Health Reform WK-EDGE Hospitals realize financial windfalls as ACA expands patient pool
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Wednesday, October 26, 2016

Hospitals realize financial windfalls as ACA expands patient pool

By Anthony H. Nguyen, J.D.

Hospitals in states that expanded Medicaid may financially benefit, although additional study is required to determine whether a policy change would support this notion. A recent study found that Medicaid expansion was associated with significant declines in uncompensated care costs and increases in Medicaid revenue in 2014 among hospitals in 19 states that expanded Medicaid compared with hospitals in 25 states that did not expand Medicaid. Hospitals in states that expanded Medicaid also had better financial margins.

The Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) expanded Medicaid eligibility for millions of low-income adults, which in turn impacted the financial health of hospitals by decreasing the proportion of patient volume and unreimbursed expenses attributable to uninsured patients, while increasing revenue from newly covered patients. Using data from the American Hospital Association Annual Survey and the CMS Health Care Cost Report Information System from fiscal years 2011 through 2014, the study found that Medicaid expansion was associated with a decline of $2.8 million in mean annual uncompensated care costs per hospital. Additionally, hospitals in states with Medicaid expansion experienced a $3.2 million increase in mean annual Medicaid revenue per hospital, relative to hospitals in states without Medicaid expansion. Medicaid expansion was also significantly associated with improved excess margins, but not improved operating margins.

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