The Medicaid Expansion: Opportunities and Challenges for Hospitals

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The Medicaid expansion provision of the Patient Protection and Affordable Care Act will start in 2014, adding millions of people to Medicaid rolls, but hospitals and other providers may not understand how to best tailor their medical and business practices to take advantage of the provision.

According to a report from PricewaterhouseCoopers (pdf), roughly 7 million Americans are estimated to be added to Medicaid in 2014 when the program expands. The federal government is expected to pay $642 billion between 2014 and 2022 for the expansion, while states will pay roughly $41 billion.

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Here are some of the opportunities and challenges for hospitals as they face the upcoming Medicaid expansion, according to PwC's report.

Opportunity: Increased revenue

According to the American Hospital Association, hospitals lose about $40 billion every year to unpaid bills, and the Medicaid expansion will help offset those rising costs of uncompensated care.

In addition, some of the Medicaid reimbursements could be higher in the future than they are now, according to the report. This will especially help some physicians, like primary care physicians. PCPs will receive Medicare rates for treating Medicaid patients for the next two years to help care for the rising Medicaid base.

Challenge: Medicaid enrollee choice of provider

As more people enroll in Medicaid, many will be herded into managed care plans — meaning their choice of hospitals and physicians will be limited to a certain network. "As a result, providers will need to become more competitive on rates and savvier about the delivery of care," according to the report.

This means hospitals will have to dig deep on who, exactly, will be added to the Medicaid rolls and tailor care to those specific beneficiaries through engagement strategies. For example, PwC estimates that most new Medicaid enrollees will be single, unemployed and have no college degree. In addition, 34 percent speak a language other than English at home.

Challenge: Will expansion make up for lost DSH payments?

More Medicaid patients equals increased revenue and decreased uncompensated care costs, but hospitals will still see reductions in Medicare and Medicaid disproportionate share hospital payments. Hospitals have to make sure their revenue strategies factor this in, which can be even tougher in states like Texas and Florida that have stated they will not expand their Medicaid programs.

More Articles on Medicaid Expansion:

NAPH: Uncompensated Care Costs Could Top $53B by 2019

Mississippi: Sixth State to Reject Medicaid Expansion

Several States Consider Only Partial Expansion of Medicaid

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