Given how large the deductibles and co-pays are that go with ACA plans, I've been assuming that going forward, hospitals will do no better at collecting debt and possibly be worse off than they are right now.
Apparently, Tenet Healthcare Corp. is a lot more optimistic. In its earnings report this week, Tenet Chief Financial Officer Daniel Cancelmi said that his company expects the Affordable Care Act to contribute between $50 million and $100 million to 2014 earnings before interest, taxes, depreciation and amortization, according to Modern Healthcare.
To get these numbers, Tenet is assuming a 15% reduction in uninsured volume, with 10 percentage points of the drop coming from those getting Medicaid coverage, and 5 points from those buying plans from the state and federal exchanges.
Tenet is also assuming that 5% of patients who had employer-based coverage will migrate to the exchanges as companies drop coverage. Reimbursement rates for the exchange products should be within 10% of commercial rates, Cancelmi told the earnings call participants.
These estimates sound reasonable on the surface. After all, while Medicaid reimbursement is lower than commercial payment, it is something as opposed to nothing. But many of Cancelmi's other assertions seem questionable:
- Assuming a 15% reduction in uninsured volume makes sense only if you believe that the state and federal exchanges will see a lot more business than they have so far.
- Even if 5% of patients who had employer-based coverage give the exchanges a look-see, those patients may not like what they see and do without coverage entirely.
- Tenet is assuming that reimbursement rates for exchange products will be in within 10% of commercial rates. From what I've seen and read elsewhere, that simply isn't true -- it seems more likely, based on a variety of sources, that exchange plans will offer much lower reimbursement than commercial plans.
And then there's the factors that Cancelmi didn't address in the earnings call. Most prominent: If payers have to narrow their networks in order to create profitable plans, won't Tenet be sitting on a whole lot of hospitals (the Vanguard acquisition) at a time when they risk being briskly booted out of health plan networks? This can't be good way to start an acquisition.
Then, there's the issue that will impact large hospital chains of all stripes (including Tenet) as they attempt to profit from the ACA. If hospitals are forced to take on new patients with questionable insurance -- by which I mean insurance that comes with huge deductibles and coinsurance requirements -- won't that eat up the comparatively modest gains the other newly insured offer?