In its Q1 earnings call, Tenet Health indicated it will be backing out of certain states where it doesn't see a future. The states mentioned were Georgia and North Carolina, two states that have not expanded Medicaid.
"As we've noted in the past, there are markets where we don't see a path either by acquisition or partnership to develop the scale we believe will be necessary as healthcare delivery continues to evolve," said CEO Trevor Fetter. "In those markets, we believe our hospitals would be better positioned under another operator."
By the numbers
Although Tenet does not say it's pulling out of these particular states because they are refusing to expand Medicaid, it's no secret that hospitals in non-expansion states are facing cuts while missing out on potential revenue. According to a study by the Robert Wood Johnson Foundation, under the Affordable Care Act, hospital revenues from more people being covered by both private insurance and Medicaid were expected to offset the ACA's "$22 billion in Medicaid cuts to disproportionate share hospital payments, $34 billion in Medicare disproportionate share hospital cuts, and $260 billion in Medicare fee-for-service cuts during 2013–2022."
In states that chose not to expand Medicaid, hospitals will pay the full cost for ACA funding. Additionally, they will only receive part of the increased revenue for the newly-insured that was built into the ACA's initial design before the Supreme Court made the decision that states could opt out of Medicaid expansion. The report goes on to say that the 21 states that have not expanded Medicaid are projected to cost their hospitals an estimated $13.9 billion in Medicaid revenue for 2016 and $146.9 billion for 2013–2022.
A question of network viability
Despite these numbers, some experts do not believe for-profits are looking to pull out of states that have not expanded Medicaid. "I think you could see that in states where systems have not been able to develop a viable network to expand on," said Jeff Hoffman, healthcare expert at global management consultancy Kurt Salmon. "But I don't think you'll see [a large system like] HCA pull out of Florida, and Florida is not going to expand anytime soon. On the other hand, California expanded Medicaid and is seeing for-profits leave."
Hoffman says he believes the current trend of hospital closures has less to do with Medicaid expansion and more to do with the systems' strategic models of expanding their networks, which is consistent with Fetter's statement about Tenet's plans.
Joe Lupica, Chairman at Newpoint Healthcare Advisors, says he doesn't see for-profits pulling out of non-expansion states any more than not-for-profits. "For-profits have better access to capital, so they can ride out these storms," he says. "There's a lot of pressure on states to expand, so people are figuring they eventually will."
Lupica says he does think some hospitals may be at risk due to overall changes brought about by the ACA. "Other bits and pieces are being pulled away from hospitals little by little in an attempt by the Congressional staff to fund the ACA," he said. "That can end up hurting as much as a state's choice not to expand Medicaid."
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