One for-profit hospital in south Texas scrimps on scrubs, blankets, mops and employee overtime. A nonprofit in Boston is fighting to preserve its world-renowned academic research program. The future for both hospitals remains uncertain.
With the failure of the Republicans’ overhaul of the Affordable Care Act, hospital administrators from every corner of the U.S. have been breathing a sigh of relief. But the respite will likely be short-lived. True, 24 million Americans won’t be losing their insurance, a fact that has investors buoying hospital stocks for now. Even so, the industry is up against market forces that will compel hundreds of hospitals to shrink, remake themselves or even close in the months and years to come.
Obamacare made big strides in providing health coverage, cutting the U.S. uninsured rate almost in half. But more than 220 U.S. counties still have uninsured rates at or above 20 percent, according to an estimate from Enroll America, a health-advocacy group. Rising interest rates threaten to bog down hospital chains — including Tenet Healthcare and Community Health Systems — with debt. Rising patient contributions — deductibles and co-pays — are both adding to unpaid bills and discouraging patients from undergoing profitable procedures.
“If you have a $5,000 or $10,000 deductible plan and your hip hurts, do you get the surgery, or do you take a couple more Advils a day and hope for the best?” said Spencer Perlman, an analyst at Veda Partners. “I understand this rally, but longer term, I still see more headwinds than tailwinds for hospitals.”
National bed-occupancy rates are now about 46 percent, part of the migration of patients from ward beds to doctors’ offices, surgery centers and other settings where care is far cheaper to provide, according to John Morrow, a managing director at Franklin Trust Ratings. Most big hospital chains are predicting flat or slow admissions growth this year, according to Bloomberg Intelligence analyst Jason McGorman.
Many hospitals may not survive. Roughly half broke even or had negative operating margins last year, with most — but not all — of the poorest performers among the nonprofit and government ranks, Mr. Morrow said.
“When you see the core business numbers under water, but the place is still skating by, you have to ask yourself, is that sustainable?” he said.
“We hope moving forward that policymakers will focus on improving access to affordable health-care coverage for Americans, protect and strengthen the Medicaid program for the most vulnerable and restore needed Medicare funding so community hospitals have sufficient resources to continue to deliver high quality care,” Chip Kahn, CEO of the Federation of American Hospitals, a for-profit industry group, said in a March 24 statement.
About 60 miles from the Texas-Mexico border, the 25-bed Big Bend Regional Medical Center is in a virtual Obamacare-free zone. Texas didn’t expand Medicaid, and few locals signed up for individual ACA plans. On an average day, eight of the beds are occupied, and about one in four patients is uninsured, said Diane Moore, chief executive officer of Big Bend, a member of the Quorum Health Corp. for-profit chain.
Big Bend’s operating margin in 2016 was minus 32 percent, or a loss of $400,000. Diane Moore is trying to keep the institution afloat, hiring surgeons to drive in for one or two days a week so patients won’t have to travel more than 140 miles to a bigger hospital in Odessa. In the meantime, she cautiously doles out supplies and holds off on painting and other maintenance.
Compounding last year’s pain, Big Bend had bad debt, including unpaid bills, of $4 million on a budget of $55 million. The good news, Moore said, is that uninsured patients at least try to pay their bills, for which she charges a discounted rate.
“This is better than any hospital I’ve ever been at for self-pay,” Moore said. Still, “we average 15 cents on the dollar for collections.”
Hospitals long for the days when they could count on steady increases in Medicare reimbursement that they gave up when the ACA passed. Those payments helped overcome budget shortfalls but were curtailed because Obamacare was expected to wipe out a huge portion of hospitals’ free care and bad debt. While those expenses dropped precipitously in the 31 states that expanded Medicaid, hospitals in the states that didn’t expand have suffered from both reimbursement cuts and rising bad debt.
Without that money, Clinton, Tennessee-based Curae Health, a nonprofit chain of three Alabama hospitals, puts off maintenance, buys used medical equipment and has cut its marketing budget.
“We’ve ended up making choices between staff, capital expenditures and new equipment,” said CEO Steve Clapp. “We don’t feel like we can afford a new MRI or CT machine.”
Even the expansion of Medicaid, which helped states cover patients who couldn’t pay their medical bills, has hit some hospitals hard. In Massachusetts, which dramatically increased private coverage under former Republican Governor Mitt Romney, widening the program is costing hospitals money.
From 2011 through early 2016, about 300,000 Massachusetts residents moved from employer-funded coverage to Medicaid, which reimburses hospitals far less for the same care. Now, 1.9 million state residents, or about one in four, are covered by the joint federal-state program.
Last year, Brigham and Women’s Hospital lost $90 million caring for Medicaid patients, according to Betsy Nabel, president of Brigham Health, the hospital’s parent. Those funds are vital to the Harvard University-affiliated Brigham, which has one of the biggest clinical-research programs in the U.S. The 18 percent budget cut at the National Institutes of Health proposed by President Donald Trump poses yet another threat.
“The monies to support clinical care are drying up,” she said Feb. 24 in a speech in Cambridge. “No margin, no mission.”
At Big Bend, Moore doesn’t have to maintain laboratories or clinical-trial facilities like those at Brigham. She would just love to net $1 million so she can show some profit and paint the whole wall instead of just touching it up when the paint gets scratched. She says Quorum, Big Bend’s parent company, can help get her through some tough years, but she’s also going to need health insurance to be even more affordable and accessible to her patients. And there’s still the possibility that the Trump administration, which already cut marketing for insurance on the ACA’s exchanges, will come back at it with sharpened knives.
“Obamacare is going to have to be fixed,” she said. “Health care in general is going to have to be fixed.”