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How will the affordable care act affect hospitals?

January 9, 2013

(EDITOR'S NOTE: This will be the first of several stories pertaining to how the Patient Protection and Affordable Care Act, known by most as Obamacare, is going to affect hospitals.)

As the bill most of the country knows as Obamacare gets ready to go into effect, hospitals must be prepared for how it will affect them.
Melody Henderson, Chief Operating Officer and Chief Nursing Officer for Golden Plains Community Hospital, presented some information to the Hutchinson County Hospital District Board of Directors Monday evening as to how this bill will have an effect on hospitals and what hospitals need to do to be prepared.
The bill, which is formally known as the Patient Protection and Affordable Care Act, has been seen as a credit neutral event by the Big Three credit rating agencies, which include Standard and Poor's, Moody's and Fitch.
“The bottom line is they expect rated borrowers to have sufficient time to manage the reform with little effect on their credit quality, at least in the near or midterm,” she said.
Future provider revenues will have less to do with patient volumes and more to do with clinical outcomes, quality, and cost efficiency. Providers that get good results for their patients and keep costs in check stand to be rewarded with performance bonuses and shared savings. Those that do not do these things can expect financial penalties that will affect revenues and tarnish their credit profile.
As this law kicks in, Henderson said that a drop in the number of uninsured patients could result in a significant reduction in a hospital's charity caseload as well as bad debt. She said hospitals will need to continue approaching how they bill patients eligible for financial assistance very carefully.
The law does not relieve hospitals of the duty not to charge those patients artificially high prices nor does it change the fair collection requirement of the law.
In terms of Medicare and Medicaid, she said that on average Medicare and Medicaid patients account for more than 50 percent of the care provided by hospitals. According to GPCH CEO Dennis Jack, the number for GPCH is 69 percent.
“Any expansion of these two programs will be a two-edged sword for hospitals,” Henderson said. “More patients may end up being covered, but declining reimbursement and greater risk-sharing with providers could offset any budgetary gains.”
Hospitals must pay as much if not more attention to their payor mix as well as how they set and mange rates.
Henderson said in the pursuit of improved clinical outcomes, growing importance will be placed on preventative health services. Greater clinical and financial alignment between hospitals and primary care physicians will be necessary if payors demand and reward lower cost alternatives to hospital stays.
Hospitals will also need to provide or contract for a broader spectrum of care to manage population health in their communities. It will no longer be acceptable to hand the patient a list of post-discharge providers and have them fend for themselves.
There will be a continuing duty to see that post-discharge care is provided in the most appropriate and least expensive setting. Accountable care will provide hospitals with an opportunity to diversify revenue by acquiring other providers along the continuum of care, such as home health.
Henderson said in order to maintain their tax exempt status, tax-exempt hospitals or districts will be required to conduct a community needs assessment every three years, then adopt and implement a strategic plan that meets those needs identified by the assessment. She said GPCH already has such a process in place.

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