CHA News Article

HHS Estimates Lower Uncompensated Care Costs for Hospitals

Last week, the U.S. Department of Health and Human Services (HHS) released the attached report, which estimates hospitals will save $5.7 billion this year in uncompensated care costs. The savings stem from the impact of health insurance coverage expansion under the Affordable Care Act (ACA) on drivers of uncompensated care (UCC) and hospital UCC costs. Based on an estimated 10.3 million decrease in the total number of uninsured individuals and an estimated 8 million increase in the number of those covered by Medicaid, HHS estimates that hospital UCC costs, including bad debt and charity care, will be $5.7 billion lower in 2014 due to the ACA. This savings represents a 16 percent reduction from baseline UCC spending. However, the estimate does not account for disproportionate share hospital (DSH) adjustments.

The report uses hospital earnings data from the Q1 and Q2 2014 earnings reports of five large for-profit hospital operators in the U.S.: Community Health Systems, Inc., Hospital Corporation of America, Tenet Healthcare Corporation, LifePoint Hospitals, Inc. and Universal Health Services, Inc. Survey data was collected from three hospital associations located in Medicaid expansion states: Arizona Healthcare and Hospital Association, Colorado Hospital Association, and Arkansas Hospital Association. The Colorado Hospital Association also released data from its DATABANK program of financial and volume data from 465 hospitals across 30 states, 15 of which have expanded Medicaid. Early hospital financial reporting and member surveys from these hospital associations indicate that, through Q2 2014, payer mix is shifting in ways that will likely reduce hospital UCC costs. In particular, volumes of uninsured/self-pay admissions have fallen substantially, particularly in Medicaid expansion states; volumes of uninsured/self-pay emergency department visits have fallen substantially, primarily in Medicaid expansion states; and the volume of hospital admissions for patients covered by Medicaid has increased, but only in Medicaid expansion states. The report acknowledges that while the hospitals represented in these earnings reports and surveys are not necessarily representative of all U.S. hospitals, examining them does allow an early look at the impact of ACA coverage expansions on the provision of UCC.

For additional details, see attached HHS report.