Tag Archives: Bad Debt Expenses

Trump Budget, Revised AHCA, Credit Negatives for NFP Hospitals

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The one-two punch of massive cuts to Medicaid that are proposed in both the new budget and the House Republicans’ revised American Healthcare Act would result in cuts of close to $1 trillion over 10 years, analysis shows.

Cutting Medicaid by more than $860 million over the next decade would be a credit negative for states and not-for-profit hospitals, both of which would be left scrambling for alternative funding to cover the loss, according to a new report from Moody’s Investors Service.

Last week the Trump administration unveiled a budget proposal that includes $610 billion in cuts to core Medicaid services, and an additional $250 million in reductions to Medicaid expansion programs created under the Affordable Care Act.

The following day, the Congressional Budget Office released its scoring of the revised American Health Care Act – the Republican plan to repeal and replace the Patient Protection and Affordable Care Act and estimated that it would reduce Medicaid spending by $834 million through 2026.

“The proposals significantly change the longstanding Medicaid financing system and are credit negative for states and not-for-profit hospitals,” Moody’s said in an issues brief.

For states that don’t have the luxury of ignoring budget imbalances, the changes would increase pressure to either kick people off Medicaid, increase the state share of Medicaid funding, or cut payments to hospitals and other providers, Moody’s says.

Hospitals, particularly those serving a high mix of Medicaid patients, could expect to see reimbursement cuts and more cases of uncompensated care as Medicaid patients lose the coverage they’d gained under the ACA’s expansion.

Medicaid is already a significant budget burden for states, consuming between 7% to 34% of state revenue and averaging 16%.

Under the ACA, bad debt expense at not-for-profit hospitals in states that expanded Medicaid eligibility declined on average by 15% to 20% since 2014, enhancing these hospitals’ cash flow. Similarly, the gains in insurance coverage lowered the nationwide uninsured rate to approximately 11%, with uninsured rates even lower in states that expanded their Medicaid rolls, Moody’s says.

“Although the budget would give states limited new flexibility to adjust their Medicaid programs, the measure overall reflects a significant cost shift away from federal funding to states,” Moody’s says. “This cost shift is significant and would force states to make difficult decisions about safety-net spending for hospitals that serve large numbers of indigent patients.”

Trump’s budget forces states into ‘difficult decisions’ about spending for hospitals serving indigent patients

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http://www.journalnow.com/business/business_news/local/trump-s-budget-forces-states-into-difficult-decisions-about-spending/article_15f1eee9-b4aa-5c6b-8132-3d93739682c5.html

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A prominent rating agency, Moody’s Investors Service, said Thursday the proposed Trump administration budget could form an even darker financial cloud over the nation’s not-for-profit health-care systems and state legislatures.

Moody’s said the White House budget, if approved in its current form by Congress, would represent a “credit negative” for both groups.

The White House budget calls for $610 billion in Medicaid cuts over 10 years as well as eliminating $250 billion dedicated to state Medicaid expansion programs.

A projected $834 billion in lower Medicaid spending over 10 years was scored by the Congressional Budget Office if the American Health Care Act (AHCA) is enacted. The bill also would lead to 23 million Americans losing their health insurance by 2026, the office projected.

Moody’s wrote that the White House budget, if enacted, “would pressure state governments to take various actions to balance their budgets, including adjusting Medicaid eligibility rules, increasing their own funding of Medicaid, or cutting payments to hospitals and other providers,” Moody’s said.

“Although the budget would give states limited new flexibility to adjust their Medicaid programs, the measure overall reflects a significant cost shift away from federal funding to states,” Moody’s said. “It would force states to make difficult decisions about safety-net spending for hospitals that serve large numbers of indigent patients.”

The warning comes 10 weeks after Moody’s and S&P Global Ratings cautioned that the proposed AHCA could put increased pressure on health-care systems’ operating revenue and bottom lines.

The ratings groups expressed concern that the ACHA would change funding for Medicaid from an open-ended entitlement to a system based on payments that will be made to the states based on a capped per-capita amount.

The bill passed the U.S. House, but is likely to face significant changes in the U.S. Senate.

Another factor Moody’s cited in the credit negative rating is a White House budget proposal “that forces” states to share the costs of the federal Supplemental Nutrition Assistance Program, also known as food stamps.

