Medicaid expansion had a 'close to zero' net effect on nonprofit hospital finances, report finds

While the ACA's Medicaid expansion lowered uncompensated care costs for nonprofit hospitals, those savings were counteracted by Medicaid payment shortfalls, according to a recent report by Washington, D.C.-based nonpartisan research institute AcademyHealth.

The study, "State Medicaid Expansion and Hospital Financial Status," took place between 2009 and 2015, which included two years of post-Medicaid expansion. Gary Young, JD, PhD, director of the Northeastern University Center for Health Policy and Healthcare Research at Boston-based Northeastern University, and colleagues studied IRS filings for more than 1,700 nonprofit hospitals including information on charity care, bad debt and Medicaid payment shortfalls.

The study found nonprofit hospitals in Medicaid expansion states saw their uncompensated care costs fall about 25 percent in the study period. However, that was paired with a more than 15 percent increase in Medicaid payment shortfalls. Nonprofit hospitals in states that fully implemented Medicaid expansion in 2014 saw the greatest effects on both ends of the spectrum, while nonprofit hospitals in nonexpansion states witnessed only small changes to their uncompensated care cost and payment shortfall levels.

Researchers concluded Medicaid expansion has had a "close to zero" net effect on nonprofit hospital financial status. Study authors added, "Although Medicaid expansion has been presented as a way to improve hospital finances, little consideration has been given to payment shortfalls. Policy makers need to consider the adequacy of payment rates as part of expansion initiatives." 

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