The Expansion of Medicaid and Its Impact on Hospitals As part of the Patient Protection Affordable Care Act 2010 (PPACA), Medicaid was to be expanded to include childless adults whose income was at or below 138 percent of the federal poverty level. Currently, 19 states have not expanded Medicaid coverage. This paper will discuss the financial impact on hospitals in the states that have. Further, differences between how for-profit hospitals versus not-for-profit hospitals are impacted, and the perspectives and responsibilities of the financial management staff will be reviewed. Lastly, rules, standards, and regulations related to how the financial management staff of these hospitals must handle such regulations will be addressed. (GCU)
The Patient Protection and Affordable Care Act originally required states to expand their Medicaid programs to provide health care coverage to people earning as much as 138 percent of the federal poverty level regardless of whether or not they have children living at home. However, in 2012, a Supreme Court ruling made Medicaid expansion optional for the individual states (Ellison, 2014). As of July 20, 2015, 30 states including the District of Columbia had chosen to implement expansion. Utah is still debating the issue, while 19 remaining states have decided not to expand Medicaid coverage. According to the Congressional Budget Office, by 2016, the ACA is expected to reduce the number of uninsured by 25 million, with a 12 million increase in Medicaid enrollment (CBO, 2013). Overall, an estimated 29 percent of the current 47.6 million uninsured are eligible for Medicaid in their state (Rudowitz, R., 2013).
In June 04, 2014, Becker’s Hospital CFO published an article, which presented a report from the Colorado Hospital Association. “The CHA collects monthly reported financial and volume data for hospitals across the country. The report is based on an analysis of data from 465 hospitals in 30 different states, 15 of which expanded Medicaid to people earning as much as 138 percent of the federal poverty level under the PPACA.”(Adamopoulos, H., 2014) These are some of their findings: “In the 15 expansion states, Medicaid charges rose from 15.3 percent of all charges in the first quarter of 2013 to 18.8 percent in the first quarter of 2014. In non-expansion states, Medicaid charges remained unchanged. The average amount of charity care provided per hospital in the expansion states also declined by about 32 percent, from $2.8 million in the first quarter of 2013 to $1.9 million during the first quarter of 2014. In non-expansion states, the average amount of charity care per hospital increased by nearly 11 percent, from $3.8 million during the first quarter of 2013 to $4.2 million during the first three months of this year.”( Adamopoulos, H., 2014).
According to Kaiser Health News, billions per year of previously unpaid hospital bills (mostly incurred by safety-net hospitals) will now be covered by Medicaid. “At Seattle’s largest safety-net hospital, the proportion of uninsured patients fell from 12 percent in 2013 to an unprecedented low of 2 percent in March, 2014. This drop is expected to increase Harborview Medical Center’s revenue by $20 million” (Galewitz, P., 2014). There were no findings that supported gained revenue would be different in not-for-profit organizations verses for-profit organizations, this may be because many for-profit hospitals provide charity care in their communities so they should expect proportional results from Medicaid expansion. Clearly, it is a matter of numbers of previously uninsured seen at a particular hospital.
Medicaid expansion is however, a double-edged sword for hospital CFOs. “After Illinois expanded Medicaid, enrollment grew by about 500,000. According to Michael Kasser, CFO of Herrin-based Southern Illinois Healthcare, the health system saw a significant decrease in unpaid hospital bills, but a massive increase in Medicaid patients. Mr. Kasser told The Wall Street Journal Southern Illinois Healthcare's hospitals saved approximately $9 million in unpaid bills, but incurred around $28 million in costs for treating Medicaid patients, of which only about half was reimbursed”(Rosin, T., 2015). As part of the PPACA, both Medicare and Medicaid reimbursement is scheduled to be reduced by over $150 billion over the next decade. In addition, many not-for-profit hospitals that have historically had a large number of uninsured patients will now experience reduction in Medicaid Disproportionate Share Hospital (DSH) payments, which has been paid to “hospitals that serve a large number of Medicaid and uninsured patients to help cover the costs of uncompensated care. These reductions will amount to $43 billion between 2018 and 2025.”(Kaiser Family Foundation, 2015).
Although many hospitals are experiencing new revenue for treating patients who were previously uninsured, it may not be enough in the long run. For hospitals to survive in this new Medicaid environment, hospital financial departments must find new ways to reduce costs and gain reimbursement in other ways. Some smaller community hospitals may find that a merger with larger hospitals may be the only way to keep their doors open. Such mergers are not good for consumers because they can drive up prices; especially when competition has been eliminated.
Although Medicaid is issued on an individual state basis, rules, regulations, and standards regarding Medicaid are issued by a federal agency called the Centers for Medicare and Medicaid Services (CMS). It is up to the hospital financial department to stay informed of these often-changing regulations, to insure full reimbursement and to avoid accidental noncompliance, which could result in denial of claims or even fines for inappropriate billing. It is the responsibility of the hospital’s Chief Financial Officer to oversee the financial department and ensure rules and regulations are being followed. The Medicaid website has over 600 entries of subjects pertaining to Medicaid including eligibility, benefits, long-term services, etc. When new regulations are pending CMS will send notices to all stakeholders who may be affected. Management of hospital financial departments is extremely important to the viability and stability of the hospital.

References Adamopoulos, H., (2014), Becker’s Hospital CFO, “5 Things to Know About the Impact of Medicaid Expansion”, paragraph 7. Retrieved from: http://www.beckershospitalreview.com/finance/5-things-to-know-about-the-impact-of-medicaid-expansion.html
Congressional Budget Office, “CBO’s May 2013 Estimate of the Effects of the Affordable Care Act on Health Insurance Coverage,” Table 1. Retrieved from: www.fah.org; www.cbo.gov
Galewitz, P.,(2014), Kaiser Health News, “Safety Net Hospitals Already Seeing More Paying Patients – And Revenue”, paragraph 1. Retrieved from: http://khn.org/news/safety-net-hospitals-seeing-more-patients-and-money/
Rosin, T.,(2015), Becker’s Hospital Review, “Hospitals had higher hopes for Medicaid expansion” , paragraph 5. Retrieved from: http://www.beckershospitalreview.com/finance/hospitals-had-higher-hopes-for-medicaid-expansion.html
Rudowitz, R.,(December 20, 2013) “A Closer Look at the Uninsured Eligible for Medicaid,” Kaiser Commission on Medicaid and the Uninsured, The Henry J. Kaiser Family Foundation. Retrieved from: http://kff.org/health-reform/issue-brief/a-closer-look-at-the-uninsured-eligible-for-medicaid/.