11 thoughts on how the American Health Care Act could affect hospitals

House Republicans revealed the American Health Care Act on Monday as their plan to replace the ACA. 

The bill includes key changes to healthcare policy, such as:

• Eliminating the individual mandate
• Implementing a per-capita cap on state Medicaid funding
• Freezing Medicaid expansion on Jan. 1, 2020
• Providing a fixed tax credit for Americans to buy health insurance

The bill maintains two key elements of the ACA, including:
• Maintaining provisions related to pre-existing conditions
• Adult children would be allowed to stay on their parents' insurance plans through age 26

House Republicans unveiled the bill without a score from the Congressional Budget Office on how the proposed legislation could affect the national budget and Americans' overall healthcare coverage. Democrats criticized this decision, contending that proposing a bill without a CBO score is irresponsible, according to The Washington Post.

Here are key thoughts from across the industry:

Jason Almiro. Director of Healthcare Knowledge Management for BOK Financial (Tulsa, Okla.): "Unfortunately, the proposed legislation isn't extremely generous to hospitals. The proposed legislation will likely reduce insured levels but won't (at least, at this time) restore Medicare rates back to their higher pre-ACA levels. A reduction in insured levels without any offsetting increase in rates/reimbursement may likely lead to higher self-pay and bad-debt levels.

The proposal will also revamp the Medicaid program by instituting per-capita caps and allowing for greater flexibility regarding states' coverage requirements. This will have implications for the hospital sector too.

There are some mitigating factors to the previously-mentioned items, however the net result is still unknown. For example, the legislation calls for eliminating Medicaid [Disproportionate Share Hospital] cuts for non-expansion states and instituting $100 billion of 'state innovation funding' over a nine year period that can be used by states to stabilize state health insurance markets by providing funding for high-risk individuals/populations or promoting insurer participation in state markets. However, it's still unclear if these items will completely mitigate the previously-mentioned items."

Molly Cate. Founding Partner at Jarrad Inc. (Nashville). "Right now, health systems are cautious given the political uncertainty around whether the bill can get passed. That said, their biggest vulnerability is the elimination of taxes used to fund the ACA and the eventual wind down of Medicaid per-capita federal grants to states. This could make it harder to increase access, while also providing charity and uncompensated care.

But at the end of the day, no matter what happens in Washington, health systems aren't expecting a windfall of funds from the federal government any time soon. The money just isn't there and everyone knows the shortfalls have to be dealt with in one way or another. Smart health systems are reducing fixed costs and diversifying revenue in anticipation of less funding regardless. It's just a reality at this point."

Ted Chan. Founder of CareDash (Cambridge, Mass.). "The ACA replacement healthcare plan will most likely negatively affect hospitals from a profitability standpoint. Repealing the ACA without clear guidelines for replacing coverage will drive up costs across the board for patients, employers and hospitals. Without requiring all to be insured, hospitals will be the insurers of last resort and will absorb the costs of uninsured patients seeking care. One recent study found that half of hospital bills go unpaid and that will only likely increase without an individual mandate. This ultimately will impact the pricing of services as that overhead will need to be rolled in somehow.

Opponents of government programs to increase healthcare coverage, including the ACA, argue that the programs are too expensive. Cutting these programs merely shifts the burden with hospitals absorbing most of the cost. When hospital bills go unpaid, taxpayers and local governments are often forced to pick up the tab. The question is not whether healthcare coverage should be paid for; it's who pays. No one benefits when people are denied access to healthcare."

Jean Drouin, MD, MBA. CEO and Co-Founder of Clarify Health Solutions (San Francisco). "The same economic realities remain very much in effect. Paying for the new plan will require significant savings to be generated by providers. Those who get ahead of the curve and vigorously reshape how care is delivered locally will be the big winners because they will end up with the most compelling products and services to offer to employers and commercial insurers, who will continue to be the major sources of margin for hospitals for the foreseeable future. Learning to generate positive margins at Medicare rates will be essential, as the high-water mark for survival will rise as providers increasingly compete with each on price."

Cindy Ehnes. Executive Vice President, COPE Health Solutions (Los Angeles) & Board member of White Memorial Medical Center, a safety net hospital serving downtown Los Angeles: "Hospitals, particularly safety net hospitals, are viewing Trumpcare with trepidation. A few statistics: 1.4 million Californians purchased coverage on the California's ACA Exchange. Of these, nearly 88 percent used subsidies to afford coverage. Further, one in three California residents rely on Medi-Cal for coverage. These gains are at risk of [being repealed]; if not outright repeal, [then] significant corrosion. This will reduce the number of paying patients and increase bad debt and charity care. Further, the innovation under the ACA was showing promise. Hospitals must continue on this path to achieve better results at lower costs."

Ron Howrigon. President of Fulcrum Strategies (Raleigh, N.C.): "The Republican healthcare plan will have an overall negative impact on hospitals. It will likely increase the number of uninsured while at the same time providing an avenue for reduced benefits for those who do have insurance. Eliminating the individual mandate and much of the employer taxes will allow for more people to drop out of the insurance market, thus increasing the uninsured. This will negatively impact hospitals because we know that hospitals become the last resort when it comes to the uninsured receiving care.