The federal government covers all benefit costs of the program, while states pay to administer it. The White House budget proposes to shift 25 percent of the benefit costs to states, totaling $190 billion by fiscal 2027.

“We expect action to vary among states, with some taking more action to limit the loss of insurance coverage or benefit changes,” Moody’s said.

“Material reductions of insurance coverage would be credit negative for not-for-profit hospitals because they would increase their bad debt and uncompensated care costs.”

In the most recent quarterly reports for the Triad’s three main health-care systems, each reported an increase in bad debt.

According to the American Hospital Association, bad debt is defined as services for which hospitals anticipate, but do not receive, payment from patients who have the financial means to pay.

Wake Forest Baptist Medical Center reported that through the first three quarters of fiscal 2016-17, it had $166.1 million in bad debt, compared with $38.2 million the year before.

GOP Conservatives’ Goal To Relax Mandatory Health Benefits Unlikely To Tame Premiums

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GOP Conservatives’ Goal To Relax Mandatory Health Benefits Unlikely To Tame Premiums

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As House Republicans try to find common cause on a bill to repeal and replace the Affordable Care Act, they may be ready to let states make the ultimate decision about whether to keep a key consumer provision in the federal health law that conservatives say is raising insurance costs.

Those conservatives, known as the House Freedom Caucus, and members of a more moderate group of House Republicans, the Tuesday Group, are hammering out changes to the GOP bill that was pulled unceremoniously by party leaders last month when they couldn’t get enough votes to pass it. At the heart of those changes is the law’s requirement for most insurance plans to offer 10 specific categories of “essential health benefits.” Those include hospital care, doctor and outpatient visits and prescription drug coverage, along with things like maternity care, mental health and preventive care services.

The Freedom Caucus had been pushing for those benefits to be removed, arguing that coverage guarantees were driving up premium prices.

“We ultimately will be judged by only one factor: if insurance premiums come down,” Freedom Caucus Chairman Rep. Mark Meadows (R-N.C.) told The Heritage Foundation’s Daily Signal.

But moderates, bolstered by complaints from patients groups and consumer activists, fought back. And a brief synopsis of results from the intraparty negotiations suggests that the compromise could be letting states decide whether to seek a federal waiver to change the essential health benefits.

“The insurance mandates are a primary driver of [premium] spikes,” wrote Meadows and Sen. Ted Cruz (R-Texas) in an op-ed in March.

But do those benefits drive increases in premiums? And would eliminating the requirement really bring premiums down? Health analysts and economists say probably not — at least not in the way conservatives are hoping.

“I don’t know what they’re thinking they’re going to pull out of this pie,” said Rebekah Bayram, a principal consulting actuary at the benefits consulting firm Milliman. She is the lead author of a recent study on the cost of various health benefits.

Opponents of the required benefits point to coverage for maternity care and mental health and substance abuse treatment as driving up premiums for people who will never use such services.

But Bayram said eliminating those wouldn’t have much of an impact. Hospital care, doctor visits and prescription drugs “are the three big ones,” she said. “Unless they were talking about ditching those, the other ones only have a marginal impact.”

John Bertko, an actuary who worked in the Obama administration and served on the board of Massachusetts’ health exchange, agreed: “You would either have very crappy benefits without drugs or physicians or hospitalization, or you would have roughly the same costs.”

Maternity care and mental health and substance abuse, he said, “are probably less than 5 percent” of premium costs.

Of course, requiring specific coverage does push up premiums to some extent. James Bailey, who teaches at Creighton University in Omaha, Neb., has studied the issue at the state level. He estimates that the average state health insurance mandate “raises premiums by about one-half of 1 percent.”

Those who want to get rid of the required benefits point to the fact that premiums in the individual market jumped dramatically from 2013 to 2014, the first year the benefits were required.

“The ACA requires more benefits that every consumer is required to purchase regardless of whether they want them, need them or can afford them,” Ohio Insurance Commissioner Mary Taylor said in 2013, when the state’s rates were announced.

But Bayram noted most of that jump was not due to the broader benefits, but to the fact that, for the first time, sicker patients were allowed to buy coverage. “The premiums would go down a lot if only very healthy people were covered and people who were higher risk were pulled out of the risk pool,” she said. (Some conservatives want to change that requirement, too, and let insurers charge sick people higher premiums.)

Meanwhile, most of the research that has been done on required benefits has looked at plans offered to workers by their employers, not policies available to individuals who buy their own coverage because they don’t get it through work or the government. That individual market is the focus of the current debate.

