Legislation that dismantles the Affordable Care Act and passed through two key House committees Thursday would hurt hospitals financially and possibly lead to debt downgrades, according to Moody's Investors Service and S&P Global Ratings. The bill relies on per-capita Medicaid caps and tax credits instead of mandates for individual insurance.
The House GOP bill to repeal and replace Obamacare is likely to leave more older and sicker Americans unable to afford insurance than coax younger and healthier people to buy coverage, S&P said.
“The overall payor mix for providers would weaken as the number of people without insurance would most likely rise, as would the hospital sector's level of bad debt and charity care expenses,” S&P said.
Limiting the expansion of Medicaid under the new bill also would have a deleterious effect on hospitals, which have benefitted by having more than 10 million newly insured Medicaid patients come to them in the 32 states and the District of Columbia where Medicaid has been expanded under ACA.
“While Medicaid expansion had a clear positive impact on not-for-profit provider ratings in states that expanded Medicaid, the reverse is likely to be incremental depending on the nature of each individual provider's overall business and payor profile,” the rating agency said.
Overall, the new legislation would reduce the number of people with health insurance and increase bad debt and uncompensated care costs," by freezing Medicaid expansion in 2020, Moody's said.
Partially offsetting those costs to hospitals would be the elimination of scheduled disproportionate-share hospital cuts for states that did not expand Medicaid.
But, the rating agency noted, “this is not enough to compensate for the credit negative aspects of the legislation.”
Moody's, S&P and Fitch Ratings are services that rate the creditworthiness of debt that both the investor-owned hospital systems and particularly the larger not-for-profit hospital systems rely on for expansion and maintenance.
By 3 p.m. EST Thursday, HCA Holdings, Community Health Systems and Tenet Healthcare had recovered most of what their shares prices had given up over the previous two days as details of the House bill began to be known. They are the three largest investor-owned hospital companies. HCA's shares traded at $87.03 at 3 p.m., down from $87.79 at the close of trading Monday. CHS' shares were at $9.51 at 3 p.m. compared to $9.86 at Monday's close. Tenet's shares at 3 p.m. were up 3% Thursday to $20.12, down from $20.79 at Monday's close.