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SCOTUS Uncertainty Deters Innovation

Philip Betbeze, for HealthLeaders Media, June 15, 2012

Many people, including (and especially) our news staff, wait with baited breath on the decision, which could happen at any time (my guess is a Friday afternoon, when the least media firestorm could be expected, sometime in the next two weeks). Don't expect that move to decrease the uncertainty—and the risk—of operating a healthcare entity.

In fact, Moody's just released a report (registration required) that no matter what the Court decides, nonprofit hospitals and health systems will be worse off. How encouraging. Heck, even if the justices leave the law alone, Moody's says the effect will be a long-term negative for nonprofits, as they predict annual Medicare reductions will "outweigh the benefits of lower uncompensated care."

The report goes on to outline three possible scenarios should the Court decide to invalidate certain parts of the law—all of them negative for nonprofit health systems. For what it's worth, here's what Moody's says about the three most likely decisions:

SCENARIO 1: The Court rules the law is constitutional. This is what Moody's calls a "credit-neutral event" because nonprofit hospitals have been preparing to operate within the law since April 2010.  But analysts add that the healthcare reform law is a long-term, credit-negative event because it mandates annual Medicare reimbursement reductions to hospitals, which outweigh the benefits of lower rates of uncompensated care.

SCENARIO 2: The Court strikes down the individual mandate, but upholds the rest of the Act. The individual mandate is the most credit-positive feature of the law for nonprofit hospitals, according to Moody's.  The result of the mandate's removal means the number of uninsured Americans will remain high and result in continued growth in uncompensated care, while Medicare reimbursement rate increases would slow.

SCENARIO 3: The Court rules the entire law unconstitutional. The resulting absence of legislative and regulatory framework for diminishing unsustainable Medicare spending creates new uncertainty.

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2 comments on "SCOTUS Uncertainty Deters Innovation"


M Cylkowski (6/19/2012 at 3:27 PM)
Phil, you might need a course in critical thinking. Your premises and conclusions support a fallacious argument. SCOTUS is not the cause. After years of Healthcare doing nothing, now it's SCOTUS causing a pause in innovation? I don't think so.

s bren (6/15/2012 at 2:28 PM)
Weak and ineffective argument Casting the "regulatory inhibition" net of stultifying regulations wiping out innovation is an inapprotiate expectation of SCOTUS. Regulation is subordinate to and the responsibilty of the President. SCOTUS is peer to Congress and the President and our last defense against tyranny. The President is solely accountable for the regulatory morrass, not SCOTUS, not Congress.