Medicaid work requirements bring uncertainty to hospital bottom lines, Fitch warns
- Hospitals could see their bottom lines become even shakier as a result of the recent CMS Medicaid work policy, a new Fitch Ratings report shows.
- While opening up the work requirements to states alone should only have a "modest" impact on hospitals, given small at-risk revenues and a lower-margin patient population, they could exacerbate pressures already battering the industry, such as competition from lower-cost settings, a shift from fee-for-service to value-based payments, consolidation and growing consumerism.
- Kentucky was the first state to obtain a waiver after CMS in a Jan. 11 letter confirmed it will accept state Medicaid waivers that include work requirements as a condition for eligibility. Seven other states could soon follow: Arkansas, Arizona, Indiana, Maine, New Hampshire, Utah and Wisconsin. Indiana could come as early as Friday.
“Assuming all eight states … implement work requirements, there would be a negligible effect on hospital revenues but a larger effect on margins, all else being equal,” Fitch says. The rating's agency estimates at-risk Medicaid revenues in the eight states comprise less than 1% of hospitals’ revenues.
The work requirements are controversial, with critics noting most able recipients already do work and argue they'd lead to loss of needed care. The Fitch report shows how hospital bottom lines could be affected, too.
Estimates of Medicaid exposure as a percent of revenues at six health systems range from 0.2% both at HCA and Tenet Healthcare, to 0.4% at Universal Health, 0.6% at Community Health Systems, 1.0% at LifePoint Health and 1.1% at Quorum Health.
A report from the Cowen Washington Research Group this week predicts a gloomy 2018 for hospitals, with possible cuts in Medicare payments and states looking to reduce Medicaid rolls. Uncompensated care grew to $3.3 billion in 2016, $2 billion more than the prior year, according to the American Hospital Association. It was the first year since 2013 that the amount increased from the previous year.
Under the waiver, Kentucky’s Medicaid program will require able adults to spend at least 80 hours a month in work, job training, education or other “community engagement” activities. It also allows the state to cut dental and vision coverage for adults and drop enrollees above the poverty level for six months if they don’t pay premiums within 60 days.