Moody’s: Hospitals in Medicaid Expansion States Not Better Off
Not-for-profit and public hospitals in states that expanded Medicaid under the Affordable Care Act did not on average have larger increases in their 2014 operating margins than such hospitals in non-expansion states, according to a report by Moody's Investors Service, the Wall Street Journal reports (Weaver, Wall Street Journal, 6/3).
The report found that the bad debt of hospitals located in Medicaid expansion states in 2014 decreased by 13% on average compared with the prior year. However, researchers found that hospitals across the U.S. improved their operating margins overall, regardless of whether their states expanded Medicaid.
Daniel Steingart, a Moody's analyst, said, "Everyone is doing better; a rising tide lifts all ships" (Kutscher, Modern Healthcare, 6/3). He added, "Clearly, reducing bad debt is positive, but it is not this silver bullet." He said the findings of the report call into question "a narrative out there that Medicaid expansion has lowered bad debt and that is driving [financial] improvements at hospitals" (Wall Street Journal, 6/3).
In the fourth quarter of 2014, hospitals in non-expansion states had higher average increases in operating margins -- at 1.3 percentage points -- than hospitals in expansion states, which experienced average operating margin increases of about 0.9 percentage points (Modern Healthcare, 6/3).
The findings suggest that Medicaid expansion has not led to the gains that some not-for-profit and public hospitals expected, according to the Journal. Some hospitals attributed their results not meeting expectations to low Medicaid reimbursement rates and seeing patients that were particularly sick, as many might have previously been uninsured and put off care.
Steingart noted that not-for-profit hospitals in states that expanded Medicaid might have saved more money than suggested by their financial reports (Wall Street Journal, 6/3). He said such hospitals could have spent money they saved from reducing bad debt on programs and services -- such as on population health management or developing accountable care organizations -- rather than on improving their bottom lines.
In addition, the report noted that bad debt in expansion states accounted for 4.8% of median hospital revenue in 2013, compared with 7.5% in non-expansion states. Researchers said that could explain why reducing bad debt did not have a strong effect on operating margins in expansion states. Further, they said expanding Medicaid in non-expansion states could have a larger effect than it has in states that already have expanded their programs (Modern Healthcare, 6/3).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.