Vital Signs Blog

Blog: Ascension hospitals see higher margins in Medicaid expansion states

Indiana, the home of Ascension Health's St. Vincent Indianapolis, received permission to expand Medicaid beginning in February 2015. Indiana, the home of Ascension Health's St. Vincent Indianapolis, received permission to expand Medicaid beginning in February 2015.
More Medicaid patients, even at low reimbursement rates, delivered a financial boost to Ascension Health hospitals in states that expanded their Medicaid programs. It's an increase that wasn't seen in the system's non-expansion states.

St. Louis-based Ascension has 131 hospitals in 16 states, seven of which expanded Medicaid and nine that did not. Therefore, its experience is one of the first indicators of how healthcare reform is affecting hospitals, which have been absorbing the costs of the uninsured through their emergency rooms for decades and potentially have the most to gain from insurance expansion.

Ascension provided the data to the Kaiser Family Foundation, which released its report Thursday.

Notably, the health system did not find that its costs increased in states that have expanded Medicaid, while costs increased 1.3% in non-expansion states. Although many Medicaid programs reimburse hospitals below cost for their services, Ascension found that being able to reduce the amount of charity care it provides offset the payment shortfall.

The amount of revenue coming from self-pay patients decreased 63.2% in its seven Medicaid expansion states while increasing 2.6% in non-expansion states. Medicaid revenue, meanwhile, increased 8.2% in expansion states and fell 9.4% in non-expansion states.

However, hospitals in the nine non-expansion states saw a larger increase in commercial patient revenue, or 3.5% compared with 0.2%.

The commercial insurance increase actually drove higher revenue growth in Ascension's non-expansion states, or 2.3% compared with 1.3%. That finding is consistent with a February report from accounting and consulting firm Crowe Horwath, which similarly found an increase in commercial revenue in non-expansion states.

As the market shifts to high-deductible plans—which could be accelerating in states that saw a large number of enrollees through their state-run insurance marketplaces—more patients are seeking care from lower-cost outpatient centers, such as retail clinics, Crowe Horwath study author Derek Bang said.

Still, Ascension found that the decrease in charity care was enough to boost operating margins for its hospitals in expansion states. Operating margins for hospitals in expansion states increased 62%, or an average of 3.4% in 2014 from 2.1% in 2013. In contrast, hospitals in non-expansion states saw a 24% increase in their average operating margin, which rose to 6.2% from 5%.


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