Analysts warn that individual-market dynamics differ greatly from those of the employer insurance market.

Bailey said he “saw this debate coming and wanted to write a paper” about the ACA’s essential health benefits. But “I very quickly realized there are all these complicated details that are going to make it very hard to figure out,” he said, particularly the way the required benefits work in tandem with other requirements in the law.

For example, said Bertko, prescription drugs can represent 20 percent of costs in the individual market. That’s far more than in the employer market.

Bayram said another big complication is that the required benefits do double duty. They not only ensure that consumers have a comprehensive package of benefits but enable other parts of the health law to work by ensuring that everyone’s benefits are comparable.

For example, the law adjusts payments to insurers to help compensate plans that enroll sicker-than-average patients. But in order to do that “risk adjustment,” she said, “all of the plans have to agree on some kind of package. So if you think of essential health benefits as an agreed-upon benchmark, I don’t know how they can get rid of that and still have risk adjustment.”

Hospitals increasingly employing pre-payment strategies to avoid bad debt

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http://www.beckershospitalreview.com/finance/hospitals-increasingly-employing-pre-payment-strategies-to-avoid-bad-debt.html

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The increase in prevalence of high-deductible health plans under the ACA has led to more unpaid hospital bills among the insured population. To combat mounting bad debt, many hospitals have begun experimenting with pre-payment strategies, many of which require patient payment before scheduled care, according to Reuters.

In 2015 U.S. hospitals faced nearly $36 billion in uncompensated care, with much of that coming from unpaid patient bills.

Hospitals are addressing this in a variety of ways. Henry County Health Center in Mt. Pleasant, Iowa, sends patients cost estimates along with pre-surgery medical advice and information.

“Most patients are appreciative that we’re telling them up front,” said David Muhs, CFO of HCHC, according to the report. The hospital even provides a discount to patients for early payment. While the cost estimates help prevent surprisingly high medical bills after medical procedures, they also lead some patients to skip or delay care. Others elect to use no interest loans available through the hospital, Mr. Muhs told Reuters.

After Winston-Salem, N.C.-based Novant Health began offering no-interest loans its patient default rate dropped from 32 percent to 12 percent, according to the report.

The trend of pre-payment strategies is expected to continue this year amid increasing bad debt, according to the report. According to government data cited by Reuters, the average deductible in 2017 for the least expensive of ACA marketplace plans is $6,000 for an individual, up 18 percent from 2014. A Kaiser Family Foundation poll found that 45 percent of Americans would have difficulty paying an unplanned $500 medical bill.

 

Fitch: Changes to Medicaid in ACA repeal bill pose risks for hospitals

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http://www.beckershospitalreview.com/finance/fitch-changes-to-medicaid-in-aca-repeal-bill-pose-risks-for-hospitals.html

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House Republicans’ proposed ACA repeal and replacement plan, known as the American Health Care Act, calls for changes to Medicaid that expose states and hospitals to new fiscal risks, according to a Fitch Ratings report.

The AHCA would eliminate Medicaid’s entitlement structure and restructure the program’s federal funding to a per-capita cap system on Jan. 1, 2020. This change is intended to slow Medicaid spending growth. The Kaiser Commission on Medicaid and the Uninsured estimates switching to a per-capita cap system would reduce federal spending on Medicaid by $1 trillion (or 26 percent) over 10 years. This reduction would require states to make significant budgetary changes and could result in reduced reimbursement for hospitals, according to the report.

The AHCA calls for the government to freeze expanded Medicaid programs on Jan. 1, 2020, and restrict funding only to people who were enrolled in the expanded programs as of Dec. 31, 2019. Under the ACHA, states that expanded Medicaid “will be faced with a unique policy predicament of denying Medicaid access to individuals who would otherwise qualify beginning in 2020, or taking on significant costs they had anticipated would be bored largely by the federal government,” according to Fitch.

Moody’s: GOP’s American Health Care Act is credit negative for nonprofit hospitals

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http://www.beckershospitalreview.com/finance/moody-s-gop-s-american-health-care-act-is-credit-negative-for-nonprofit-hospitals.html

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If House Republicans’ proposed ACA repeal and replacement plan, known as the American Health Care Act, were to become law in its current form it would be credit negative for nonprofit hospitals, according to Moody’s Investors Service.

