Relieved hospital execs say ruling could speed Medicaid expansion

Hospital leaders say they're moving ahead with delivery-system reforms that keep their populations healthy now that the U.S. Supreme Court has removed uncertainty about the continuation of premium subsidies. They hope the subsidies ruling will clear the way for more states to expand Medicaid to low-income adults.

Healthcare investors also cheered the King v. Burwell decision, sending shares of companies such as Community Health Systems and Tenet Healthcare Corp. as much as 14% higher on the day that the court issued its opinion.

“It's very positive for the industry,” said Alan Miller, CEO of Universal Health Services, a publicly traded chain with acute-care and behavioral-health hospitals in 37 states. “It's good for reduction in bad debt. We'll get paid for our services.”

The court's decision in King means that insurance will remain affordable for 6.4 million Americans in 34 states and that hospitals will have a payment source for many previously uninsured patients. Some healthcare leaders predicted the ruling would weaken Republican efforts to roll back the Affordable Care Act. If the court had killed the subsidies, they say, it would have strengthened further attacks on the law.

“A negative ruling would have been very disruptive,” said Dr. Bruce Vanderhoff, chief medical officer of OhioHealth, Columbus. “It would have been a lot like pulling a thread in a garment. You just don't know what will happen if you pull that thread.”

In Ohio, 234,000 people bought health insurance through the federal exchange and 196,000 of them got a subsidy. “The court's ruling allows for stability,” Vanderhoff said. “What it signals is a continued evolution to value-based care rather than fits and starts.”

Trinity Health, based in Livonia, Mich., estimates that 3.8 million people were at risk of losing coverage in the 21 states where it operates. Trinity has an ambitious plan to expand into new value-based payment models. In 2013, the system hired Dr. Richard Gilfillan, the Obama administration's architect of accountable care organizations, as its new CEO.

“The No. 1 impact (of the King ruling) for us is that those people who want to get care can continue getting care,” said Gilfillan, who formerly headed the CMS Innovation Center, which was created by the healthcare reform law. “It maintains momentum around transforming our healthcare system.”

At health systems across the country, executives emphasized that the ruling will allow them to focus on providing people with urgent and preventive care before they end up in the emergency room or the hospital. “It's critically important to population health,” said Bill Carpenter, CEO of publicly traded LifePoint Health, based in Brentwood, Tenn. Most of its 64 hospitals are small, rural facilities. “We are grateful that those people who bought affordable health insurance through exchanges will continue to have coverage.”

In Texas, the uninsured rate has fallen to 16.9% from 24.6% since the ACA coverage expansion took effect, despite the state's refusal to expand Medicaid to low-income adults. “For each 1% of our business that moves from being uninsured to being insured via the marketplace, we realize approximately $40 million,” said Joel Allison, CEO of Baylor Scott & White Health in Dallas. “That is money that we, as Texas' largest not-for-profit healthcare provider, can reinvest in the health of the communities we serve, expanding access to quality care for the uninsured and the underinsured.”

Notably, the justices not only upheld the Obama administration's interpretation that the ACA unambiguously authorizes premium subsidies in all states, but they blocked future administrations from interpreting the law differently and shutting off subsidies in states served by the federal marketplace.

Public health advocates and safety net providers say the King ruling was vital in ensuring healthcare access to the most vulnerable patients. “In non-expansion states it would have been a triple whammy,” said John Haupert, CEO of Grady Health System in Atlanta, whose state has not expanded Medicaid. “We would have had to start having discussions with our board and the community about which clinical services we could no longer” afford to provide with those kinds of cuts.

The King decision is likely to preclude future legal challenges to the healthcare reform law and take the healthcare pressure off the 2016 elections, said Fletcher Lance, national healthcare practice leader for consulting firm North Highland Co., who worked with hospital companies on planning for various scenarios prior to the ruling. For Republicans who want to repeal or roll back the healthcare reform law, “It becomes politically riskier to do that now,” he said. “The die is clearly cast.”

Beyond that, Lance said, more states may move to expand Medicaid to low-income adults under the ACA. In addition, more uninsured people are likely to sign up for exchange coverage now that the court has removed uncertainty about the legality of the subsidies.

Dr. Georges Benjamin, executive director of the American Public Health Association, said that much more focus must now be given to expanding Medicaid in all states, and that healthcare leaders need to highlight the negative health and economic effects of not expanding. “There is strong correlation between some of the worse health outcomes in the nation and the lack of Medicaid coverage,” he said.

Benjamin said the King v. Burwell case has helped spark what he called a “national conversation around health,” which he expected will put pressure on lawmakers to provide greater healthcare access to more Americans. “I believe the public is going to see through the lies and distortions against the Affordable Care Act and begin to demand their elected officials do something to cover people who are uninsured,” he said.

Still, healthcare leaders in states that have not expanded Medicaid said it's difficult to predict what Republican governors and legislative leaders will do. “That debate will continue,” said Jim Nathan, CEO of three-hospital Lee Memorial Health System, Fort Myers, Fla. That state just went through a huge battle over Medicaid expansion, splitting the state's Republican leaders and ending in defeat for hospitals and business groups advocating Medicaid expansion.

Lee Memorial's southwestern Florida base has the second-highest number of uninsured people among the state's regions. Many people who had service jobs lost their job-based coverage when the economy tanked several years ago, and the hospital system's share of patients with private insurance plummeted from 35% to 20%.

Under Obamacare, 1.3 million Floridians purchased coverage through the federal exchange, with a large majority receiving premium subsidies. Because of the ACA's coverage expansion last year, “We saw a leveling off in the decline in commercial insurance,” Nathan said. “That's a positive for us.”

His relief over the King ruling was palpable. “We were about ready to lose that,” he said.