As noted in an earlier post, the new health reform law continues to thwart reliable projections about the financial future. Investors in bonds that finance hospital construction or technology have been cautioned since March of the sector's shaky outlook under health reform. Details vary, but this disclaimer perhaps best captures the uncertainty that pervades hospitals' disclosure of the potential impact on operations as health reform provisions take hold in coming years:
“Management cannot predict with any reasonable degree of certainty or reliability any interim or ultimate effects of the legislation.”
Changes to Medicare payment for hospitals start in October and in 2012, payment from Medicare will drop to account for the cost of avoidable hospital readmissions, the bond disclosures note. Medicare will also begin to tie pay to quality that year. As of 2014, Medicare payments to offset losses for hospitals that care for high rates of uninsured will drop to a quarter of what they were. The following year, Medicare will curb pay to treat infections patients acquire in the hospital.
Meanwhile, there are rules on the way; the chance of new laws; and court challenges to reform, as BayCare Health System noted as it went to market this month for roughly $200 million:
“Thus, the healthcare industry will be subjected to significant new statutory and regulatory requirements and consequently to structural and operational changes and challenges for a substantial period of time, assuming the 2010 Health Legislation survives any constitutional challenges or is not significantly modified by future legislation.”
One bright spot for hospitals may prove not to be, warned Ascension Health, the largest U.S. not-for-profit health system, as it prepared to go to market for $157 million this month. Expanded insurance under the law may cover 19 million by 2015 and another 11 million the following year. But the potential drop in unpaid bills and increased revenue from the newly insured “may or may not” offset the cost of care, the system said.
Some of the industry's other players have already made changes to comply with reform or released early projections for how the law will affect revenue. Insurers, under political pressure, have begun to adopt some popular provisions of the law ahead of schedule, such as extended coverage for young adults under their parents' plans and a ban on dropping coverage for patients who become ill.
Footnoted.org reported Bristol-Myers Squibb said the drugmaker expects the negative impact from reform to roughly double in 2011 (when new fees and Medicare discounts take hold) as the company disclosed first-quarter sales fell by $49 million under the law's retroactive Medicaid rebates.