4 Predicted Supreme Court Rulings on the PPACA: What's at Stake for Hospitals

For the past two weeks, people following healthcare reform have waited eagerly for the Supreme Court to issue its decision on the constitutionality of the Patient Protection and Affordable Care Act. It hasn't happened yet, and everyone with an interest in the nation's healthcare system continues to wait and see what the Court's ruling will be.

Nevertheless, there seems to be a growing consensus that the Supreme Court will rule in one of the following ways. Justices may:
  1. Uphold the entire PPACA;
  2. Eliminate only the individual mandate requiring adults to purchase insurance;
  3. Eliminate the mandate and two other closely aligned provisions; or
  4. Overturn the entire law.

Here's some insight into how each of these four scenarios could impact hospitals and health systems.

1. The Supreme Court upholds the entire PPACA. If this happens, there will likely be an extra 15 to 20 million people insured because of the individual mandate, requiring adults to purchase health insurance or pay a tax for not doing so. This could theoretically benefit hospitals and total hospital revenue could increase.

But Doug Fenstermaker, managing director and vice president of healthcare at consulting firm Warbird Consulting Partners, says the added reimbursements coming from the newly insured population — many of whom will be covered by an expanded Medicaid program — will probably not be enough to offset reductions in Medicare reimbursements, called for in the PPACA.

"It may be less difficult from a funding standpoint for hospitals if the entire healthcare law remains intact," Mr. Fenstermaker says. "But it's still difficult because there is $400 billion in reductions to Medicare reimbursement between now and 2019."

Emergency room and urgent care utilization will likely increase because of pent-up demand and lack of physicians accepting new patients at lower reimbursement rates, according to a Camden Group report describing potential impacts of the Supreme Court ruling.

Bad debt and accounts receivable are likely to continue to rise due to continued proliferation of high-deductible plans with large co-pays and a rise in Medicaid coverage.

Revenue per unit will not keep up with costs in the event the law is upheld, according to the Camden Group report, and hospitals will likely be forced to pursue significant cost reduction actions and eliminate money losing programs in an effort to stay afloat.

2. The Court eliminates only the individual mandate. If the Court throws out only the individual mandate requiring adults to purchase insurance, hospitals should expect less patient flow but more ER visits. Healthy people may decide to not buy health insurance, only going to the hospital in the event of an emergency. The move to in-office and outpatient medical care will likely continue, predicts the Camden Group.

The Camden Group also expects hospitals to see an increase in bad debt and A/R as it becomes increasingly difficult to collect payments under this scenario. Declining reimbursement concerns will continue too, since the cuts in Medicare reimbursement would remain intact.

"Hospitals and health systems will need to take significant cost reductions, somewhere in the range of 15 to 30 percent of where they currently perform at," Mr. Fenstermaker predicts.

3. The Court gets rid of the individual mandate and two linked provisions. When the Obama Administration made its case to the Supreme Court in March, it argued the insurance mandate is inextricably linked to two other provisions — one that requires insurers to accept all customers regardless of pre-existing conditions and another that restricts insurers from charging more based on medical history. The Supreme Court could theoretically decide to overturn the individual mandate and the provisions regarding pre-existing conditions and premiums based on medical history, but keep the rest of the PPACA.

This scenario creates broad uncertainty in the health business, according to a Wall Street Journal report. The provisions mandating all states have a health insurance exchange would remain intact. Also, companies with more than 50 or more workers would still be required to offer a set level of health benefits or pay a fine. Both the state exchange mandate and the employer fine kick in beginning 2014.

Under this scenario there may be more people utilizing state health insurance exchanges, and potentially more people with health plans, but hospitals should not expect the kind of new patient volume likely to follow if the Supreme Court upholds the law, or strikes down only the individual mandate.

4. The Court overturns the entire healthcare law. If this scenario plays out, the healthcare industry "may be a deer in the headlights" says Mr. Fenstermaker. He envisions a decline in the building of accountable care organizations without the PPACA.

"If the entire law is eliminated, I don't think people will spend the time and money to build ACOs," he says.

This line of thinking goes against the grain of what others in the healthcare industry are predicting, including a recent poll of 200 healthcare companies in which two-thirds of companies responding said ACOs will survive even if the Supreme Court strikes down the PPACA.

As for issues relating solely to hospitals, the Camden Group predicts there will be little to no change from the current situation in terms of access to care should the Supreme Court strike down all of the healthcare law. The group also expects inappropriate use of ERs to continue. Also, hospitals should anticipate soft volumes and bad debt and A/R to increase if the court overturns the entire law.

Hospitals will also face greater pressure to reduce costs as Medicare and Medicaid will need to cut fees, which will likely drive more consolidations and closures, according to the Camden Group.

More Articles Related to Supreme Court's Decision on the PPACA:

7 Healthcare Reforms, Ideas in a Century of Change
For-Profit Hospital Stock to Take Hit if PPACA is Struck Down
How the Supreme Court Has Kept Its PPACA Decision a Secret

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