Potentially more damaging are the changes in the proposed laws to the mandated benefit package. Under the proposed law, insurers could sell very stripped down plans to make them affordable. Under these high deductible plans, more financial responsibility is placed on the patient. This will put a significant financial burden on patients, which will ultimately reduce hospital revenue. While the Republicans argue that people shouldn't be forced to buy more coverage than they want, high deductible plans — while better than no coverage at all — will still shift some financial burden onto hospitals due to increases in patient bad debt."

David Kashmer, MD. General Surgeon and Author (New York City): "Plan for payer mix change. Although the American Health Care Act was released on Monday, it is still unclear what it will cost or how many Americans will gain or lose coverage. Since it is possible that more Americans will go uninsured under the new healthcare system, hospitals should prepare as if they will be taking care of more patients who have no insurance or means to pay.

Invest in quality to improve or maintain your margin, and more importantly, to give better patient care. In the face of possible changes in payer mix and other P&L effects of ACA repeal, improving quality is not only the right thing to do for patients, but it will help hospitals eliminate a great deal of waste and ultimately, save on costs.

Utilize the next year to prepare for the worst. Based on the fact that many are saying the plan still contains so many unanswered questions, it is clear that there is not going to be an immediate replacement plan. This means that hospitals have time now to implement data-based quality improvement projects that could save them an average of $250,000 per year."

Nancy Lakier. CEO and Founder of Novia Strategies (Poway, Calif.): "The Affordable Care Act and CMS have been driving toward value and coming up with a variety of initiatives that ultimately would reduce costs and ensure quality by determining new processes for hospitals to provide care across the continuum, as well as for specific segments of the population, such as orthopedic and cardiac patients. The proposed American Health Care Act could lead to a diminished role for the CMS in rolling out new measures and reverse the progress that has been made in moving the country toward reducing clinical variation across patient populations, standardizing best practice, and ensuring quality care across the continuum.

Furthermore, it appears the proposed American Health Care Act will result in a shift away from healthcare insurance exchanges towards per capita allotment or block grants. This will likely mean that future federal funding for Medicaid will not keep pace with projected Medicaid spend, leaving individual states to determine how best to allocate funding. These funds may or may not go to the sources that provide the best care for patients, which would negatively impact providers. As a result, many hospitals would receive even lower reimbursement than they have in the past, presenting significant financial challenges as they are faced with the likelihood of absorbing additional costs for uncompensated care."

David Lareau. CEO of Medicomp Systems (Chantilly, Va.): "The ACA replacement healthcare plan eliminates the individual mandate. This will result in an increase in the uninsured population, many of whom will put off getting treatment until they have a health crisis. When they finally show up at a hospital, they will still receive care, the cost of which the hospitals will, at best, only partially recover. The increase in uncompensated care, combined with the downward pressure on reimbursements, due to the transition to MACRA and value-based care, will be a 'double whammy' for hospitals."

Anne McGeorge. National Managing Partner of Healthcare for Grant Thornton LLP (Chicago): "Eliminating the individual and employer mandates and reduced funding for Medicaid will most likely cause an increase in the number of uninsured patients, resulting in a decrease in revenues for hospitals and other healthcare providers. Hospitals have already experienced cuts in Medicare funding since the passage of the ACA, and to add additional funding reductions through this new legislation will likely continue the trend of hospital closures around the country."

Ken Perez. Vice President of Healthcare Policy, Omnicell, Inc. (Mountain View, Calif.): "The Republicans' ACA replacement plan, an aggregation of multiple bills, provides an initial official volley in what will surely be a contentious legislative process. The plan amounts to a mixed bag for hospitals, and the bill's 123 pages leave some salient questions unanswered.

Three provisions would benefit hospitals:

• A $422 million increase in fiscal year 2017 for the Community Health Center Fund, which provides grants to federally qualified health centers that provide health services to medically underserved populations, shunting patients from emergency departments.
• Repeal of the ACA Medicaid disproportionate share hospital cuts, for non-expansion states in 2018 and for expansion states in 2020. This would restore about $8 billion in DSH allotments, directly benefiting hospitals.
• The creation of the Patient and State Stability Fund, whose purpose is to improve patient access to coverage and care, as well as to stabilize State markets. In so doing, the fund would reduce hospitals' uncompensated care. The Republican plan provides $100 billion for the fund over a nine year period, starting in 2018.

Offsetting those benefits, hospitals' uncompensated care could be higher down the road, relative to the ACA, as the plan calls for a freezing of new Medicaid enrollment after two years while grandfathering in current enrollees.

In addition, the bills do not address the fate of the ACA's numerous value-based care delivery reforms, though a separate bill could do so."

More articles on healthcare:
American Hospital Assoc. 'cannot support AHCA in current form'—5 thoughts from CEO Richard Pollack
Every major hospital association opposes AHCA: 4 things to know
ACA replacement plan would nix medical device tax: 4 things to know

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