Alabama rural hospital funding board approves distribution of tax-incentive donations

A state board Monday approved a system of distributing private donations to rural hospitals, based on need.

The Rural Health Investment Program Board will use three weighted criteria to approve the allocation of the money, made available through legislation passed earlier this year that created a dollar-for-dollar tax incentive program for individuals and businesses that donate to rural hospitals.

“We just did a simple table where the hospital with the greatest need would get 100 points, the second greatest need would get 99 points,” Wesley Ashmore, vice president of finance at the Alabama Hospital Association, told the board Monday during its virtual meeting.

The board will use three weighted criteria to score hospitals’ needs. The “quick ratio” weight is current assets divided by current liabilities and accounts for 50% of a hospital’s rank. “Operating margin” is determined by the hospital’s net income from services to patients divided by operating revenues and accounts for 25% of the rank. “Uncompensated care” accounts for 25% and is determined by the hospital’s uncompensated care divided by operating expenses.

Each hospital is ranked on each weighted category, Ashmore said, which is then averaged for the hospital’s overall rank. Lake Martin Community Hospital ranked first overall and will fall into the first tier. Lake Martin and nine other hospitals will receive 30% of undesignated funds.

Greene County Hospital ranked last overall and will fall into tier five. Greene County and nine other hospitals will receive 10% of undesignated funds. The board did not have all of Green County Hospital’s data, which led to its position.

Alabama State Treasurer Young Boozer complimented Ashmore’s methodology.

“It’s easy to understand, and I think it’s going to be a very positive impact and it will be something that will be able to be used for some time,” Boozer said.

According to the University of North Carolina’s Sheps Center, nine rural hospitals have closed in Alabama since 2009. Only 30% of the state’s rural hospitals have labor and delivery units, leaving many expectant parents to drive long distances for care. Alabama is one of ten states that has not expanded Medicaid. Alabama’s hospitals have long pushed for expansion, saying it would help hospitals on the brink of collapse survive, but Republican leaders have resisted it.

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While Alabama House leaders have signaled openness to a public-private hybrid approach to expansion, the Senate has been hostile, and removed a provision from a 2024 gambling bill that could have provided money for the program.

The donation program approved by the Alabama Legislature earlier this year has an annual statewide cap of $20 million for 2026, $25 million for 2027 and $30 million for 2028 and beyond. It requires a 10% match from local communities.

In November, board members and Danne Howard, president of the Alabama Hospital Association, said the program will help, but would not save a hospital in danger of closing.

“It was never intended to be something that would prevent or save all of the rural hospitals, because it can’t, it won’t,” Howard said in an interview in November. “It is an opportunity for community engagement, for community support of their hospitals, to get some much needed cash into a rural hospital that has needs for something.”

The board approved funding for 50 hospitals at its meeting last month, which will be displayed on the Alabama Department of Revenue’s website. Donations made without designating a specific hospital will be distributed based on a weighted five-tier system. There will be 10 hospitals in each tier.

Alabama’s rural hospitals will also be receiving funding from the federal Rural Health Transformation Program, part of the One Big Beautiful Bill Act (OBBBA) that was signed into law this summer. It distributes $50 billion in grants to the states over five years for rural health care. According to a brief from KFF, a national health policy research organization, the fund could offset just over a third (37%) of the estimated federal Medicaid spending cuts in rural areas, which are projected to be $137 billion over ten years.

Gov. Kay Ivey’s office announced that the state submitted its application to the federal government last month.

Rob Pearson, chair of the board, said he is happy with how the undesignated funds tier came together.

“I believe we’ve got something that the Legislature intended. If there’s any adjustments to be made, we’ll get back with them, but it’s certainly something that will be supported statewide,” Pearson said. “I look forward to seeing it improve our rural hospitals around the state.”