Between the lines of stockholder calls, refusing Medicaid expansion bad for hospitals’ balance sheets

May 14, 2014 by

First-quarter financial results are in, and the CEOs of some of America’s publicly-traded hospitals systems are finding Medicaid expansion is good for business. And they are reporting big differences between their facilities in states that have expanded Medicaid and the hospitals in states still refusing federal healthcare dollars.  In states that have accepted federal healthcare funds and worked to promote the ACA, hospital executives are realizing significant increases in the number of their patients insured through the Marketplace as well as by Medicaid, and decreases in the number of patients who are uninsured.   The Hospital Corporation of America, which has a presence in 20 states, had a 29% decline in uninsured admissions in expansion states.  In contrast, uninsured visits increased 5.9% in non-expansion states.

Quote pull out 5-14-2014v2In a call with investors, Bill Carpenter, CEO of Nashville-based LifePoint, summarized what Medicaid expansion means for his hospitals:

“So far and as expected, the new health care law has been a net positive for LifePoint with respect to Medicaid expansion. In the seven states where we operate that have expanded coverage, we saw increasing Medicaid and decreasing self-pay volumes. Increases in Medicaid membership and health insurance exchange participation contributed measurably to our results in the quarter. While we don’t expect additional states to expand coverage in 2014, we’re optimistic that more conversions will occur over time.”

This is why almost half of state chambers of commerce across the nation support Medicaid expansion in their states.  Hospitals don’t just create patient outcomes: they create jobs.  Notably, chambers in Arizona and Missouri came out strongly in favor of accepting federal dollars, even as they remained opposed to the broader Affordable Care Act.  The Missouri Chamber’s spokesperson, former U.S. Senator Christopher “Kit” Bond, explained:

“While I was and still am one of the loudest opponents of Obamacare, I’m getting involved in Medicaid reform now because if our State sits on the sidelines I’m concerned hospitals in rural and inner city Missouri won’t survive.”

What does this mean for Maine?  While some local Chambers endorsed expansion, the state Chamber did not take a formal position.  But as months tick by and close to 70,000 Mainers who would be eligible for coverage remain uninsured, more Maine hospitals are revealing the extent of their financial challenges.  Eastern Maine Medical Center cited a “surge in unpaid care” as a factor in a $7 million shortfall this spring.   When asked about the implications of Medicaid expansion, EMMC Chief Medical Officer Dr. James Radcek said, “It has made a difference in the amount of free care and possibly bad debt that we’re seeing.  Also, it’s been evident that those individuals have been accessing and seeking care. If they do get sick, then they come to the hospital and they’re much more ill than they would be if they had been accessing care on an ongoing basis.”

Keeping people uninsured comes with costs, and not just health costs: 77,000 Maine jobs are healthcare-related.  And those jobs are placed in peril by continuing to reject federal funds – Maine has missed out on more than $123 million (and growing) since January of this year.

It’s undeniable that things are changing for some hospitals in states that have accepted Medicaid expansion.  More people are accessing care; fewer people are uninsured.  For hospitals in states still refusing federal funds, the landscape is more treacherous.   Indiana University Hospital was forced to lay off 800; Vanderbilt University Medical Center in Tennessee laid off over 1000.  Both systems blamed the layoffs in part of their states’ continued refusal to accept federal healthcare dollars to cover thousands of uninsured patients.

A year ago, the world-famous Cleveland Clinic cut $330 million from its budget.  Mass layoffs were avoided only because 700 employees took early retirement.  Eileen Sheil, Executive Director of Communication for the Clinic, noted:  “We’re not blaming health care reform. We think it is very necessary.  Something had to give because costs are going to continue to rise and it’s unsustainable.”  The Cleveland Clinic then worked with partners over the summer to make the case for Medicaid expansion to Ohio legislators.  By fall, Governor John Kasich, a Republican, had moved swiftly to expand Medicaid in his state – noting that many of the Ohioans eligible for expansion were the working poor who could not afford health benefits.

How many more headline-grabbing layoffs will need to happen before Maine policymakers think more like CEOs, and less like politicians?

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