The components of the AHCA most likely to negatively affect hospitals are transitioning federal Medicaid payments to a per-capita payment to the states, the Medicaid expansion freeze in 2020 and how subsidies are calculated for individuals who purchase insurance on the exchanges, according to Moody’s.

Under the legislation, the uninsured rate would rise, which would cause hospitals’ bad debt and uncompensated care costs to increase, according to Moody’s.

The AHCA’s retention of Medicaid expansion and elimination of scheduled disproportionate share cuts for states that did not expand Medicaid would have a positive impact on nonprofit hospitals, according to Moody’s. However, the rating agency said the positive effects are not enough to compensate for the credit negative components of the AHCA.

Uncompensated Hospital Care Costs Sink to Record Low in California

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http://www.chcf.org/aca-411/insights/uncompensated-hospital-care-costs?utm_source=Facebook&utm_campaign=doc_patient&utm_medium=cpc

Uncompensated Care in California

As California’s uninsured rate plummeted during the first two years of the implementation of the Affordable Care Act (ACA), uncompensated care costs for California’s hospitals followed suit, declining 52% from $3.1 billion in 2013 to $1.5 billion in 2015, according to data from the California Office of Statewide Health Planning and Development (OSHPD) now available on ACA 411. This progress may be in peril, however, if efforts to repeal and replace the ACA are successful and the uninsured population increases.

The most common way to measure the cost of uncompensated care is to combine charity care and bad debt. Charity care refers to the costs for patients with a demonstrated inability to pay. Bad debt refers to the costs for patients who were considered to have the financial ability to pay — or for whom the ability to pay was never determined — but who have not done so.

While we expected to see dropping uncompensated care costs because of the increase in Californians with health insurance under the ACA, the magnitude of the decline is notable when placed into historical context. The data show that in 2015, California hospitals’ uncompensated care costs as a percentage of operating costs reached 1.7% according to the author’s analysis of OSHPD Hospital Annual Financial Data — the lowest rate in more than a decade. This mirrors national trends. For the same year, the American Hospital Association reported that US hospital uncompensated care costs (charity care and bad debt) as a percentage of total hospital expenses reached a 25-year low of 4.2% (PDF).

Estimating the cost of hospital uncompensated care is an imperfect science, and the available data have limitations. For example, the California OSHPD data above do not include uncompensated care provided by Kaiser Foundation hospitals, which provide about 10% of general acute hospital care in California.

In addition, some hospital reimbursement rates (such as Medi-Cal and Medicare) often do not cover the costs of providing care. These shortfalls are not reflected in measures of uncompensated care, as the measure is not designed to capture under-compensated care.

Still, uncompensated care, as measured by OSHPD in the chart above and in other national metrics, has been tracked for years. The steep decline between 2013 and 2015 is unparalleled and a sign of major progress.

The uncertain future of the ACA makes it difficult to predict what will happen with health care financing. However, it is clear that if changes to federal health legislation increase the uninsured population, the uncompensated care burden on hospitals will rise again as fewer people can afford care they receive at hospitals. That won’t be good for California’s people or its hospitals.

 

Hospital groups: ACA repeal may cost billions, jobs

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http://www.healthcaredive.com/news/hospital-groups-aca-repeal-may-cost-billions-jobs/431786/

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Members of the Republican party have been attempting to repeal the ACA ever since the healthcare law was implemented in 2010. In the proposed ACA repeal-and-replace plans currently available, such a replacement plan may not come for up to three years, Kahn said. In addition, there still doesn’t seem to be a unified front on what that replacement would actually entail.

President-elect Donald Trump has said he would make repealing and replacing the healthcare law a top priority. However, HHS Secretary Sylvia Mathews Burrell has warned that getting rid of the ACA could potentially have dire consequences, including the estimated 22 million people that could be left without health insurance coverage. In addition, current repeal-and-delay plans could widely change the already fragile individual insurance markets.

The hospital groups sent a letter to Trump and members of Congress to urge any repeal bill include a simultaneous mechanism for replacement coverage. “We strongly believe that any repeal legislation must be accompanied by provisions that protect the coverage for those currently receiving such protection,” the letter noted. What would be “absolutely essential” to include would be to restore the Medicare and Medicaid payment cuts so that hospitals can provide the care that communities “both respect and deserve,” according to Tom Nickels, executive vice president of government relations and public policy at the American Hospital Association.

