“Patient service revenue grew. Largely linked to the growth in patient volumes from insured patients, operating revenues increased for expansion state hospitals (by an average of 17 percent) and, to a lesser extent, for non-expansion state hospitals (11 percent on average) between 2013 and 2015. For expansion state hospitals, this increase came largely from Medicaid. Revenue growth was especially large for the study hospitals that receive cost-based Medicaid reimbursement (for at least some patients and/or services) from their states; these hospitals include the rural critical access hospitals and LAC+USC (Appendix 2). For others, Medicaid reimbursement is less than the costs of providing the services; however the hospitals previously had been treating many of these patients as uninsured patients and so had received even less reimbursement in the past.
“Some hospital executives expressed concern that Marketplace products tend to reimburse providers at rates considerably lower than traditional commercial coverage—at or closer to Medicaid payment rates. One hospital detected lower payments as some patients switched from employer-sponsored commercial coverage to Marketplace plans. Because Marketplace patient volumes have been relatively low for these hospitals to date, however, the revenue impact has been small overall.
“Hospitals’ payer mix based on total patient revenues followed similar patterns to the shifts in patient mix based on encounters (Figure 4). For both expansion state hospitals and non-expansion state hospitals, commercial insurance revenues comprise a significantly larger proportion of total revenues than commercial insurance encounters as a proportion of total patient encounters, reflecting the higher payment rates for these services.
“Hospital subsidies are on the decline. Longstanding federal, state, and local subsidies—for example, from DSH programs, state provider taxes, or general county revenues—to safety net hospitals began declining over the last few years, tempering their revenue growth. However, to date some of these cuts have not been as large as the hospitals expected because of policymaker decisions to phase them in more gradually, allowing hospitals to adjust to reform. Also payment schedules typically lag behind the time frame during which the services are provided and shifts in payer mix have occurred. That is, some safety net hospitals are temporarily benefiting from stable subsidies based on a time frame during which they served more uninsured patients, even as their uninsured numbers have since declined; in other words they are paid retroactively for services provided. Some executives expect to have to repay some of these funds once the state and/or federal government fully account for patient and payer mix changes.”
Source: Laurie Felland, Peter Cunningham, Annie Doubleday, and Cannon Warren. Final Report: Effects of the Affordable Care Act on Safety Net Hospitals. Prepared by Mathematica Research for the Department of Health and Human Services. November 2016. https://aspe.hhs.gov/pdf-report/effects-affordable-care-act-safety-net-hospitals
