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3 things hospitals are saying about PPACA

By Allison Bell

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Executives at two big, publicly traded hospital companies — HCA Holdings Inc. and LifePoint Hospitals Inc. — are happy with what the Patient Protection and Affordable Care Act (PPACA) has done for earnings this year.

Both HCA (NYSE:HCA) and LifePoint (Nasdaq:LPNT) found that PPACA continued to help revenue and earnings in the third quarter

The companies benefited from the start of two big PPACA health coverage access programs: The widely promoted PPACA health insurance public exchange system, and the somewhat less publicized PPACA Medicaid access expansion program.

Hospital companies also welcomed the effects of the two big PPACA coverage expansion programs earlier in the year, but there was some thought that the companies might start to talk about PPACA-related administration glitches and payment adequacy or payment timing problems as the year went on.

So far, at least, the companies are continuing to accentuate the PPACA positives.

For more details about what companies’ executives are saying, read on.

Steps going up

1. The effects of Medicaid expansion are bigger, but both Medicaid expansion and the exchange program seem to be good for business. 

William Rutherford, the chief financial officer (CFO) of HCA, was happy to talk about the effects of PPACA on patient volume and patient mix during the conference call his company held with securities analysts to go over third-quarter earnings.

Same-facility admissions increased 2.8 percent overall, and Medicare admissions — which were not directly affected by new PPACA coverage expansion programs — increased 3.1 percent.

Medicaid admissions, which were directly affected by PPACA Medicaid expansion in many states, jumped 9.7 percent, and the number admissions involving patients covered by some kind of commercial health insurance plan, including exchange qualified health plans (QHPs), increased 3.8 percent.

The percentage of patients who were paying entirely out of their own pockets, or clearly had no ability to pay their bills, fell 15 percent.

At LifePoint, Bill Carpenter, the chief executive officer, said his company under PPACA has been very positive. He said PPACA contributed about $12 million to the company’s $156 million in operating earnings.

At LifePoint hospitals, PPACA coverage expansion measures have reduced self-pay admissions 40 percent, and self-payment emergency room visits 22 percent.

Carpenter said his company will be using social media initiatives, radio ads and e-mail campaigns to try to persuade more consumers to get covered. ”We also have certified application counselors in our hospitals to assist anyone who needs help with enrollment,” he said.

Hospital hallway

2. The health status of the patients coming in with new PPACA exchange plan coverage does not seem to be that terrible.

At HCA, Rutherford noted that the number of incoming patients who have exchange plan coverage has increased over the course of the year, as consumers iron out enrollment problems and get used to using their coverage, but that the rate of increase has slowed.

The number of exchange plan enrollee HCA hospital admissions increased to 2,700 in September, up from 2,600 in July and 2,500 in August, and an average of about 1,800 per month in the second quarter.

The “acuity of exchange volume” — how sick the exchange plan enrollee patients have been — is only about 8 percent to 10 percent higher for the exchange plan enrollees than for other enrollees with commercial health coverage, Rutherford said.

A dollar bill as a jigsaw puzzle

3. Any PPACA-related problems with hospital claim collections that may exist have not been a hot topic during the third-quarter earnings calls.

At HCA, Rutherford talked about some about timing of Medicaid program payments, but he said nothing about timing of payments from commercial insurers and little about cash flow.

Rutherford’s main comment about cash flow is that it was about 25 percent higher in the third quarter of 2014 than in the third quarter of 2013.

Similarly, at LifePoint, Leif Murphy, the chief financial officer, did not spend any time talking about problems with collecting payments from commercial insurers.

Some have suggested that Medicaid plans and the exchange plans might not pay hospitals much better than state charity care programs had.

Murphy said that, in the third quarter, as the new PPACA programs kicked in, net revenue per equivalent admission was 3.2 percent higher in the latest quarter than it was in the comparable quarter in 2013.

Murphy did express some concerns about collecting payments from the patients themselves. He did spend some talking about the effects of out-of-pocket costs on revenue.

Revenue related to co-payments and deductibles has increased to about 4.7 percent of total net revenue for the first three quarters of 2014, from 3.9 percent for the first three quarters of 2013, Murphy said.

“This has led to an increase in our provision for doubtful accounts,” Murphy said.