Hospital profit margins plummet in first year of Medicaid Expansion

Revenue down despite increased utilization, reductions in uncompensated care

A new report by the Montana Hospital Association shows hospitals’ total profit margin plummeted by 40 percent during the first full year of Medicaid Expansion, despite anticipated reductions in uncompensated care. The report also shows hospitals experienced increased use of health care services by newly insured patients, although the total days of care provided to patients admitted to the hospital remained unchanged.

“Medicaid Expansion is working,” said MHA President/CEO Dick Brown. “More Montanans are covered by health insurance and are receiving the care they need, at the time they need it. At issue are the payment shortfalls that hospitals continue to absorb in order to provide around-the-clock care in our rural communities.”

Total profit margins for all hospitals decreased from 4.3 percent in 2015 to 2.6 percent in 2016. Critical access hospitals’ total margin decreased 25 percent to an average -7.7 percent.

Inpatient acute hospital admissions increased 3.4 percent over 2015 to 57,564 admissions. Outpatient visits increased 2.6 percent, ambulatory surgery increased 12.1 percent and emergency department visits increased 3.9 percent.

Medicaid accounted for 16 percent of patient charges in 2016, compared to 11 percent in 2015. At the same time, self-pay (which generally accounts for patients who are uninsured or underinsured) decreased 40 percent to 2.7 percent of patient charges. Hospital care consumed by individuals with commercial insurance dropped 11 percent. Medicare increased 4 percent, to 45 percent of total patient charges. These changes in payer mix contributed to a 45 percent decrease in uncompensated care over the previous year.

“With reimbursement from Medicare, Medicaid and some managed care plans falling below the cost to deliver care, cost-shifting and the reliance on other revenue streams become more acute,” said Brown.

“Uncompensated care has generally improved, but those savings have been offset by reduced utilization by patients with high-deductible health plans and rising costs related to drug and medical supplies, regulatory compliance and staffing.

“To protect the future of rural health care, we urge our elected leaders to preserve Medicaid and Medicaid Expansion funding and support hospitals and other caregivers in their mission to improve the health of their communities.”

The 2016 Hospital Utilization and Financial Performance Trends analysis compares hospital performance in the first 12 months of 2016 with the same period in 2015. The report is the fourth in a series of quarterly data releases that summarize utilization and financial performance trends for hospitals participating in MHA’s Databank program. The data are self-reported and are not subject to audit. A list of participating hospitals is included with the report.



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