Rich Daly | January 16, 2017
Jan. 16—Healthcare organization leaders are downplaying expectations of major changes to the Affordable Care Act (ACA) in 2017, despite moves by Republicans to repeal and replace it.
The expectation of some leaders is that the effort to overhaul the ACA and build the infrastructure for a replacement system will take several years.
Milton Johnson, chairman and CEO of Hospital Corporation of America (HCA), recently told an investors conference (log-in required) that he is watching for legislative decisions in the coming months but does not expect such changes to have a “material impact” on the company’s performance in 2017.
“It’s pretty clear that there isn’t a replacement plan that there is support behind,” Johnson said at the annual J.P. Morgan Healthcare Conference. “I think it’s going to take quite a while for that to develop.”
Although he cited public comments by House Speaker Paul Ryan (R-Wis.) that an ACA replacement was expected to pass this year, Johnson noted it could take a couple more years to put in place the infrastructure for the new system.
Johnson’s comments were echoed by others, such as Wayne Smith, chairman and CEO of Community Health Systems (CHS), which operates 158 hospitals.
Smith cited the upcoming 2018 midterm elections, saying he doesn’t expect “too many things that are too dramatic or are too big before 2018.”
Even if repeal-and-replace legislation were enacted before the midterms, Smith said he expected it wouldn’t go into effect until after the election.
The comments came during the same week that S&P Global Ratings issued a stable 2017 outlook for the not-for-profit healthcare sector, despite the likely repeal of the ACA. Moody’s Investors Service and Fitch Ratings also previously issued stable 2017 outlooks for the sector.
However, S&P warned that it could change its outlook in the near future based on legislative changes.
Legislative Plans
Among the ACA repeal-and-replace plans laid out so far was a Jan. 10 outline by Sen. Lamar Alexander (R-Tenn.), chairman of the Health, Education, Labor, and Pensions Committee.
According to Alexander, Republicans plan to “repair temporarily” the ACA marketplaces, which have seen average premium increases of about 25 percent for 2017 coverage.
Such a move was expected by Trevor Fetter, chairman and CEO of Tenet Healthcare Corp., which operates 79 acute care hospitals.
“It’s clear that policymakers are focused on taking steps to ensure that the exchange market continues to function during a transition period to a potentially different regulatory market,” Fetter said at the conference.
Subsequent steps by Republicans will include initiatives to move “health care decisions out of Washington, D.C., and back to states and patients,” Alexander said.
“Finally, when our reforms become concrete, practical alternatives, we will repeal the remaining parts of Obamacare in order to repair the damage it has caused Americans,” Alexander said. “This is what I believe we mean when we say Obamacare should be repealed and replaced, simultaneously and concurrently.”
Future Opportunities?
Hospitals reported that the ACA has had a “mixed” financial impact on their organizations. For instance, the law was credited with producing about $230 million in revenue and $200 million in cuts for CHS since 2015. Similarly, Tenet has gained $230 million from the ACA even as the law’s Medicare cuts lowered its earnings. The overall negative financial impact of the ACA was blamed on the refusal of many states to expand Medicaid eligibility.
“We ended up getting all of the Medicare cuts and not all of the expanded coverage,” Fetter said.
Healthcare leaders highlighted the potential financial benefits of an ACA overhaul that ends up getting the remaining 19 states to expand Medicaid eligibility.
For instance, three years after the ACA’s coverage expansions, the uninsured still comprise 8.5 percent of HCA’s business—largely in the non-expansion states of Texas and Florida, Johnson noted.
Smith noted CHS could garner $200 million in additional revenue if Medicaid were expanded in 11 of the states in which the health system operates. He noted a Republican-led overhaul of Medicaid could include a move to block-grant funding, although such changes also were not expected before the 2018 elections.
Susan DeVore, CEO of Premier, a hospital advisory company, said if hospitals lose the $150 billion in revenue that the ACA has provided, “then there is a major cost transformation that has to occur.”
She expected increasing numbers of “larger-scale cost reduction opportunities” by hospitals worried that payers will have more clout in the Trump administration.
“They are trying to figure out how they are going to be responsive to payers that are shifting the risk to them,” DeVore said.
She expected the new administration to shift from mandatory to voluntary bundles but said hospitals likely would continue to be attracted to such payment models because they embed savings in the business models of health systems.
Healthcare company leaders echoed the sentiment that their organizations need to change and are changing. For instance, Smith highlighted his company’s movement from inpatient to outpatient care, where there is heavy competition but more opportunities to generate volume. Conversely, he noted it is difficult to reduce inpatient pricing “because we have such huge investments.”
Source: HFMA