For a time, hospitals were the greatest benefactors of the Patient Protection and Affordable Care Act, or ACA.
In particular, facilities in Medicaid expansion states have experienced an uptick in newly insured patients and have reported major reductions in uncompensated care, resulting in unprecedented financial dividends for hospitals. Medicaid expansion has enabled facilities to expand their bottom lines, open new clinics, hire new staff and invest in new programs to begin addressing care gaps in the current healthcare system.
However, the initial financial windfall hospitals benefited from after the ACA was passed in March of 2010 is fading significantly. More than two years after the onset of expanded Medicaid coverage, expansion has, for the most part, come to a halt and the remaining major states that have not yet expanded coverage—such as Texas and Florida—have no plans to do so any time soon. This means hospitals are likely to see declines in the patient influx that had helped many facilities succeed through the recession.
According to research from Bloomberg, Medicaid expansion has been on the decline since Q1 of 2015. This noted observation correlates with findings from the Altarum Institute that indicate spending acceleration from coverage expansion reached its peak in February of 2015.
As growth in patient volume tapers off, hospitals are left with a sizeable Medicaid population. On average, this newly insured Medicaid population requires more medical services than those who had already been insured, due to untreated chronic diseases such as diabetes, heart disease and depression, which may pressure margins.
As a result, hospitals will experience both increased resource utilization for treating chronic conditions and an increase in exposure to government payers who typically reimburse at rates below commercial insurance, further adding to the risk of margin contraction.
Hospitals coming off several of their most successful financial years, attributed largely to Medicaid expansion, are posed with a major concern now that expansion has plateaued. Facilities that do not begin looking beyond the ACA and Medicaid Expansion for revenue opportunities may soon find themselves in a radically different environment, which could potentially cost them millions in revenue.
Hospitals face a unique challenge adapting to the uncertainties of today's evolving healthcare environment, and stalled Medicaid expansion is simply one of many other areas for concern. These include changes in payment models, the evolution of patients' role in healthcare, and uncertainties of provider and payer consolidation which all hold major financial implications for hospitals.
Finding ways to overcome these external pressures may challenge conventional wisdom and will ultimately require hospitals to take a hard look at their current processes. For a deeper dive into these issues, download this report on the external pressures threatening hospital revenue and growth.
Kyle Wailes is the executive vice president of physician services at Intermedix. In his role, Kyle oversees the services and technology that Intermedix provides to physician groups and healthcare facilities. Kyle has more than 10 years of experience in the healthcare industry with a focus on physician practice innovation and investment.
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