emergency services, and a maximum 96-hour average length of stay.
Allendale also operates a 44-bed nursing home in Fairfax, several rural health clinics and the only retail pharmacy in the county, making it essential to the area.
It has become even more critical in the last decade as closures have made it the only in-patient hospital in a three-county area.
The Medical University of South Carolina took over operations of a freestanding emergency room in Bamberg County in 2023. But while it can handle emergencies, lab work and imaging, patients needing more intensive care must be transferred via ambulance to a hospital.
Making the switch to a rural emergency hospital is not without its downsides, Gooding said.
Allendale’s pharmacy would no longer be eligible for federal medication discounts — often 25% to 50% off the sticker price — under what’s known as the 340B Drug Pricing Program.
“Which is a huge deal for us,” Gooding said.
The hospital also would have to drop its so-called swing beds, which allow patients to stay at the hospital for 20 days of therapy after a major surgery.
The cost of Medicaid cuts
It was cuts to Medicaid under the Trump administration’s hallmark tax cut package that spearheaded the notion Allendale may one day have to make the switch, Gooding said.
“We know it’s going to affect us in some way. We just don’t know how much,” he said. “I’m not saying it’s going to close hospitals, but it’s certainly not going to help.”
More than 70% of the business Allendale does comes from Medicare and Medicaid patients, Gooding said, making the hospital particularly vulnerable.
The biggest cost-cutting measures under the “One, Big, Beautiful” law apply to states that expanded Medicaid coverage to all adults up to 138% of the federal poverty level, as intended under the 2010 law commonly known as Obamacare. South Carolina is among the 10 states that never did, so it’s less affected.
It’s Medicaid-related changes under another part of the massive tax cut law that will hit South Carolina hospitals hardest. Starting in 2028, the state will start losing its ability to pay hospitals for treating Medicaid patients at similar rates as private insurance through what’s known as the state directed payment program.
For the 60 general care hospitals in the Palmetto State, that collectively means a looming loss of roughly $150 million annually over 15 years, according to the state’s hospital industry group.
Instead of reimbursing hospitals at rates that align with private insurance — as the state has for the last two years — payments would plummet back to near Medicare levels. The difference would mean an estimated $2.4 billion loss, according to the advocacy group.
How it works and what’s next
The program, authorized by federal regulators in the final months of the Obama administration in 2016, allowed states to tax hospitals. Those taxes were then used to draw down more money from the federal government. The hospitals ultimately got those dollars back — plus the added federal funds — through the increased rates paid for treating Medicaid patients.
Since 2023, South Carolina has used the program to hike Medicaid payments to hospitals by a whopping 70% on average. That’s how much it took to bring payments more in line with treating a privately insured patient.
For the fiscal year that just ended June 30, 2025, South Carolina’s participation in the program provided hospitals an additional $2.5 billion: $1.75 billion from the federal government and $761 million from higher state taxes funneled back to them, according to documents filed by the state Department of Health and Human Services.
Allendale’s share of that: $3.5 million.
To help rural health care most heavily impacted by the new law, Congress set aside a $50 billion pot of money distributed nationwide over five years. South Carolina’s share in the first year is $200 million.
The state Department of Health and Human Services is still finalizing guidelines for how it will dole out the funding, but it won’t just go to rural hospitals to cover financial losses. In its initial proposal, the agency says it wants to use the money to expand telehealth, fund health technology startups, expand chronic disease management programs, purchase mobile health vans, and offer signing bonuses to health care workers willing to take jobs in rural settings.
