Fitch: Additional Medicaid expansion states could mean financial gains for nonprofit hospitals

Nonprofit hospitals will likely face an array of challenges amid regulatory and political uncertainty, but those located in states that may expand Medicaid in the future could see a financial boost, according to Fitch Ratings.

Here are seven things to know.

1. At present, 31 states — plus the District of Columbia — have opted for Medicaid expansion, leaving 19 nonexpansion states.

2. The GOP's ACA replacement bill called for a Medicaid expansion "freeze" to take effect by Jan. 1, 2020. However, the American Health Care Act was pulled from the House floor last month due to lack of support.

3. Since President Donald Trump's decision to pull the AHCA, a number of states have pursued Medicaid expansion. In North Carolina, GOP lawmakers proposed a bill to expand Medicaid. Additionally, Maine residents will have a chance to vote on Medicaid expansion in November, according to Fitch.

4. Some states have tried to expand Medicaid recently, but were not successful. For instance, Republican Kansas Gov. Sam Brownback on March 30 vetoed a bill to expand the state's Medicaid program under the ACA. The state House subsequently voted to uphold the governor's veto. And in Virginia, lawmakers earlier this month rejected expanding the state's Medicaid program.

5. Nonprofit hospitals in states that opted for Medicaid expansion initially saw financial benefit, such as decreased bad debt, and Fitch predicts the same would happen initially for nonprofit hospitals in states that expand the program in the future.

6. States that expanded Medicaid effective January 2014 will see federal funding for expansion decrease beginning this year. "States such as Washington and Connecticut have announced reduced Medicaid reimbursement rates for 2017. This would likely also affect hospitals in the states that expand this year over the longer run," Fitch said. The agency noted payment related to Medicaid expansion could also change under President Donald Trump's administration, which subsequently could affect nonprofit hospitals.

7. Overall, Fitch said it has a negative sector outlook on nonprofit hospitals "based on our long-term view that the sector will be increasingly challenged by regulatory and political uncertainty, the growth in Medicare and Medicaid payer exposure and meager rate increases."


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