Tag Archives: Uncompensated Care

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.”

Children’s hospitals — and their patients — caught in the crosshairs with planned federal cuts

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http://www.healthcaredive.com/news/childrens-hospitals-and-their-patients-caught-in-the-crosshairs-with-p/443825/

Republican plans targeting federal funding for health coverage have drawn ire from Americans in all corners of the country, but some of the loudest voices are coming from parents. They have cornered members of Congress at town halls to ask how the slashed budgets will affect some of society’s most vulnerable.

Suggested cuts to Medicaid and the Children’s Health Insurance Plans (CHIP) would throw millions of Americans off insurance and leave hospitals that are already teetering financially facing more uncompensated care. Children’s hospitals, safety net hospitals and rural hospitals will be most affected, and disabled children will face devastating cuts in coverage.

The funding decreases have been proposed in bills making their way through Congress and separately by President Donald Trump. They would shift the cost burden further onto states, many of which have seen success in expanding Medicaid, which is also on the chopping block.

“Children, the elderly, the disabled, and others from our most vulnerable populations would all be affected by these deep budget cuts,” Joanna Hiatt Kim, vice president of policy at the American Hospital Association, told Healthcare Dive. “For hospitals, this could mean more uncompensated care as millions continue to seek needed healthcare without any coverage. For the patient, this could mean delayed care or foregoing care altogether.”

Impact on children’s healthcare

More cuts to Medicaid and CHIP would reverse the trend of fewer uninsured Americans, including children.

Congress created CHIP 20 years ago when 15% of children were uninsured. CHIP, the Affordable Care Act and Medicaid expansion provided more insurance offerings and now only about 5% of children are uninsured. CHIP, which is a federal/state partnership, includes free well-child visits in many states and also provides prescription coverage, inpatient and outpatient care and emergency services.

While suggesting a two-year CHIP extension in his budget plan, Trump proposed a 20% CHIP cut over the next two years. His budget also seeks a $610 billion cut from Medicaid over 10 years, despite early promises to leave the program alone.

Studies have shown that CHIP helps reduce hospitalizations and child mortality, and improves quality of care. The program has bipartisan support. However, HHS Secretary Tom Price voted twice against expansion when he was a congressman.

CHIP is up for reauthorization by Sept. 30 and governors recently spoke out in favor of expanding it. In his budget proposal, Trump proposes a two-year extension of CHIP, but also suggests program cuts, including the matching rate for states.

Jim Kaufman, vice president of public policy at Children’s Hospital Association (CHA), told Healthcare Dive that CHIP helps children’s hospitals.

“CHIP is good for kids, and that makes it good for children’s hospitals and children’s providers.”

Jim Kaufman

Vice President of Public Policy, Children’s Hospital Association

Edwin Park, vice president for health policy at the Center on Budget and Policy Priorities, told Healthcare Dive that the cuts would shift costs to states and reduce benefits. He said Trump’s budget would eliminate a 23-percentage-point increase in each state’s federal CHIP matching rate, which is in effect until 2019. That would mean $3.5 billion cut from the program.

The budget would also cut CHIP funding for children with families that have incomes above 250% of the federal poverty line, which would affect 28 states and Washington, D.C. that provide CHIP coverage to children above the income threshold, according to Park.

This will mean states will need to pick up more of the CHIP program costs if they want to maintain the current coverage level. Park said he believes Congress will reauthorize the program, but questions remain about CHIP’s funding and benefits.

 

NYC Health + Hospitals cuts 476 positions amid financial pressure

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http://www.healthcaredive.com/news/nyc-health-hospitals-cuts-476-positions-amid-financial-pressure/444136/

Dive Brief:

  • NYC Health + Hospitals on Friday cut 476 management positions, which will reduce the current six layers of managers to four and is expected to save the health system $60 million, several news outlets reported.
  • The largest U.S. public health system cut 396 managers and eliminated 80 unfilled positions.
  • The system expects the job cuts to lead to $60 million in savings in fiscal year 2018.

Dive Insight:

The announcement of the health system’s massive restructuring day came after a $673 million loss was posted for Q3 2017. H+H interim President and CEO Stanley Brezenoff said in a statement the restructuring will reduce “unnecessary layers of management.” The health system will now be able to “better direct resources where we need them most —  at the front line of patient care.” It also cut 70 employees in February.

Revenue increased by 1.8% to $6.7 billion during the third quarter. Yet system officials said net patient service revenues dropped by 9%. The reasons behind the drop were “lower payments from the disproportionate share hospital (DSH) and upper payment limit programs,” according to the healthcare system of 11 hospitals.

At that time, H+H predicted that it would cut its $779 million budget gap this year and end with $185 million cash in hand. In April, the health system announced a redesign of its management structure after losing $776 million for the first half of FY 17, but said at that time that they did not expect layoffs.

