Hospitals in Medicaid expansion states report better profit margins, study finds

Hospitals in states that expanded Medicaid under the Affordable Care Act (ACA) reported lower uncompensated care costs, more Medicaid revenue, and an overall improvement in their profit margins—suggesting that states on the fence about expansion might want to move ahead, according to an Urban Institute report, Ilene MacDonald reports for FierceHealthcare.

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Study methods

The report, commissioned by the Robert Wood Johnson Foundation, is based on data from the American Hospital Association's annual survey and CMS' Healthcare Cost Report Information System. Researchers used that data to estimate the effects the ACA had on hospital finances in 2015, and to examine how hospital finances differed in states with and without expanded Medicaid.

So far, 31 states have opted to expand Medicaid, but several others, such as Maine, are still on the fence.

Findings

The researchers found that on average, hospitals in states that expanded Medicaid under the ACA saw a $5 million increase in Medicaid revenue, and a $3.2 million decrease in uncompensated care cost. Average operating margins improved by 2.5 percentage points as well.

According to the study, the hospitals experiencing the greatest windfall in terms of operating margins included:

  • For-profit hospitals;
  • Hospitals in nonmetropolitan areas;
  • Non-federal-government-operated institutions; and
  • Small hospitals.

Implications

According to the report, "for states still considering the Medicaid expansion, these findings suggest that expansion likely would improve hospitals' payer mix and overall financial outlook, particularly those in nonmetro areas."

But the researchers cautioned that outcomes might vary across states and will probably depend on several factors, including:

  • Existing state or regional coverage increases under the ACA;
  • State Medicaid eligibility thresholds before the 2014 expansion;
  • Medicaid reimbursement levels; and
  • Subsidies hospitals would receive for uncompensated care given to people losing coverage (MacDonald, FierceHealthcare, 4/5).

How will states utilize waivers to reform Medicaid? Join us on May 22 to find out.

At the same time many states are considering Medicaid reforms, new HHS Secretary Tom Price has signaled the administration’s intent to expand use of waiver authority to grant states flexibility. States use these waivers to modify both coverage and care delivery requirements in Medicaid, potentially impacting provider strategy, finances, and operations.

This webconference provides an overview of waivers that are available, the Medicaid reform goals that states often pursue, and the evolution of reform models over time. We also highlight case studies of several states that have already used waivers to align their Medicaid programs with local priorities.

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