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Nonprofit Hospitals: Will Margin Change Mean Mission Change?

Philip Betbeze, for HealthLeaders Media, June 13, 2011
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“By 2019 or so, we’ll have 32 million more people covered,” he says, citing Congressional Budget Office estimates. “That leaves 23 million still uncovered, which is problematic.”

The 23 million who will remain uncovered include the undocumented immigrant population, which accounts for approximately 33% of the total, Nickels says. There is no provision in PPACA that will cover that group.

“The burden will not be at the level as before for sure, but there will still be a decent number who will be uninsured who we will still have to provide services for,” Nickels says.

It’s not as simple as saying the uninsured are now covered, so nonprofit hospitals should pay taxes like everyone else, he argues. That’s because the cost gap between what care costs and what state Medicaid programs—probably the insurer for the vast majority of the newly insured—pay hospitals will still likely be substantial. 

“Even when we get more people covered, we’ll still have Medicaid and Medicare as primary payers for that group,” he says. “We’ll still have shortfalls, meaning the combination of uncompensated care and shortfalls will still be a challenge, though it’s certainly better than the absence of PPACA.”

Coverage doesn’t equal bigger margins

The notion that hospitals will eventually have higher profit margins in the future because of higher coverage levels is highly debatable, says Russ Rudish, vice chairman and U.S. Health Care Providers Sector Leader for Deloitte & Touche LLP.

“That is a big assumption,” he says.

In pockets of the country, hospitals likely will be better off from the influx of new money from those who were previously unable to pay, but in some states—he offers New York and Massachusetts as examples—the number of newly insured isn’t likely to change much due to PPACA. In fact, he predicts that PPACA will actually decrease revenue at a significant number of hospitals, not raise it.

“From the biggest to the smallest [hospitals], they think net revenue will go dramatically down over the next five years, not up,” he says. “Radical change is coming.”

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1 comments on "Nonprofit Hospitals: Will Margin Change Mean Mission Change?"


Jennifer James (6/24/2011 at 1:54 PM)
On behalf of UNC Health Care, I'd like to clarify some information. The article, as written, appears to imply that UNC Health Care recently purchased Rex Healthcare. In fact, UNC Health Care purchased Rex more than 10 years ago. Since then, UNC and Rex have built an important partnership that allows the two institutions to fulfill UNC Health Care's missions of providing excellent care to North Carolinians across the state, regardless of their ability to pay, conducting cutting-edge research and training the next generation of North Carolina's physicians. Also, to be clear, Rex is not a state institution and has never received any state taxpayer funding. Jennifer James, News Director, UNC Health Care