ACA Repeal Would Squeeze For-Profit Hospitals

The report notes that for-profit hospital operators have already begun to pay for healthcare reform through reductions in annual Medicare market basket increases and the healthcare law itself schedules additional reductions, such as cuts in disproportionate share payments and productivity adjustments. The reductions are among the hospital industry's concessions to help cover the cost of healthcare reform initiatives.

Diaz explains that if the healthcare law remains intact without the individual mandate then the cuts would continue to be implemented, offsetting a portion of the growth in Medicare reimbursement expected through annual market basket increases.

"Given our expectation that the elimination of the individual mandate would increase bad debt expense, this development could be a double hit to the for-profit hospital operators," says the report.

If the healthcare law is repealed, Diaz says the cuts wouldn't be implemented and for-profit hospital operators could see full market basket increases again. However, he expects any increase in reimbursement rates to be offset by the negative effect of the continued rise in uncompensated care costs on for-profit hospital operators' profit margins.

It's also unclear whether the for-profit hospital operators will see a return on the investments and strategies related to healthcare reform that they have put in place. Diaz says the efficiencies related to electronic medical records and enhanced clinical systems should translate indirectly into financial gains.