Fitch: Medicaid work requirements put pressure on LifePoint, Quorum and CHS

Kentucky received a waiver from CMS Jan. 12 allowing it to add work requirements for Medicaid recipients, and seven other states are working to impose similar eligibility requirements. This trend could have a negative effect on for-profit hospital operators' finances, according to Fitch Ratings.

"Work requirements, on their own, should only have a modest impact on hospitals given small at-risk revenues and as the patient population tends to be lower margin," Fitch said. "However, the requirements compound volume pressures buffeting hospitals, which have reported four straight quarters of negative same-facility admissions growth."

If the seven other states follow Kentucky's lead and implement Medicaid work requirements, it would likely have a negative effect on hospital margins. Although there would be an insignificant impact on hospital revenues, the new Medicaid eligibility requirements could cause large declines in EBITDA, as it would be difficult for hospitals to lower their fixed operating expenses in the short term, according to Fitch.

Fitch estimates the new eligibility requirements would put about 1.1 percent of Brentwood, Tenn.-based LifePoint Health's revenues at risk and 1 percent of Brentwood-based Quorum Health's revenues at risk. Below are the percentages of other major for-profit hospital operators' revenues at risk due to the possible Medicaid eligibility changes.

  • Community Health Systems (Franklin, Tenn.): 0.6 percent of revenues at risk
  • Universal Health Services (King of Prussia, Pa.): 0.4 percent
  • HCA Healthcare (Nashville, Tenn.): 0.2 percent
  • Tenet Healthcare (Dallas): 0.2 percent

Access the full Fitch Ratings report here.

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