Hospitals are facing financial issues across the country. Safety net hospitals like H+H may soon face even more difficulties. H+H has a large Medicaid population and potential cuts in President Donald Trump’s budget and the American Health Care Act – the GOP’s proposed bill to replace the Affordable Care Act – could send millions off of Medicaid. This would mean a system like H+H may soon face more uncompensated care.

H+H is looking for ways to improve its finances. One way is through a new Epic revenue cycle system that officials in May said will “improve efficiency and ensure that the health system is collecting the maximum amount of revenue for the services it delivers.” They expect it will improve clinical documentation, reduce claims denials and accelerate reimbursements.

The Impact of the ACA’s Medicaid Expansion on Hospitals’ Uncompensated Care Burden and the Potential Effects of Repeal

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http://www.commonwealthfund.org/publications/issue-briefs/2017/may/aca-medicaid-expansion-hospital-uncompensated-care

Abstract

Issue: By increasing health insurance coverage, the Affordable Care Act’s Medicaid eligibility expansion was also expected to lessen the uncompensated care burden on hospitals. The expansion currently faces an uncertain future.
Goal: To compare the change in hospitals’ uncompensated care burden in the 31 states (plus the District of Columbia) that chose to expand Medicaid to the changes in states that did not, and to estimate how these expenses would be affected by repeal or further expansion.
Methods: Analysis of uncompensated care data from Medicare Hospital Cost Reports from 2011 to 2015.
Findings and Conclusions: Uncompensated care burdens fell sharply in expansion states between 2013 and 2015, from 3.9 percent to 2.3 percent of operating costs. Estimated savings across all hospitals in Medicaid expansion states totaled $6.2 billion. The largest reductions in uncompensated care were found for hospitals in expansion states that care for the highest proportion of low-income and uninsured patients. Legislation that scales back or eliminates Medicaid expansion is likely to expose these safety-net hospitals to large cost increases. Conversely, if the 19 states that chose not to expand Medicaid were to adopt expansion, their uncompensated care costs also would decrease by an estimated $6.2 billion.

Background

Prior to the Affordable Care Act (ACA), childless, nondisabled adults were ineligible for Medicaid in most states. The ACA allowed states to expand eligibility to nonelderly adults with incomes up to 138 percent of the federal poverty level (roughly $16,400 for an individual and $33,600 for a family of four in 2017). As of March 2017, 31 states and the District of Columbia had expanded Medicaid, while 19 states had not.1

One intended benefit of the Medicaid expansion was to reduce uncompensated care burdens that hospitals face. Uncompensated care is any treatment or service not paid for by an insurer or patient. We define uncompensated care costs as the sum of a hospital’s losses on both charity care (when hospitals forgo or reduce the cost of care) and bad debt (when hospitals bill for services but cannot collect payment).

Our previous research, detailed in a 2016 Health Affairs article, found that hospitals in Medicaid-expansion states experienced a sizeable reduction in their uncompensated care costs between 2013 and 2014, from 4.1 percentage points to 3.1 percentage points of operating costs.2 To see if this uncompensated care decrease has continued, we extended our analysis to 2015 and explored which hospitals saw the greatest decreases in uncompensated care costs.

This issue brief is intended to guide decisions around a possible ACA repeal and further state Medicaid expansions, as well as inform policies aimed at alleviating hospitals’ uncompensated care burden. In 2015, U.S. hospitals provided a total of $35.7 billion in uncompensated care, according to the American Hospital Association.3 However, this burden is unevenly distributed. Safety-net hospitals care for a larger-than-typical share of low-income and uninsured patients. In the past, Medicare and Medicaid disproportionate share hospital (DSH) payments provided significant financial relief to safety-net hospitals. But the ACA mandates a sizeable reduction in DSH payments.

Findings

Uncompensated Care Declines in Expansion States Are Substantial Relative to Profit Margins

To identify trends in uncompensated care burdens for hospitals in expansion and nonexpansion states, we used data from Medicare Hospital Cost Reports to create a sample of 1,154 hospitals that report financial data for the calendar year. Focusing on hospitals within the 75th percentile, 50th percentile, and 25th percentile of the uncompensated care cost distribution, we found that between 2013 and 2014, these costs markedly declined in expansion states, and this downward trend continued into 2015 (Exhibit 1). The trajectories of uncompensated care costs were similar for hospitals across the three percentiles. In contrast, we found no similar break from historical trend in nonexpansion states.

 

What individual insurance market trends mean for providers

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http://www.fiercehealthcare.com/finance/implications-individual-insurance-market-trends-for-providers?utm_medium=nl&utm_source=internal&mrkid=959610&mkt_tok=eyJpIjoiWTJFNU1EQm1aREUyWW1FMSIsInQiOiJlVnd2K1hXVFcwN1wvUTMzTGpkR1lxV3huNGNnXC9IN2c2eEpxNFZBTDBuWmtIR1wvV0RSQXpBOFJnbEs1cHB0UUJJcEFKQnhhYUQ4UDcxNUxTZldTekNBalJMeGpDcWVZa2lpdVJxTHJVZSs5TmRvMWVqSGl0N1V2OUV4azBcL2R3M2QifQ%3D%3D

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Amid uncertainty about the future of healthcare reform, hospitals and health systems must be aware of and prepare for the potential challenges posed by the individual health insurance marketplaces.

