Rebecca
Pifer @RebeccaMPifer
Dec. 10, 2019
Dive Brief:
·
Next year should be kinder to nonprofit hospitals and health
systems, with Moody's Investors Service forecasting a 2% to 3% growth in
operating cash flow next year, driven by stronger provider revenue due to
Medicare and commercial reimbursement raises and growth in patient volumes.
·
Moody's revised its 2020 outlook for the not-for-profit provider
sector from negative to stable as a result, and expects to see
increased consolidation as hospitals bid to gain "negotiating leverage
with commercial insurers, achieve savings through economies of scale, and
ensure a foothold in emerging offerings such as urgent care and
telemedicine," analysts wrote.
·
That's not to say health systems won't continue to contend with
sharp industry headwinds like rising labor costs and the aging population,
along with uncertainty from up-in-the-air legislation, regulation and lawsuits.
Dive Insight:
High Medicare
reimbursement rates should, along with slightly more favorable commercial
reimbursements, drive sector revenue to jump 4% to 5%, Moody's predicts.
Medicare payment rates in 2020 are the most industry-friendly in a while,
analysts say, at 3.1% for overall inpatient rates and 2.6% for outpatient.
Expense
management is also forecast to improve cash flow, though provider shortages
will cause labor costs to grow.
A growth in the
number of uninsured is projected to curb some of the gains expected under this
positive forecast, however. The uninsured rate reached
13.7% at the end of 2018, ticking up from 12.2% in 2017 and a low of 10.6% in
2016, according to Gallup. Policy experts blame the elimination of the
Affordable Care Act's individual mandate, along with other Trump administration
policies destabilizing the market.
Other
regulatory waves could also impact hospital margins next year.
Cuts to
Medicaid disproportionate share payments are likely to be postponed until late
2020 at least, which will help hospitals serving a large number of low-income
patients. The $4 billion payment reduction was supposed to go into effect in
2014, but lawmakers have delayed the unpopular cuts annually since.
On Nov. 21, the
Senate approved a continuing resolution to fund the federal government through
Dec. 20. The CR once again pushed back the trims to the Medicaid payments.
A Trump administration policy requiring
payers and providers to post secret negotiated rates online could help some
hospitals and hurt others, with some health experts arguing it would stimulate
competition through transparency and others warning it could cause prices
across the board to rise.
Hospital
lobbies filed a lawsuit Dec. 4 to stop the rule, arguing it violates the First
Amendment and would put overly onerous administrative burdens on providers.
Cuts to the
340B Drug Discount program, meant to prop up hospitals with a large amount of
uncompensated care, could also hurt the sector. The program generated an
average savings of almost $12 million
across all U.S. hospitals last year.
In May, a
federal judge struck down planned
HHS cuts to 340B, arguing the change was outside of the agency's authority.
However, CMS has said it plans to go through with the payment reductions
in the final outpatient rule for 2020.
On the
legislative side, the Republican state-led initiative to find the Affordable Care Act
unconstitutional would shear an estimated 20 million Americans from coverage
and raise premiums on millions more, hitting both hospitals and the consumer
hard.
“The fate of
the ACA will likely again rest with the Supreme Court," Moody’s
analysts said. "An adverse ruling there would have painful implications
for hospitals if millions of individuals lose insurance," and
"coverage gains from Medicaid expansion would likely be lost."
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