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Regulation and Compliance > State Regulation

Medicaid expansion may cut hospitals' losses on caring for poor

By Allison Bell

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A big nonprofit hospital group has data supporting the idea that Patient Protection and Affordable Care Act of 2010 (PPACA) coverage changes helped its finances, rather than simply reducing the number of patients classified as being uninsured.

See also: 3 things hospitals are saying about PPACA

Analysts at the Henry J. Kaiser Family Foundation have used the data, from Ascension Health, to take a look at how the PPACA Medicaid coverage expansion program and other PPACA provisions, such as the new restrictions on medical underwriting and the PPACA exchange coverage subsidy program, might be affecting hospitals.

Some health market watchers have asked whether PPACA cost-control strategies will cut the average amount of provider reimbursement per patient so much that those reductions will offset the effects of any increases in insured patient volume, and leave providers worse off than they were before the major PPACA coverage expansion provisions took effect, in January 2014.

See also: Insurers take on the hospitals

The Kaiser analysts found evidence that PPACA may have reduced the financial burden of providing care for the poor in states that expanded Medicaid.

Ascension runs 131 acute-care hospitals. The Kaiser analysts had complete financial data for Ascension hospitals in eight jurisdictions that expanded Medicaid: Connecticut, Illinois, Maryland, Michigan, New York, Washington state and the District of Columbia. 

The analysts also had data for eight Ascension hospitals that did not expand Medicaid: Alabama, Florida, Idaho, Indiana, Kansas, Oklahoma, Tennessee, Texas and Wisconsin.

The analysts compared data for the first three quarters of 2014 with data for the last three quarters of 2013.

Even in 2013, patients in the expansion states were more likely to have health coverage. The gap widened in 2014, as the already-small number of expansion state residents who lacked health coverage fell sharply. The number of Ascension hospital inpatients who were uninsured dropped 32 percent in the expansion states and just 4.4 percent in the non-expansion states.

See also: Baton Rouge emergency room shows the cost of PPACA fight

The number of expansion state inpatients who had Medicaid increased 7.4 percent in the expansion states, to 33,611, and the average level of Medicaid revenue per Medicaid discharge increased 0.8 percent, to about $17,000.

The number of non-expansion state inpatients who had Medicaid increased 1.4 percent, to 55,663, but, in those states, the average level of Medicaid revenue per discharge fell 11 percent, to about $15,000.

The number of commercial inpatients fell 3.4 percent in the expansion states and 0.2 percent in the non-expansion states. Commercial revenue per patient increased 3.7 percent in the expansion states and 5.6 percent in the non-expansion states.

The analysts also looked at a measure of the financial burden of providing care for poor people: the sum of the cost of charity care and of the “Medicaid shortfall,” or the gap between what Medicaid pays for care and what providing the care really costs.

See also: Is Medicaid expansion PPACA blood money?

The Ascension hospital burden level fell to $179 million in the expansion states in 2014, from $191 million. The average loss per poor inpatient fell to about $4,300, from about $4,600.

The burden level rose to $721 million in the non-expansion states, from $645 million. The average loss per poor inpatient in those states increased to about $9,000, from about $8,000.

Although PPACA decreased the expansion states’ financial burden for caring for the poor in 2014, the non-expansion state hospitals continued to be more profitable.

Overall, the expansion state hospitals reported operating profit margins of 3.4 percent on $4.3 billion in revenue in 2014, up from 2.1 percent on $4.2 billion in 2013.

The non-expansion state hospitals reported operating margins of 6.2 percent on $9.3 billion in revenue in 2014, up from 5 percent on $9 billion in 2013.

See also: Florida’s Scott meets Burwell after suing her over PPACA

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