News Feature | October 2, 2014

Hospitals' Uncompensated Care Will Drop $5.7 Billion This Year

Christine Kern

By Christine Kern, contributing writer

Uncompensated Care Drops $5.7 Billion For Hospitals

Early hospital financial reporting and member surveys from hospital associations indicate through second quarter 2014, payor mix is shifting in ways that will likely reduce hospital uncompensated care costs.

A new projection presented to the Obama Administrations examines the “impact of insurance expansion on hospital uncompensated care costs in 2014,” concluding hospitals will reduce unpaid care by at least $5.7 billion. Hospitals in states that expanded Medicaid are getting most of it.

According to Modern Healthcare, hospitals in the 26 states that raised Medicaid eligibility under the ACA will save about $4.2 billion because of lower costs of uncompensated care, while those in states that resisted the Medicaid expansion will save $1.5 billion. (Two more states have moved ahead with the expansion.)

“This is one of the reasons that we see hospitals and others supporting the expansion of Medicaid,” HHS Secretary Sylvia Burwell said at a briefing with reporters. While the health law required states to expand Medicaid, the Supreme Court made that optional.

The report reveals that the reduction projected by HHS would amount to a significant dent in the amount of uncompensated care delivered by U.S. hospitals, estimated to be as much as $52 billion in 2012.

Some key takeaways from the report include:

  • Volumes of uninsured/self-pay admissions have fallen substantially, particularly in Medicaid expansion states, as have volumes of uninsured/self pay emergency department visits.
  • The volume of hospital admissions for Medicaid patients has increased, but only in Medicaid expansion states.
  • Initial projects also suggest that $4.2 billion of the overall reduction will come from the 25 states plus Washington, D.C., that expanded Medicaid as of the beginning of FY 2014, which is a 25 percent reduction from baseline uncompensated care spending, or  74 percent of total savings.
  • The 23 Medicaid non-expansion states will see $1.5 billion, representing a 9 percent reduction, or 26 percent of total savings.

The report asserts that these findings have significant implications for the future financial performance of hospitals as public and private insurance programs continue to expand and as levels of federal reimbursement for UCC are reduced through cuts in DSH payments.

Despite these positive predictions, many providers will still struggle as the CMS scales back disproportionate-share hospital funding, the enhanced payments intended to offset those expenses, according to America’s Essential Hospitals.

“Even in states that have expanded Medicaid, our members continue to face the burden of Medicaid payment rates that fall well short of the true cost of care,” Dr. Bruce Siegel, CEO of America's Essential Hospitals, said in a statement. Siegel added that many Americans who qualify for premium subsidies still can't afford to buy coverage on the exchanges.

To conduct the study, HHS researchers examined results from five large investor-owned chains: Community Health Systems, HCA, Tenet Healthcare Corp., LifePoint Hospitals, and Universal Health Services, in addition surveys conducted by the hospital associations in Arizona, Colorado and Arkansas.

Burwell said the savings to hospitals released Wednesday may help convince governors who have not expanded their Medicaid programs that they should do so. She said she hoped that those who have opposed expansion might change their minds after talking to their colleagues who have. “I think it’s true that people are influenced by people who are like them,” she said.

While the number of Americans with health coverage increased, the report found, overall admissions remained steady. In states that expanded Medicaid, hospitals' Medicaid volume was 4 percent to 31 percent higher in the first quarter of 2014 than the first quarter of 2013.