3 factors that could influence hospital bankruptcies in 2017

The number of hospital bankruptcy filings may increase in 2017, as providers struggle with a challenging reimbursement landscape, higher supplies costs and the uncertainty surrounding the ACA.

Here are three factors that could influence healthcare bankruptcy filings next year, according to a Lexology report by Foley and Lardner.

1. Challenging reimbursement landscape. Many health systems across the nation will see a decline in Medicare reimbursements in 2017, as alternative payments models take hold and payments are more closely tied to quality and value. In March, HHS hit its goal to have 30 percent of all Medicare provider payments fall under an alternative payment model, which includes ACOs, patient-centered medical homes or bundled payments. This trend will continue, as the benchmark is to have half of all Medicare payments fall under an alternative model by 2018. 

The move to alternative payment models has negatively affected margins on hospital Medicare business. Provider organizations that treat large Medicare populations will need to adapt their business model in 2017, and some distressed facilities may explore bankruptcy to regain their financial footing, according to the report.

2. Soaring expenses. As supplies costs rise and hospitals invest in technology and hire more employees, some hospitals may see expenses outpace revenue. "Ultimately, the cost of care in combination with decreasing reimbursements and difficulties in collecting accounts receivable may continue the increasing healthcare bankruptcy filings in 2017," according to the report.

3. Uncertainty about the ACA. Some form of an ACA repeal is a high priority for Republican lawmakers and President-elect Donald Trump. Dismantling the ACA would significantly affect hospitals and health systems and could put financial pressure on some provider organizations, according to the report. According to a Fitch Ratings report released in November, rolling back the ACA would be credit negative for healthcare providers. The health reform law has contributed to hospitals seeing higher volumes of insured patients, and those volumes would drop if the ACA is repealed or materially replaced, according to Fitch.

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