Impact of Insurance Expansion on Hospital Uncompensated Care Costs in 2014. B. Early Data on Changes in Hospital Volume and Payor Mix: Quarter One and Quarter Two, 2014

09/01/2014

The increase in insurance coverage was expected to decrease hospital UCC by decreasing the proportion of hospitals’ clinical volume comprised of uninsured patients (although increased volumes of patients covered by Medicaid were expected to have a smaller impact on UCC as a result of lower payment rates). In this subsection, we will use data from the first available sources on volume and payor mix since insurance expansion to examine this issue: hospital earnings data and hospital association surveys. Hospital earnings data are from the Q1 and Q2 2014 earnings reports of five large for-profit hospital operators in the United States: Community Health Systems, Inc. (CHS), Hospital Corporation of America (HCA Holdings, Inc.), Tenet Healthcare Corporation, LifePoint Hospitals, Inc., and Universal Health Services, Inc. (UHS). The surveys come from three hospital associations that are located in Medicaid expansion states: the Arizona Healthcare and Hospital Association, the Colorado Hospital Association, and the Arkansas Hospital Association. The Colorado Hospital Association also released data from its DATABANK of financial and volume data from 465 hospitals across 30 states, 15 of which have expanded Medicaid. While the hospitals represented in these earnings reports and surveys are not necessarily representative of the totality of U.S. hospitals, examining them does allow an early look at the impact of the ACA coverage expansions on the provision of UCC.

Declining Uncompensated Care Volumes

Four of the five for-profit hospital groups – Community Health Systems,28 HCA,29 LifePoint,30 and Tenet31 – reported how their hospitals’ volumes of uninsured and/or self-pay admissions (which we will collectively refer to as UCC) changed in Q1 2014 (relative to Q1 2013). The Colorado Hospital Association32 and Arkansas Center for Health Improvement33 also reported similar figures for their membership. Please note that the numbers reported here are relative changes, which allow us to compare trends across hospital chains and across states; the absolute proportion of care provided to the uninsured nationwide ranges from roughly 5-10 percent of total admissions.34

As shown in Figure 1, hospitals overall tended to see relative reductions in their numbers of admitted patients who were uninsured between Q1 2013 and Q1 2014. Moreover, hospitals in Medicaid expansion states saw substantial declines in their uninsured admissions, ranging from 28 to 33 percent relative reductions compared to one year prior. Hospitals in Medicaid non-expansion states, on the other hand, did not experience declines in their volumes of UCC admissions.

Figure 1. Percent Change in the Volume of Uninsured Admissions, Q1 2013 to Q1 2014

CHA=Colorado Hospital Association. HCA=Hospital Corporation of America.

Though fewer data are available for emergency department (ED) use, among those that reported these figures, hospitals overall saw 0 to 13 percent relative declines in ED visits by uninsured patients between Q1 2013 and Q1 2014. These changes were largely concentrated in Medicaid expansion states, ranging from 16 percent to 28 percent in these states (Figure 2), with small to no changes among hospitals in Medicaid non-expansion states.

Figure 2. Percent Change in the Volume of Uninsured ED Visits, Q1 2013 to Q1 2014

HCA=Hospital Corporation of America. NA=not applicable. NR=not reported.

The declines in volumes of uninsured admissions were even greater between Q2 2013 and Q2 2014. Overall, hospitals saw relative declines in their volumes of uninsured admissions that ranged from 15 to 34 percent. Among hospitals in states that expanded Medicaid, the number of uninsured patients admitted declined between 48 percent and 72 percent between Q2 2013 and Q2 2014 (Figure 3). By contrast, in states that did not expand Medicaid, the decrease in volume of uninsured patients admitted to hospitals ranged between 0 and 14 percent.35 36 37 38

Figure 3. Percent Change in the Volume of Uninsured Admissions, Q2 2013 to Q2 2014

HCA=Hospital Corporation of America.

Again, though less evidence is available, relative reductions in UCC in the ED appeared to continue to grow when comparing Q2 2013 and Q2 2014, ranging from 26 percent to 60 percent in Medicaid expansion states (Figure 4).

