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Hospital Outlook for 2017? Stay Tuned.

Analysis  |  By John Commins  
   December 07, 2016

President-elect Donald Trump has promised to repeal and replace Obamacare with "something terrific." His pick to lead HHS has called for radical overhauls of Medicare and Medicaid, and the Republican-controlled Congress has the votes to get it done, or not.

For better or worse, the next 12 months could be the most unsettled period for the healthcare sector in decades. Or, not much could happen.

The only thing that's certain is uncertainty.

We could see the complete unravelling of the Affordable Care Act, or not. President-elect Donald Trump vowed throughout his campaign to repeal and replace it with "something terrific" on his first day in office.

Now that the election is over, however, there are mumblings that the repeal could go forward, on a delayed track, while the "replace" component could take years to craft, and most certainly won't occur before the mid-term elections in two years.

In large part, that's because the ACA is mind-bogglingly complex, entrenched and expansive, and Republicans have so far provided only a vague outline of a potential replacement, and they don't want to do anything to anger voters.

It's not clear what any of this will mean for the approximately 20 million people that HHS says have gained health insurance in some form through the ACA, or how trimming the ranks of the insured would affect hospital operations.

The presumption is that it would not be a good thing for hospital bottom lines.

Medicare's Fate Uncertain
Trump's pick to lead the Department of Health and Human Services, Rep. Tom Price, MD, (R-GA), an orthopedic surgeon, has called for radical transformations of Medicare and Medicaid.


AAPS Membership May be Liability for Price, Says Group's Leader


Republicans control both chambers of Congress, but any such reforms are dynamite, especially with Medicare, and Democrats have promised a bruising fight to defend these safety net programs.

At this point, there's no way to project how much the Republicans will do, or if it's all just empty campaign rhetoric.

On other fronts, the American Hospital Association wasted no time and twice last week presented the president-elect with an aggressive and expansive wish list.

It's not clear how receptive the Trump administration will be to these ideas, but even if only a handful of reforms are adopted, such as RAC reforms, ditching Stage 3 Meaningful Use, factoring socio-demographics in readmissions, and protecting DSH payments, they could have a significant effect on hospital operations.

Look to the Financial Indicators
It is in these times of flux that we look to the sober analyses of the bond rating agencies. With all the potential for massive disruption, Moody's Investors Service this week projected a stable outlook in 2017 for the nation's not-for-profit and public healthcare sector, which was based on a "modestly positive pace of operating cash flow growth" in the next 12 to 18 months.

"Following two years of extraordinary growth associated with expansion under the Affordable Care Act, hospital operating cash flow has moderated to 0% to 1%," Moody's Senior Analyst Eva Bogaty writes. "Top-line revenue growth continues to be strong, but constrained increases in reimbursement rates and rising expenses will counteract that growth."

Here are some other key projections from Moody's:

  • Patient volume growth is stable at about 1%. Utilization will be more modest in 2017 as the uninsured population stabilizes, but revenue growth will remain favorable with hospitals pursing outpatient growth strategies.
  • Expenses are on the rise, compressing margins. Soaring pharmaceutical costs, employment growth and rising pension pressures are driving thinner bottom lines.
  • Bad debt is rising as expected. Hospitals in non-Medicaid expansion states will see continued growth in bad debt as exchange enrollment likely contracts. In Medicaid expansion states, strong declines in bad debt will moderate because the benefits of expansion have largely been realized. High deductibles and rising co-pays will also drive bad debt.

Bogaty believes the outlook could be revised to positive if operating cash flow growth rises above 4% over the next 12 to 18 months, or revised to negative if the economy flattens or there is "any major regulatory changes or disruption of current policy."

Those are a handful of big "ifs," but there's not much else we can hold on to right now.

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.


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