Healthcare News & Insights

Hospitals report high profits: Why this may not last

Good news for hospitals on the financial front: Because of the Affordable Care Act, business is growing for facilities, with more patients who have insurance from the healthcare exchanges coming in for treatment. 

american health care reformBut unfortunately, this may only be temporary.

More exchange business – for now

According to an article from Forbes, two major health systems, Tenet Healthcare and HCA Holdings, reported significant profits and growth over the first quarter of this year.

Due to a less-severe flu season and other factors, hospital profits were expected to stay stagnant, or even decrease. However, more patients signed up for coverage over the healthcare exchanges than expected, so facilities got a boost in patient traffic.

Specifically, HCA saw a 27% increase in exchange patients compared to the first quarter of 2016, while Tenet saw its hospital patient revenue grow by 6% in facilities open more than a year. Inpatient admissions for exchange patients at Tenet went up by 28%.

It’s more profitable for hospitals to treat patients who have insurance from the exchange plans than to write off expenses incurred by uninsured patients or to provide charity care. So it’s a positive sign that more patients are obtaining insurance coverage.

But this growth may start slowing soon due to a recent development: One of the largest carriers in the U.S, UnitedHealthcare (UHC), recently announced that it’ll be officially pulling out of the healthcare exchange next year.

According to an article in Reuters, the payor will discontinue most of its plans available on the exchange.

UHC had been considering the move since late last year, when its profits for 2015 were lower than expected. Many patients with serious illnesses signed up for insurance on the exchange, and there weren’t enough healthy consumers to balance them out. So UHC ended up spending more money to care for exchange patients.

Overall, this will leave close to 650,000 patients without insurance coverage. And it’ll limit competition on the exchange as well.

Possible outcomes

Healthcare experts have said that the loss of UHC doesn’t jeopardize the future of the insurance marketplace as a whole. But it will likely have some effects on the coverage other payors offer.

One expected change: Due to the lack of competition, and the fact that other payors are also reporting lower profits than expected from exchange plans, premiums for patients will likely rise.

That means patients will have higher out-of-pocket costs for their health care. And this may discourage some people from purchasing exchange plans entirely, which could increase the number of uninsured patients that hospitals treat as time goes on.

Treating fewer patients, combined with financial penalties from the feds for not meeting standards with lowering readmission rates and other quality measures, may hit hospitals hard. Time will tell whether profits will maintain an upward swing in the face of these pressures. We’ll keep you posted.

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