Figure 4. Percent Change in the Volume of Uninsured ED Visits, Q2 2013 to Q2 2014

HCA=Hospital Corporation of America.

It is also important to note that the decreases in the volume of uninsured patients that we report above are being seen in both urban and rural hospitals. The two non-urban hospital operators observed, Community Health Systems39 and LifePoint,40 saw a decrease of roughly 70 percent in uninsured admissions in Q2 2004, and a significant drop in uninsured ED volume; the two more urban hospital providers, HCA41 and Tenet,42 saw an average decrease of around 50 percent. Arkansas, a primarily rural state, saw the volume of uninsured patients in inpatient and ED settings decline up to 30 percent43 – on par with other states and hospitals with more urban geography.

Overall, there is thus strong evidence that the volume of uninsured patients is dropping in both the inpatient and ED settings and across a variety of geographical areas, indicating a likely drop in hospital UCC costs.

Increasing Overall Patient Volumes

Despite the observed reductions in the volume of uninsured patients, hospitals have experienced positive trends in their overall volumes of admissions compared to prior years.44 45 46 47 The same-quarter to same-quarter comparisons have improved each of the last three quarters, which is in contrast to prior trends in hospital admission volumes. For example, comparing Q4 2012 to Q4 2013, total hospital admissions declined from 1.8 percent to 10.5 percent across four large for-profit hospital groups. However, when comparing Q1 2013 to Q1 2014, declines were smaller (Figure 5), and when comparing Q2 2013 to Q2 2014, two of the four chains moved into positive comparisons in admission volumes.

Figure 5. Percent Change in Hospital Volume

HCA=Hospital Corporation of America

Increases in the Volume of Medicaid Admissions

One group that seems to be driving these volume increases is those patients who are newly insured by Medicaid. Initial data from hospitals and hospital associations suggest that the volume of admissions represented by patients covered by Medicaid has increased, but only in Medicaid expansion states. Between Q1 2013 and Q1 2014, hospitals in Medicaid expansion states experienced relative increases in their volume of Medicaid patients that ranged between 4 percent and 31 percent, while there is no evidence that Medicaid admissions increased among hospitals in Medicaid non-expansion states (Figure 6).48 Please note that the proportion of admitted patients who are insured by Medicaid at baseline ranges significantly across these hospital chains, but Medicaid patients comprise up to 21 percent of total hospital admissions nationwide.49

Figure 6. Percent Change in the Volume of Medicaid Admissions, Q1 2013 to Q1 2014

CHA=Colorado Hospital Association; HCA=Hospital Corporation of America.

Growth has continued in the second quarter. Comparing Q2 2013 and Q2 2014, it appears that hospitals in states that expanded Medicaid experienced further relative increases in their volumes of Medicaid admissions that ranged between 17 percent and 32 percent, with again no evidence of increases among hospitals in non-expansion states (Figure 7).50 These large percent increases in the volumes of Medicaid admissions are most likely the result of a shift in admissions of uninsured patients to admissions of patients covered by Medicaid, although some of the increase in Medicaid admissions could be the result of pent-up demand among the formerly uninsured.

Figure 7. Percent Change in the Volume of Medicaid Admissions, Q2 2013 to Q2 2014

HCA=Hospital Corporation of America.

Evidence suggests that Medicaid admissions are increasing outside these health systems as well, and that the expansions are in both urban and rural areas. For example, in Kentucky, 46 percent of urban hospitals and 36 percent of rural hospitals are receiving more in Medicaid reimbursements than they did a year ago, according to the state’s Cabinet for Health and Family Services, which administers Kentucky Medicaid.51

Changes in UCC and Bad Debt Costs

Very little direct evidence on changes in UCC and bad debt costs as a result of insurance expansion is available to date, as bad debt is not always split out in the surveys and earnings reports, and formal 2013 Cost Report filings (which do require separate reporting of bad debt) are not yet available. However, two of the large hospital groups – Community Health Systems and Tenet – did report on their changes in bad debt in the first two quarters of 2014. When comparing Q1 2013 and Q1 2014, bad debt was higher in 2014 in these two hospital groups, with the increase ranging from 4 to 10 percent. In contrast, these groups experienced large declines in bad debt when comparing Q2 2013 and Q2 2014 that range from 5 to 19 percent (Figure 8).

