How Will Medicaid Affect Hospitals in 2014? 3 Finance Leaders Respond

Three hospital finance leaders on how Medicaid will impact their organization this year.

One of the biggest provisions in the healthcare reform law affecting providers — the expansion of Medicaid — went into effect Jan. 1.

Under the Patient Protection and Affordable Care Act, states have the option of expanding their Medicaid programs to cover adults earning up to 138 percent of the federal poverty level. Originally, the law mandated the provision, but in June 2012, the Supreme Court ruled Medicaid expansion was optional.

Hospitals hailed the policy, as an expansion of health insurance to the nation's poorest individuals meant less bad debt and a large stream of revenue to keep operations steady. However, the ability for states to opt in could disproportionately affect safety-net providers in states that decide to not expand. In October, Fitch Ratings issued a report noting that hospitals and health systems in states not expanding Medicaid are expected to lose out on more than $200 billion in additional revenue during the next decade.

As of last month, 25 states and Washington, D.C., decided to move forward with expanding their programs, two states opted to explore expansion after 2014 and 23 states are not moving forward with expansion at all, according to the Kaiser Family Foundation.

Here, three hospital finance executives explain how they think the program for the poor will influence their organization and community.

Question: How do you think your state's Medicaid program will affect your hospital or health system in 2014?

Jane Berkebile. System Vice President of Revenue Cycle at OhioHealth (Columbus). Expansion of the Medicaid program in the state of Ohio should prove to have a positive impact on our healthcare system as well as to the community. By expanding eligibility to 138 percent of the federal poverty guidelines, more individuals who currently fall into coverage under our OhioHealth financial assistance program will now be covered by Medicaid.

OhioHealth has a very generous financial assistance program and one in which thousands of central Ohio residents qualify for free or discounted care. A portion of this free care will now be covered by Medicaid. A small payment is better than no payment at all. Patients with Medicaid coverage will now have some coverage, which can lead to reductions in visits to the emergency room and hopefully the seeking of care in a more appropriate setting. By expanding clinic coverage and/or providing more family practice venues for patients with coverage, these patients should no longer need to seek free care in emergency departments of hospitals. In addition, patients should be able to seek more preventive care as opposed to waiting for a serious or catastrophic event to bring them [in] for emergent care.

OhioHealth anticipates a slight reduction in charity care for the above population. However, any potential reductions in bad debt will probably be offset by increasing bad debt associated with larger out-of-pocket expenses associated with health insurance exchange products. In general, as out-of-pocket expenses increase with insured patients, the challenge of collecting all of those high deductibles and/or copays [increases]. The need to collect "all" dollars associated with insured patients is required for healthcare providers to remain whole.

The reliance of good real-time information about eligibility and benefits for providers is a key element in early identification and collection of said out-of-pocket expenses. At OhioHealth, we take every opportunity to educate our patients about anticipated expenses and begin the collection process from the beginning of the encounter. The only way to effectively do this is by having quality information with which you can begin the conversation.

Mark Bogen. CFO of South Nassau Communities Hospital (Oceanside, N.Y.). The expectations are that there will not be any material impact on our hospital for 2014 even though there are several significant changes taking place.

Operating in New York, the entire healthcare provider system has been living under a "global spending cap" since April 1, 2011, and April 1, 2014, will mark the fourth year under the cap. Under the global cap, Medicaid spending annually for all healthcare sectors is limited to a predetermined spend on the state share of Medicaid expenditures with the full burden of risk of spending over the cap placed on the shoulders of the healthcare provider sector. However, it is projected for the fiscal year ending March 31, 2014, that for the third year in a row, the spending will be below the cap. Additionally, we have received no trend factor increase in our rates since 2008.

Although under healthcare reform it is expected that Medicaid enrollment will rise nationally through the expansion of program access fueled by the enticement of expanded federal match, in New York there are approximately 5 million people enrolled in the Medicaid program (approximately one out of every four people living in the state), and the expansion is not expected to be as significant.

Medicaid did change the base year for setting inpatient rates for 2014 from 2005 to 2010, which had a positive impact on our hospital but has mandated that the entire long-term home healthcare program move to 100 percent Medicaid managed care, which will have a substantial negative impact on our hospital.

Finally, there is on the horizon the potential for a significant impact to the state Medicaid program if New York's request for an 1115 waiver is granted by the feds. The waiver speaks to a return to New York of approximately $10 billion over a five-year period from the significant savings being generated to the federal program through the state's adoption of its Medicaid redesign team initiatives.

Paul Bolin. CFO of Williamson Medical Center (Franklin, Tenn.). Though Tennessee Gov. Bill Haslam initially declined to pursue the expansion — which would cover 100 percent of the state's additional costs for three years and 90 percent in subsequent years — he claims to be pursuing an alternative expansion of TennCare, the state's version of Medicaid.

My hospital doesn't see as many Medicaid patients as some other hospitals, and the fact that Medicaid itself remains largely unchanged, I don't expect to see big changes. Many of us here in Tennessee remember the evolution of TennCare (which is managed care), which started out as a progressive model. But in later years, difficulties with population health management led the state through some difficult financial days. I'd love to see an interview with former Tennessee Gov. Phil Bredesen regarding current reform efforts. Gov. Bredesen is a healthcare entrepreneur and did a brilliant job of righting the ship when TennCare was in trouble.
I'm disappointed state leaders left so much federal money on the table. We have many small hospitals that treat nonpaying patients.

A side note to this story: Hospitals currently struggling with income and little cash on hand may be bankrupt as a result of payment disruptions related to the ICD-10 implementation. I think ICD-10 is the bigger story.

More Articles on Medicaid:
Bronze Exchange Plans Pose Bad Debt Risk for Hospitals
4 Disproportionate Share Hospital Survival Strategies From UW Medicine
Fitch: Hospitals in States Not Expanding Medicaid Face Dire Financial Fate

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