Hospitals were under the impression that they would be getting more insured patients, so they reasoned that the Medicare and Medicaid payment cuts that came with the ACA implementation were not necessarily going to have a major impact, both AHA President and CEO Richard Pollack and Kahn noted on the media call. Yet the payment cuts to hospitals that date back to 1997 with the Balanced Budget Act have caused hospitals to “cut back staff, services, education, research, investments in new technology, and modernization, and upgrading of aging facilities,” the letter stated.

The losses that would come from ACA repeals as they have been proposed “cannot be sustained and would adversely impact patients’ access to care, decimate hospitals’ and health systems’ to provide services, weaken local economies that hospitals sustain and grow and result in massive job losses,” Nickels said on the media call.

One of the Dobson reports explains why the groups support using HR 3762 as a starting point. Even though the bill, which President Obama vetoed after it passed Congress, repeals ACA provisions that expand health insurance coverage and does not offer a replacement plan, it restores all ACA reductions in hospital payments that were supposed to help to finance the additional coverage, the report states.

California Braces For Medi-Cal’s Future Under Trump And The GOP

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California Braces For Medi-Cal’s Future Under Trump And The GOP

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California grabbed the first opportunity to expand Medicaid and ran with it, helping cut the number of uninsured people in half in a few short years.

Thanks in part to billions of dollars in federal funding, a third of California’s residents — including half its children — are insured by Medi-Cal, the state’s version of Medicaid.

Now, with the election of Donald Trump and a Republican-controlled Congress, the state that bet so heavily on the Medicaid expansion is bracing to see how much of its work will be undone. While no one knows yet exactly what will happen, many policymakers and advocates fear the federal government will end or severely limit funding for the expansion.

“There are no easy cuts in Medi-Cal,” said Stan Rosenstein, a former Medi-Cal administrator. Reduced federal funding “could have a major impact on the uninsurance rate, on the viability of our hospitals, and it could have a very negative impact on the economy.”

Medi-Cal cuts could restrict who is eligible for coverage, slash health care benefits, limit access to doctors and reduce payment rates to medical providers — already among the lowest in the nation, health policy experts and advocates said. Medi-Cal covers a host of services for low-income residents, including maternity care, prescription drugs, long-term care services, mental health treatment and hospital stays.

Laurel Lucia, a health care program manager at the University of California, Berkeley Labor Center, said a well-funded Medicaid program benefits everyone, not just those currently on the program.

“A lot of people are just a layoff away from needing Medicaid,” she said. “The Republican plans for Medicaid threaten to undermine that safety net.”

The Future of Health Care Mergers Under Trump

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Though there has been a flurry of merger and acquisition activity in recent years, industry experts are unsure whether the merger momentum will continue under President-elect Donald Trump’s administration, according to The New York Times.

Here are five things to know about how M&A activity in the healthcare industry may be affected under the Trump administration.

1. President-elect Trump nominated Sen. Jeff Sessions (R-Ala.) to replace Attorney General Loretta Lynch. While it is unclear how the department will handle antitrust cases under Sen. Sessions, the impact from the change in leadership will not be felt immediately. The outcomes of the two major antitrust cases in the insurance market, the Anthem-Cigna and Aetna-Humana mergers, are expected to be decided before Mr. Trump takes office in January. However, the new administration might still have an impact on the mergers, particularly if either the companies or the government decide to appeal the decision, according to the article.

2. According to the article, there is little expectation the Department of Justice under President-elect Trump would drop the cases if the insurers lost and appealed. However, any agreed upon settlement deal may be less onerous to the insurers involved.

3. There is a chance the federal government’s approach to healthcare mergers may not change, according to the article. “There is a history of bipartisan support for antitrust enforcement in healthcare,” said Leslie Overton, a partner at Alston & Bird and a former DOJ official. “I don’t think we should expect a wholesale shift, based on the change from Democratic to Republican.”

4. The Federal Trade Commission’s position on M&A activity may change even less, according to industry experts interviewed by The New York Times. The independent agency is less subject to the political preferences of the president and of Congress.

5. Industry experts also suggest the possible repeal of the ACA will not impede the increasing M&A activity of the past few years. According to the article, hospitals may feel more pressure to join together if the ACA is repealed due to reduced Medicare and Medicaid payments and increased volumes of uninsured patients.