Most talk about hospital revenue under health reform has been speculation. Hospitals can expect fewer unpaid medical bills as insurance coverage expands, a shift widely expected to curb losses from bad debt and free or discounted care. But it's unclear how much hospitals will be paid for patients newly insured by commercial plans, or how many will forgo insurance despite fines.
Hospitals also agreed to $155 billion less from the federal government during the next decade as part of the reform package. Other provisions tie payment to performance and Medicare savings targets.
That's too much uncertainty for executives debating whether to replace one Connecticut hospital.
Plans to replace Stamford (Conn.) Hospital—a campus with some buildings roughly 100 years old—are up in the air until executives better understand how reform will affect hospital revenue and margins, said Kevin Gage, the 227-bed hospital's chief financial officer. Reform is one of three factors to determine whether Stamford builds, he said. (The remaining two are fundraising plans and sale of a long-term-care facility.)
Stamford won approval in February from Connecticut regulators for the $222 million first phase of its hospital replacement: a 289,500-square-foot building, with a ground floor emergency room and other floors to be filled in during a second phase. The final stage will add a bed tower.
Gage said Stamford Hospital may face more difficult rate negotiations for commercially insured patients as private insurers grapple with heightened regulations under reform. Medicaid expansion may increase stress on operations, despite additional revenue, should the hospital see an influx of patients newly enrolled in the safety net insurer, which fails to cover costs, he said. Commercial insurance accounted for roughly 56% of Stamford's revenue in 2009. Medicaid accounted for 7.6% of revenue that year.
“That's why we have taken the conservative stance that we want to understand the impact of health reform before we make a long-term commitment to a new facility,” Gage said.
Many hospitals put capital spending on hold after the credit crisis. Are you aware of other hospitals that are weighing projects as a result of reform? We'd love to hear from you.
Credit analysts have been cautious, but mostly pessimistic about not-for-profit hospitals' prospects once the nation adopts most reform provisions in 2014.
Consolidation is widely expected as capital-hungry hospitals seek stronger partners and reform puts greater stress on revenue.