Hospital Revenue Declines as Patients Gain Obamacare Insurance

Published July 27, 2017

Revenue for hospitals in northeast Ohio has declined since implementation of the Affordable Care Act (ACA), even as the number of people with private or taxpayer-funded health insurance has increased, according to a study by The Center for Health Affairs, an association representing hospitals in the region.

Northeast Ohio hospitals brought in $9 billion of revenue in 2014 and just under $10 billion in 2015, compared to approximately $11 billion in 2012, Deanna Moore, vice president of corporate communications at The Center for Health Affairs, reported in a blog post in May.

Revenue declined as self-pay patients enrolled in Medicaid and Medicare and as people bought commercial health insurance on the Obamacare exchanges using federal subsidies, the article states.

Go Figure

Moore says hospital revenue was supposed to increase under ACA.

“[A] favorable payer mix is financially advantageous to hospitals, and I [previously] described which payers tend to pay well and which do not,” Moore wrote. “The policy changes in the ACA have led to a more favorable payer mix in Northeast Ohio, and yet, contrary to what you would expect, overall revenue has declined.”

Joel Allumbaugh, a visiting fellow at the Foundation for Government Accountability, says the decline in revenue could be caused by patients foregoing care to save money or failing to pay their bills.

“High deductibles may be leading to lower total revenue to hospitals,” Allumbaugh said. “It could be an inclination to delay or forego care, but it could also simply be that consumers are not paying their deductible expenses. In Maine and, I expect, elsewhere, hospitals have started to see bad debt exceed charity care.” 

Conflicting Objectives

Patients’ desire for lower costs conflicts with hospitals operators’ desire to sustain their revenue, Allumbaugh says.

“We have reached a critical pressure point where individuals and employers are paying too much and want an absolute reduction in health care costs, while the hospitals approach every challenge with the objective of retaining revenue,” Allumbaugh said.

The revenue decline suggests ACA has increased access to health insurance without expanding access to actual health care, Allumbaugh says.

“This speaks to the larger issue of health care costs,” Allumbaugh said. “Access seems to often be the focus, but until we lower the cost of care, we will continue to struggle in health care. We can cover more people, but if the plans and deductibles are unaffordable, unintended consequences like this will persist.”

‘Creative Destruction’

Allumbaugh says the revenue decrease will put pressure on hospitals to become more efficient.

“The solutions are somewhat obvious but also painful,” Allumbaugh said. “We need to look at delivering care more efficiently at a lower cost. This is understandably not a prospect hospitals can easily embrace or execute. We will have to push through the creative destruction to get there. It will require outside pressure from consumers and employers.”

Hospitals should not expect to ride out the storm without changing, Allumbaugh says.

“The pressure will not abate until we find a way to lower health care costs,” Allumbaugh said.

Hospitals willing to innovate will find new income opportunities, Allumbaugh says.

“Hospitals have to start thinking about privately insured patients as desired customers that they have to actively market to,” Allumbaugh said. “There is an enormous opportunity for hospitals to work with larger local employers, but they have to approach those discussions with a true willingness to look at prices.”

DPC Option

Patients and doctors should consider the monthly membership at a direct primary care (DPC) practice as an efficient model for delivering preventive health care services, Allumbaugh says.

“DPC can be a very effective solution for a patient to access high-quality care at lower cost,” Allumbaugh said. “At the same time, DPC could have a disruptive effect on traditional care delivery. This is an important innovation in health care that I expect will provide far more good than harm, long-term.”

David Grandouiller ([email protected]) writes from Jamestown, Ohio.

Internet Info:

Deanna Moore, “Northeast Ohio Hospital Payer Mix: A Tale of Intrigue and Mystery,” The Center for Health Affairs, May 2, 2017:

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