Costs in the individual marketplaces have been volatile, so one way providers can support patients who have those plans is to understand the total costs associated with treating them, writes Paul Keckley, Ph.D., health policy analyst and editor of the Keckley Report, in an article for Hospitals & Health Networks.

Until now, much of the discussion from the provider side on the future of healthcare reform has centered on proposed changes to Medicaid. States that expanded Medicaid saw uncompensated care costs drop significantly, and provider groups largely came out against Republican efforts to repeal and replace the Affordable Care Act as well as proposed sweeping cuts to Medicaid.

But, Keckley writes, providers need to monitor trends in the individual market as well, which may result in more problems for them. For example, higher copays and deductibles may put preventive care, including key tests and screenings, out of reach for this patient population. Furthermore, the individual market is likely to grow as more employers push responsibility for insurance costs on employees, which in turn could push more costs of care onto providers.

“Hospitals must prepare for two realities: The individual market will grow, and the risks associated with its management will be challenging,” according to Keckley.

One solution that some hospitals are considering is to offer sponsored health plans that target individual market enrollees. But this could backfire, Keckley writes, as premiums will likely increase significantly. Just because a big hospital name is on the plan, that doesn’t mean it will attract more enrollees if premiums are too high to draw interest. Instead, he suggests providers engage in greater advocacy on these issues with state and local leaders.

 

Fitch: Uncompensated care could increase next year under ACA

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http://www.beckershospitalreview.com/finance/fitch-uncompensated-care-could-increase-next-year-under-aca.html

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Without modifications to the ACA, exchange enrollment could suffer and hospitals are likely to see uncompensated care rise next year, according to Fitch Ratings.

Last Friday, the GOP’s proposal to repeal and replace the ACA was pulled from the House floor, leaving the ACA in effect for the time being.

Hospitals are not expected to see a rise in uninsured patients this year since those enrolled in an ACA plan for 2017 will keep it, Fitch said in a news release. However, with premiums rising and insurers leaving the exchanges, ACA enrollment is likely to decrease, the agency noted. Total signups for open enrollment fell 4 percent from 2016 to 2017.

“The failure of the AHCA [American Health Care Act] to move forward means that the ACA exchanges will be ostensibly functioning in 2018, but hospital companies will likely face higher levels of uncompensated care as fewer individuals enroll in exchange products,” Fitch said.

Still, Fitch said it is the ACA’s Medicaid expansion — not the exchanges — that have primarily driven a decrease in uncompensated care for hospitals.

“The AHCA’s changes to the ACA related Medicaid expansion were relatively more benign than the expected dislocation in the exchange covered lives with respect to the ultimate influence on hospital companies’ patient payer mix and the financial burden of treating uninsured patients,” Fitch said. “However, while current Medicaid enrollment is likely to be stable, more states will not likely expand eligibility given the uncertainty of future funding.”

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

OR Efficiencies

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.

 

State fears Trump will topple health care gains under Obamacare

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http://www.sfchronicle.com/business/article/California-fears-Trump-will-overturn-health-gains-10944890.php

Member services representative Nancy Chen helps a customer with their coverage at the Asian Health Services offices on the final day of open enrollment for Covered California, the state's health insurance marketplace created by the Affordable Care Act, in Oakland, CA on Tuesday, January 31, 2017. Photo: Michael Short, Special To The Chronicle

Hospital uncompensated care costs fall to lowest level in 26 years: 4 things to know

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http://www.beckershospitalreview.com/finance/hospital-uncompensated-care-costs-fall-to-lowest-level-in-26-years-4-things-to-know.html

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From 1990 through 2015, U.S. hospitals’ uncompensated care costs totaled $704.7 billion, according to a recent American Hospital Association report.

To calculate a hospital’s uncompensated care costs, the AHA combined the hospital’s bad debt and financial assistance costs. The uncompensated care figure does not factor in Medicare or Medicaid underpayments or other contractual allowances.

Using that formula, the AHA has calculated national uncompensated care costs from 1990 through 2015.

Here are four things to know about hospital uncompensated care costs, according to the AHA report.

1. In 1990, total uncompensated care costs were $12.1 billion, representing 6 percent of total hospital expenses.

2. Although total uncompensated care costs steadily increased from 1990 to 2000, the costs consistently represented about 6 percent of total expenses. During that period, uncompensated care costs represented the smallest percent of total expenses in 1992 at 5.9 percent and the largest percent in 1999 at 6.2 percent.

3. From 2000 to 2015, national uncompensated care costs fluctuated, reaching a high of $45.9 billion in 2012, which represented 6.1 percent of total expenses.

4. In 2015, total uncompensated care costs were $35.7 billion, representing 4.2 percent of total expenses — the lowest level in 26 years.