Figure 8. Percent Change in Bad Debt

Additionally, reports from the Arizona Hospital and Healthcare Association52 suggest a 31 percent drop in total UCC costs between Q1 2013 and Q1 2014, though again this is not split out into charity care versus bad debt. Similarly, Colorado’s urban hospitals reported providing $3.6 million less in UCC in Q1 2014 than in Q1 2013, while its rural hospitals also experienced a drop in UCC during Q1 2014.53

Finally, though in this brief we focus on hospital uncompensated care, there is also evidence from other sources that uncompensated care in the outpatient setting may be decreasing as well. A recent report from the Robert Wood Johnson Foundation and athenaResearch suggested that the proportion of outpatient visits accounted for by uninsured patients has decreased, particularly in Medicaid expansion states, while the proportion accounted for by Medicaid patients has increased.54 Further study is necessary to understand the consequences and stability of these trends in the outpatient setting.

Summary and Implications

Based on the available data, hospitals in Medicaid expansion states have seen substantial declines in their admission volumes of uninsured patients, declines in their volumes of uninsured patients visiting the ED, and increases in admissions that are covered by Medicaid. Hospitals in non-expansion states, by contrast, report relatively little change in these volumes.

Thus, UCC costs are likely declining among hospitals, particularly among hospitals in Medicaid-expansion states. This has important implications for future financial performance in the hospital industry, as well as for hospitals’ ability to remain clinically excellent and financially solvent in the setting of impending decreases in federal reimbursement for uncompensated care in coming years, as well as implications for state and federal governments.


28 Community Health Systems earnings presentation, 1st quarter 2014, and Community Health Systems' (CYH) CEO Wayne Smith on Q1 2014 Results - Earnings Call Transcript. Available at http://seekingalpha.com/article/2200033-community-health-systems-cyh-ceo...

