- Providers could face billions in hospital revenue cycle losses if the Affordable Care Act is repealed without replacement legislation that preserves health coverage increases and rolls back claims reimbursement cuts, stated the American Hospital Association (AHA) and Federation of American Hospitals (FAH).
Dobson DaVanzo & Associates, a healthcare firm commissioned by the AHA and FAH, projected that hospitals would see a $168.5 billion decrease in revenue between 2018 and 2016 because of coverage losses under the Restoring Americans’ Healthcare Freedom Reconciliation Act, an Affordable Care Act repeal bill passed by Congress, but vetoed by President Obama in January.
Researchers also estimated that hospitals would experience $289.5 billion in additional losses because the repeal bill used in the study would maintain Medicaid and Medicare reimbursement reductions from the Affordable Care Act.
The hospital revenue losses identified in the report “suggest that any repeal bill that does not replace coverage also should reverse hospital payment reductions, particularly those for the Medicare and Medicaid DSH programs as well as those in the inflation updates.”
The report used the Restoring Americans’ Healthcare Freedom Reconciliation Act as a model for a repeal of the Affordable Care Act. The bill contained the following provisions:
• Repeal Affordable Care Act policies that expand healthcare coverage without conditions to preserve coverage increases
• Eliminate Affordable Care Act taxes designed to finance increased coverage, such as premium tax credits, cost-sharing subsidies, tax penalties, medical device taxes, and prescription drug taxes
• Maintain hospital payment reductions, such as annual Medicare reimbursement rate cuts, except for Medicaid Disproportionate Share Hospital decreases
• Repeal Medicaid expansion
Based on the bill’s mandates to eliminate Medicaid expansion, premium tax credits, cost-sharing subsidies, and penalties, researchers projected that more individuals would lose healthcare coverage. The number of uninsured individuals would increase by 22 million people by 2026, resulting in about 50 million uninsured Americans.
As a result, hospitals would face about $399.8 billion in revenue losses between 2018 and 2026.
Hospitals, however, would see some funding increases under the repeal bill, added researchers. Hospital costs would decrease by $139.4 billion in the same period because of reduced utilization stemming from coverage losses.
The repeal bill would also boost hospital revenue through the restoration of Medicaid and Medicare Disproportionate Share Hospital payments to pre-Affordable Care Act levels. Hospitals would receive $94.5 billion more in combined Medicaid and Medicare Disproportionate Share Hospitals payments.
But the net reduction in revenue would still equal $165.8 billion, reported researchers.
Additionally, hospitals would experience further Medicaid and Medicare reimbursement reductions under the model repeal bill. The claims reimbursement losses would total $289.5 billion from 2018 to 2026 because of ongoing annual hospital market basket reductions and productivity adjustments.
The Affordable Care Act included annual hospital payment reductions to balance revenue gains from coverage expansion, including uncompensated care cost decreases. However, the report stated that a repeal bill that maintains hospital payment reductions would strain hospital revenue cycles because coverage losses would produce higher uncompensated care costs.
In an accompanying letter to President-elect Trump and Vice President-elect Pence, the AHA and FAH urged the upcoming administration to consider potential hospital revenue cycle losses when developing an Affordable Care Act repeal bill, especially if it does not preserve coverage gains.
If the repeal legislation does not ensure similar healthcare coverage, then the AHA and FAH called for a bill that would eliminate Medicaid and Medicare reimbursement reductions from the Affordable Care Act that were intended to offset revenue gains from expanded coverage.
The hospital groups suggested that the repeal bill should reinstate the Medicare hospital inflation update as well as pre-Affordable Care Act Medicare and Medicaid Disproportionate Share Hospital payment levels to protect the hospital revenue cycle.
“If the coverage associated with the ACA disappears, the importance of these payments would be heightened – they are vital in helping defray the costs of treating our most vulnerable patients,” stated the letter.
However, the AHA and FAH added that they “strongly believe that any repeal legislation must be accompanied by provisions that protect the coverage for those currently receiving such protection.”
Last month, Fitch Ratings also expressed concerns that an Affordable Care Act repeal could put financial pressure on the hospital revenue cycle. The ratings agency stated that “successful efforts to repeal or materially replace the ACA would be a credit negative for healthcare providers as it is [currently] contributing to higher volumes of insured patients.”