Moody’s: Ending health reform would hurt for-profit hospitals

The bond rating agency says recent investments, including physician hiring and practice purchases, could be for naught if the health reform law is struck down.

By — Posted April 24, 2012

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For-profit hospital chains like Tenet Healthcare and Hospital Corp. of America could be the hardest-hit parts of the health care system if the U.S. Supreme Court overturns the Patient Protection and Affordable Care Act, according to an April report by credit rating agency Moody’s Investors Service.

The report’s authors said the cost of caring for uninsured patients probably would rise without a mandate to buy coverage under health reform, a problem that would affect physicians and nonprofit hospitals as well. But for-profit hospitals have spent a lot of money in the past few years preparing for a “post-reform environment,” the report said. They have hired physicians, bought medical practices and upgraded technology. If the health system reform law is repealed, “it’s unclear whether operators will benefit from all the investments they’ve made.”

The court is expected to announce in June whether it will to repeal the health reform bill in whole or in part. If the court eliminates an individual requirement to buy health insurance and expand Medicaid eligibility, an estimated 49.9 million people would remain uninsured rather than gain coverage in 2014.

“Uninsured patients enter the health care system through the emergency room and often wind up admitted and accumulating bills they don’t have the means to pay,” the report said. “The continued rise in uncompensated care costs would limit operators’ revenue growth and profit margins and constrain cash flow.”

Specialty hospital chains like HealthSouth, Kindred Healthcare and Acadia Healthcare would be less affected by the growing cost of caring for the uninsured, because they see fewer uninsured patients, the report said.

For-profit hospitals aren’t alone in facing uncertainty. Moody’s has downgraded credit ratings for many nonprofit hospitals during the last two years as hospital revenue dropped, states cut Medicaid budgets and commercial insurers tightened their payment rates.

Moody’s past reports noted that nonprofit hospitals were seeing lower margins because of spending on such items as physician hiring and electronic health records so they could prepare for health reform. As of yet, Moody’s has not produced a report assessing how nonprofit hospitals would be affected if the Supreme Court overturns health reform.

In an amicus brief filed in the Supreme Court case in support of keeping the health reform law in place, the American Hospital Assn. and five other hospital organizations argued that the burden of caring for the uninsured hurts interstate commerce.

The brief noted that of the $86 billion in care received by the uninsured in 2008, hospitals, doctors and health systems wrote off $56 billion in uncompensated care.

“Although hospitals do what they can to assist patients, burdens on uninsured individuals remain heavy,” the brief said. “The legislation extends coverage to millions more Americans. To undo it now would be to maintain an unacceptable status quo — a result that is neither prudent nor compelled by the Constitution.”

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