29 HCA Holdings' CEO Discusses Q1 2014 Results - Earnings Call Transcript. Available at http://seekingalpha.com/article/2174773-hca-holdings-ceo-discusses-q1-20...
30 LifePoint Hospitals' CEO Discusses Q1 2014 Results - Earnings Call Transcript. Available at http://seekingalpha.com/article/2166743-lifepoint-hospitals-ceo-discusse...
31 Tenet Q1 2014 report and Tenet Healthcare's (THC) CEO Trevor Fetter on Q1 2014 Results - Earnings Call Transcript. Available at http://seekingalpha.com/article/2194873-tenet-healthcares-thc-ceo-trevor...
32 Colorado Hospital Association Center for Health Information and Data Analytics, Impact of Medicaid Expansion on Hospital Volumes, June 2014. Available at http://www.cha.com/Documents/Press-Releases/CHA-Medicaid-Expansion-Study...
33 Arkansas Center for Health Improvement, Arkansas Hospitals Show Reduction in Emergency Room Use and Uninsured Admissions Three Months Into Private Option, May 2014. Available at http://www.achi.net/pages/news/article.aspx?ID=33
34 Hempstead K., Hospitals and Health Reform: What’s at Stake? Robert Wood Johnson Foundation, August 2014. Available at http://www.rwjf.org/en/about-rwjf/newsroom/newsroom-content/2014/08/hamp...
35 Community Health Systems earnings presentation, 2nd quarter 2014, and Community Health Systems' (CYH) CEO Wayne Smith on Q2 2014 Results - Earnings Call Transcript. Available at http://seekingalpha.com/article/2372765-community-health-systems-cyh-ceo...
36 HCA Holdings' (HCA) CEO Milton Johnson on Q2 2014 Results - Earnings Call Transcript. Available at http://seekingalpha.com/article/2353325-hca-holdings-hca-ceo-milton-john...
37 LifePoint Hospitals' (LPNT) CEO Bill Carpenter on Q2 2014 Results - Earnings Call Transcript. Available at http://seekingalpha.com/article/2343785-lifepoint-hospitals-lpnt-ceo-bil...
38 Tenet Q2 2014 report and Tenet's (THC) CEO Trevor Fetter on Q2 2014 Results - Earnings Call Transcript. Available at http://seekingalpha.com/article/2384715-tenets-thc-ceo-trevor-fetter-on-...
39 Community Health Systems earnings presentation, 2nd quarter 2014, and Community Health Systems' (CYH) CEO Wayne Smith on Q2 2014 Results - Earnings Call Transcript. Available at http://seekingalpha.com/article/2372765-community-health-systems-cyh-ceo...
40 LifePoint Hospitals' (LPNT) CEO Bill Carpenter on Q2 2014 Results - Earnings Call Transcript. Available at http://seekingalpha.com/article/2343785-lifepoint-hospitals-lpnt-ceo-bil...
41 HCA Holdings' (HCA) CEO Milton Johnson on Q2 2014 Results - Earnings Call Transcript. Available at http://seekingalpha.com/article/2353325-hca-holdings-hca-ceo-milton-john...
42 Tenet Q2 2014 report and Tenet's (THC) CEO Trevor Fetter on Q2 2014 Results - Earnings Call Transcript. Available at http://seekingalpha.com/article/2384715-tenets-thc-ceo-trevor-fetter-on-...
43 Arkansas Center for Health Improvement, Arkansas Hospitals Show Reduction in Emergency Room Use and Uninsured Admissions Three Months Into Private Option, May 2014. Available at http://www.achi.net/pages/news/article.aspx?ID=33
44 Community Health Systems Management Discusses Q4 2013 Results - Earnings Call Transcript. Available at http://seekingalpha.com/article/2032761-community-health-systems-managem...
45 HCA Holdings Management Discusses Q4 2013 Results - Earnings Call Transcript. Available at http://seekingalpha.com/article/1992601-hca-holdings-management-discusse...
46 LifePoint Hospitals' CEO Discusses Q4 2013 Results - Earnings Call Transcript. Available at http://seekingalpha.com/article/2023301-lifepoint-hospitals-ceo-discusse...
47 Tenet Healthcare Management Discusses Q4 2013 Results - Earnings Call Transcript. Available at http://seekingalpha.com/article/2047653-tenet-healthcare-management-disc...
48 Community Health Systems Presentation and Earnings Call Transcript Q1 2014, HCA Earnings Call Transcript Q1 2014, Tenet Presentation and Earnings Call Transcript Q1 2014, Colorado Hospital Association 2014
49 Pfuntner A et al., Costs for Hospital Stays in the United States, 2010. HCUP Statistical Brief #146, Agency for Healthcare Research and Quality, January 2013. Available at http://www.hcup-us.ahrq.gov/reports/statbriefs/sb146.pdf
50 Community Health Systems Presentation and Earnings Call Transcript Q1 2014, HCA Earnings Call Transcript Q1 2014, Tenet Presentation and Earnings Call Transcript Q1 2014
51 Kentucky Cabinet for Health and Family Services, Preliminary Data Regarding Medicaid Expansion, Enrollment, and Reimbursement in Kentucky. July 14, 2014. Available at http://www.new-kyha.com/Portals/5/NewsDocs/MedicaidExpansionReport.pdf.
52 Jim Haynes, Arizona Hospital and Healthcare Association, Memorandum June 13, 2014
53 Colorado Hospital Association Center for Health Information and Data Analytics, Impact of Medicaid Expansion on Hospital Volumes, June 2014. Available at http://www.cha.com/Documents/Press-Releases/CHA-Medicaid-Expansion-Study...
54 Sung I and Gray J, ACA View: First Observations Around the Affordable Care Act. Robert Wood Johnson Foundation and athenaResearch, 2014. See in particular page 8, Figure 8. Available at http://www.athenahealth.com/_doc/pdf/ACAView_Final_Comprehensive_Report.pdf

 

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