A new report from the Cowen Washington Research Group is predicting a tough 2018 for hospitals, including potential Medicare payment cuts and states looking to reduce Medicaid coverage.
One bright spot could be psychiatric hospitals, which may benefit from the federal government expanding the fight against opioid abuse and possibly ending the Medicaid Institutions for Mental Diseases (IMD) exclusion, which prohibits Medicaid dollars being used for some addiction and mental health patients.
Medicaid Disproportionate Share Hospital (DSH) cuts are also in play, but the analysts forecast they will be pushed off for another year.
The Republican-led “repeal and replace” movement to kill the Affordable Care Act failed — a relief for hospitals — but other changes are coming.
The next year will continue to see change in healthcare driven by Washington. The report said the industry may win some of the fights to keep the status quo, but warned they will lose some battles that will affect hospital finances.
Issues facing hospitals this year include Medicaid DSH cuts, a possible return of mandatory bundling initiatives and CMS potentially moving hip replacement procedures to outpatient. All three of these could impact hospital finances, the report says. Hospitals are also facing a cut to payments from the 340B drug program, which they are currently challenging in court.
Another major issue involves Medicaid. The Trump administration is offering states more flexibility to change Medicaid programs, including work requirements, higher premiums and copays and removing the 90-day look-back provision that requires coverage for people 90 days before Medicaid coverage. Those changes will cut the number of people with Medicaid, which will affect hospitals. If those covered by Medicaid lose insurance, hospitals may see a rise in bad debt and uncompensated care. The American Hospital Association (AHA) recently said uncompensated care already increased to $38.3 billion in 2016, which was more than $2 billion over the previous year. It was the first year since 2013 that the amount went up from the previous year.
There was optimism that more states would expand Medicaid this year, but so far there has been little movement. Maine Gov. Paul LePage is opposing Medicaid expansion approved by voters last year. The Republican governor’s tenure ends this year.
Medicaid advocates hoped Virginia would expand the program after a strong showing by Democrats running for the legislature last fall. However, a Senate panel voted against expansion, which may derail the possibility, according to the report.
Despite the list of negatives for hospitals, there is one area that may have a better 2018.
CMS may streamline Medicare waivers concerning substance abuse patients at private psychiatric hospitals, the report predicts. The change would make it easier for states to get an 1115 Medicaid waiver to cover substance abuse patients in IMDs. The Trump administration may also expand IMD beds for psychiatric patients. That could help psychiatric hospitals.