Hospitals wary of ACA repeal

BUDGET SQUEEZE: Michael Souza, second from right, president of the Hospital Association of Rhode Island, works with staff members, from left, Liz Almanzor, director of financing; Melvin Smith, government-relations manager; and Amanda Barney, vice president. / PBN PHOTO/RUPERT WHITELEY
BUDGET SQUEEZE: Michael Souza, second from right, president of the Hospital Association of Rhode Island, works with staff members, from left, Liz Almanzor, director of financing; Melvin Smith, government-relations manager; and Amanda Barney, vice president. / PBN PHOTO/RUPERT WHITELEY

Uncompensated-care costs for Rhode Island hospitals have plummeted since 2013, as expanded coverage under the Affordable Care Act reversed what had been a growing trend.

But millions of dollars in savings on the surface don’t always translate to the bottom line, and hospitals are now alarmed any repeal to the ACA could be detrimental to already squeezed margins.

“People look only at uncompensated-care costs, and the reality is that we’re experiencing a lot less reimbursement,” said Mamie Wakefield, executive vice president and chief financial officer at Lifespan Inc.

Lifespan is the state’s largest employer and the largest network of hospitals. From fiscal 2013 through fiscal 2016, total uncompensated-care costs at Lifespan fell 57.7 percent, or $62.8 million, to $46 million, according to preliminary results. While impressive, it doesn’t paint the whole financial reality of what hospitals are facing, Wakefield said.

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“It was helpful in the beginning,” she admitted.” But we took rate cuts … and the bottom line is we’re caring for more people with less reimbursements.”

The issue is multifaceted, explains Michael Souza, president of the Hospital Association of Rhode Island.

Prior to the rollout of the ACA, also known as Obamacare, health providers received a 3 percent increase each year through Medicare. Those yearly increases, however, were frozen, Souza said.

“Someone had to pay for it, and some of that payment came from the hospitals, nursing homes and physicians,” Souza said.

Second, while the Rhode Island uninsured rate has dropped from 11 percent in 2011 to 4 percent in 2016, meaning more people have insurance to pay for hospital visits, customers on the private market are struggling to pay out-of-pocket costs before reaching ever-growing deductibles.

The trend has forced hospitals to take larger write-offs each year.

“The amount of deductibles and copays have drastically increased for the past three-to-five years,” Souza said.

Also, prior to 2012, hospitals could negotiate yearly increases with commercial insurers, but in 2013 that was capped to 2-3 percent per year. The cap has squeezed hospitals’ ability to negotiate with the private market, which has historically helped offset costs incurred from uncompensated care.

So, while uncompensated-care costs have fallen, the ACA has provided a near net-zero result for Rhode Island hospitals.

“We’re not a whole lot better off,” Souza said.

HARI provided Providence Business News data showing uncompensated-care costs falling 60.5 percent – or $114.9 million – to $74.9 million from fiscal 2013-2016. But Souza estimates member hospitals, which don’t include Lifespan, either broke even or realized a 1 percent loss during that period.

For Lifespan, the net benefit between fiscal 2013-16 was about $14 million, according to Wakefield.

Both Wakefield and Souza agree expanding health insurance for Rhode Islanders, which included Medicaid coverage growing from 18 percent in 2012 to 26 percent in 2016, has been a good aspect of the ACA.

But what was once anticipated to be a potential financial windfall realized through savings for hospitals, hasn’t yet come to fruition.

Now, hospitals are worried any repeal of the ACA could effectively increase the number of uninsured Rhode Islanders, again, and uncompensated-care costs would skyrocket, again. The difference, according to Souza and Wakefield, is the reimbursement rates wouldn’t necessarily be reinstated, which could hammer hospital budgets.

“Don’t repeal the ACA,” Wakefield said pointedly, when asked what the government could do to help alleviate some of the financial pressures facing hospitals.

“They’d need to restore the reductions,” she added.

Souza agrees.

“Our rates have been reduced. If [the ACA] goes away, we’ll have to restore all those rates. … That’s not likely going to happen,” he said.

Repealing the ACA has become a priority at the federal level. President Donald Trump in January signed an executive order to “minimize the economic burden of patient protection and [the] Affordable Care Act pending repeal.” At the same time, members of Congress have been champing at the bit for years to repeal the health care law passed under former President Barack Obama.

For Rhode Island hospitals, which HARI estimates provide $7 billion in economic impact to the state, further cuts around the margins will likely impact the 60-65 percent of expenses tied up in salary, compensation and benefits, which doesn’t bode well for the health care workforce.

“It’s not something we want to do, but it’s all we really have,” Souza said.

What could help hospitals better deal with all of these changes?

“It can be summed up in one word: predictability,” Souza said. “Every year you never know what’s coming at you. … Now we don’t know what’s going to happen to the ACA. … Such an unpredictable environment makes it that much more difficult.” •

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