February 8, 2017

Hospitals fear payment cuts as GOP mulls ACA replacement

Daily Briefing

    Hospital leaders are raising concerns about how Republican efforts to repeal and replace the Affordable Care Act (ACA) could affect their facilities' finances.

    How the ACA changed hospital funding

    The ACA cut two sources of hospital funding:

    • Disproportionate share payments, which hospitals received for caring for low-income and uninsured patients; and
    • Yearly raises the government paid hospitals for treating Medicare beneficiaries.

    The Congressional Budget Office has estimated those cuts would cost hospitals a total of $232 billion over ten years. At the time the ACA was approved, policymakers said the law would compensate for the cuts by reducing uninsured rates, which in turn would decrease the amount of uncompensated care hospitals provide. Since the law's implementation, more than 20 million U.S. residents have gained coverage under the law.

    Hospitals urge lawmakers to consider potential effects of repeal

    Health policy analysts have said repealing the ACA without a replacement likely would result in coverage losses, meaning fewer patients would be able to pay their medical bills.

    For example, Rachel Garfield, an analyst with the Kaiser Family Foundation, said if lawmakers repeal the ACA's Medicaid expansions, many "hospitals would see an increase in their uncompensated care costs."

    And the American Hospital Association (AHA) estimated that U.S. hospitals could lose more than $160 billion from the loss in Medicaid funding and the increase in unpaid medical bills if the ACA's Medicaid expansions are repealed.

    Industry stakeholders are warning lawmakers that any plan to repeal or significantly change the ACA should either maintain coverage levels or increase hospital funding to account for increases in uncompensated care costs.

    Why some Republicans aren't talking about 'replacing' the ACA anymore

    For instance, William Carpenter, CEO of LifePoint Health, during a health care conference last month said if lawmakers repeal the ACA, hospitals will "need to have the [ACA's] cuts repealed as well."

    Rob Casalou, CEO of the St. Joseph Mercy Health System, said, "Until [Congress and the White House] have a good replacement, and all they can really do is repeal or partially repeal, it makes us very worried on the coverage front and on the financial front."

    Hospital officials express concern about care delivery changes

    Hospital officials also have expressed concerns about the future of alternative payment models that were implemented under the ACA, Kaiser Health News/Healthcare Finance News reports.

    For instance, Timothy Ferris, an internist and medical director of Massachusetts General Hospital's Physicians Organization, cited the hospital's recent formation of various accountable care organizations and other investments in care-delivery innovations. He said while most of the new care models have not yet generated savings, more time is needed to evaluate them.

    "One of the things that it's difficult for people outside of health care to appreciate—particularly politicians—is how long it takes to make significant improvements in the delivery of care," Ferris said. "I would be worried that a repeal of the ACA would undermine our ability to invest in services for our patients."

    Dennis Keefe, who heads the Rhode Island-based hospital chain Care New England, expressed similar concerns. "We have invested enormously to be successful in this area," he said, adding, "I think, if there's a real change in direction away from these alternative payment models, we will be assuming risk to care for a population."

    Tom Nickels, executive vice president for government relations at AHA, said the group is urging hospital leaders to visit Washington and speak with lawmakers about their concerns (Evans, Wall Street Journal, 2/6; Kaiser Health News/Healthcare Finance News, 2/1; Gooch, Becker's Hospital Review, 2/6).

    Navigating the first 100 days of the Trump administration

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    Since Donald Trump won the presidential election in November, health care reform has since quickly risen to the top of the GOP's policy agenda—and heath care executives are grappling with a new sense of uncertainty.

    While many unknowns will remain across the next few months and potentially even years, the first 100 days of the Trump administration will provide significant insight into the direction of reform efforts. Read our briefing to learn what five key issues you should watch.

    Download the briefing

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