Uncompensated care has been a drag on Memorial Health System’s bottom line for years, but that could change once the Obama administration’s health care reforms take effect and more people become insured.
Assuming a best-case scenario, the two-hospital system’s performance could improve by as much as $33 million a year under the legislation passed by the House late Sunday. The hospital currently loses around $70 million annually in uncompensated care costs.
But about $17 million in charity care and $16 million in bad debt each year could be wiped out as more people get coverage.
Also, the system can expect to see its Medicaid revenue — currently about $24 million a year — rise as reimbursements for care to the poor, who are covered by Medicaid, are brought up to 100 percent of what the government pays for the care of patients in the Medicare system for the elderly.
All of it equals a rosier financial outlook for Memorial and hospitals nationwide — though not immediately.
It will be years before the legislation’s various provisions go into effect.
“We haven’t heard the last of this,” said Steve Berkshire, a health care administration analyst. “They (lawmakers) have time to tinker with the bill.”
If they don’t tinker too much, the legislation will eventually provide 32 million people with insurance, doubling the number of people with coverage in 2010. More Americans will be eligible for Medicaid, because the threshold for enrollment was moved up to 133 percent of the federal poverty level. Others will receive subsidies — those making up to $88,000 a year, or 400 percent of the federal poverty level.
But hospitals will have to wait until 2014, when the individual coverage mandate kicks in, to begin to see drops in uncompensated care.
In El Paso County, 25 percent of the populace is without insurance or underinsured, meaning they simply don’t have access to a primary care doctor and often rely on more-expensive emergency-room care. Across the state, 17 percent of Colorado’s children and adolescents don’t have coverage. Moving those people out of the ER should help lower uncompensated care costs.
Still, uncompensated care is likely to remain a problem, if only because the nation could find itself with too few primary-care doctors to treat everyone who suddenly has insurance.
“Controlling costs is really the goal of getting so many more people insurance,” Berkshire said. “But (the legislation) doesn’t provide more access, and that’s where the trouble might be.”
Memorial, as the largest provider of charity care in the region, understands the need.
“We could see a much brighter financial picture if doctors start seeing more of these patients,” said John Suits, associate administrator for government affairs at Memorial Health System. “Another (helpful) aspect — there will just be more money in the system. People will have government subsidies for insurance premiums, and that’s going to make a difference, too.”
Suits said the end result of the legislation could make the system more stable financially and reduce the risk to taxpayers of the municipally owned hospital system.
But he also fears health care reform won’t live up to its promises — and might actually create more instability for the system.
Physician reimbursement rates are his main source of concern. Those rates are set to be cut 21 percent in October, and could force many primary-care doctors to limit the number of Medicare patients they see.
“And that loads up my emergency room,” he said.