Hospitals Seeking to Understand PPACA Impact Turn to Data

A large multi-hospital research effort is underway to solve one of the great mysteries of federally driven healthcare reform— the net financial impact of providing coverage to millions of previously uninsured Americans.

About 1,700 hospitals have embarked on a quest for elusive healthcare reform truths that could determine the fate of their financial futures.

In a collaborative effort with the Robert Wood Johnson Foundation, 24 state hospital associations and their members are collecting data on inpatient admissions and emergency department utilization. The Hospital ACA Monitoring Project is designed to gauge the net financial impact on hospitals from the federal Patient Protection and Affordable Care Act.

"The impact of healthcare reform on hospitals has upside, but also downside issues that are concerning," Katherine Hempstead, coverage team director and senior program manager at RWJF, said of risks including "expansive utilization of medical services by low-margin payers."

As more Americans who previously lacked health insurance gain coverage through the new public exchanges and expansion of Medicaid to more poor adults, hospital bottom lines are expected to benefit from a reduction in uncompensated care. That's the upside.

The downside risks for hospitals include the expectation that there will be surge in medical services utilization, particularly from the expanded Medicaid population.

Research conducted on the 2008 lottery-based expansion of Medicaid in Oregon raised alarms in hospital board rooms last year. The study, published in the New England Journal of Medicine, found a spike in medical service utilization after Oregon's Medicaid expansion. [One state, Arizona, has reported benefits stemming from expansion.]

Although the implications of the Oregon research are cause for concern, Hempstead says the increased utilization finding should not have come as a surprise.

"If you give uninsured people access to primary care through coverage, they will use medical services more," she said, adding that the Hospital ACA Monitoring Project is designed tackle questions that can't be answered by looking at a single state.

"The hospitals are not really starting out at the same place," Hempstead said. Rather, the impact of healthcare reform on a hospital with a large Medicare and commercially insured patient population is not going to have the same financial impact from the PPACA as a safety net hospital that serves a large number Medicaid patients. "Expanding coverage isn't the same thing as changing the delivery system."

'Real, Documented Information'
The New Jersey Hospital Association is serving as the data repository for the Hospital ACA Monitoring Project. Kerry McKean Kelly, vice president for communications and member services at the NJHA, said the monitoring project should provide hospitals with essential information.

The monitoring project has targeted a handful of conditions to follow because they are believed to be good indicators of cost-effective utilization of medical services.

"Newly covered patients theoretically will have greater access to primary care for minor health issues, so the question this study will answer is: Will they use that rather than go to a hospital emergency room or wait until a problem becomes serious enough for a hospital admission?" she said.

"This project focuses on those minor issues that we expect to see a change in—up or down—with respect to emergency department visits. These include urinary tract infections, headaches, and acute upper respiratory infections. We’d also expect to see volume changes in those conditions that, if treated early on in either a primary care or ED setting, would prevent an inpatient hospitalization. These would include avoidable admissions for things like short-term diabetes complications, hypertension and urinary tract infections."

Examining Utilization
The Hospital ACA Monitoring Project will be collecting utilization data by payer because the hospitals involved in the effort are eager to determine how healthcare reform is going to affect their payer mix, Hempstead said.

"We may see the volume increase but the revenue decline due to low-margin payers. I do think the margins are going to change… Providers want to know who's paying because it determines how much they are going to get paid."

In addition to a spike in overall medical services utilization, the Oregon Medicaid research found an increase in emergency department usage. "What surprised people is that patients didn't stop using the emergency room," Hempstead said of the Oregon study.

While more research is needed to explain why Medicaid expansion can increase emergency department utilization, some reasons are obvious, Hempstead said. "A lot of people like to use the ER. It's just a pathway that they have established," she said. "A lot of people find it convenient."

Unlike the new public health insurance exchanges, which have policies with cost-sharing features that provide patients with financial incentives to stay out of the emergency department, Medicaid programs often lack incentives for patients to seek care in the most cost-effective setting, according to Hempstead. "There have to be some other delivery system reforms," she said.

With 2013 baseline data in hand, the RWJF researcher is confident that the Hospital ACA Monitoring Project is going to provide insight about questions that have vexed hospital officials from coast to coast.

"The real excitement is going to come when we get the 2014 data," Hempstead says, adding the first quarter data from 2014 is slated for publication around the Labor Day weekend. "I'm really glad these hospitals decided to share this data."

Kelly says the monitoring project will provide essential information to healthcare providers.

"Hospitals have bought into the ACA and in fact conceded billions of dollars in Medicare funding to support the law. New Jersey hospitals, for example, will see their Medicare reimbursement decline $4.5 billion over 10 years under the ACA."

"The hope is that those investments will help us transform our healthcare system for the future, insuring more Americans and reducing healthcare costs in the long run by delivering the right care in the right setting. So the stakes are high for hospitals, and the financial impact could be severe if the positive impacts of the ACA aren’t realized, such as more patients in primary care versus EDs. "

"We don’t know – and we can’t assume," Kelly said, "whether the ACA will greatly reduce the need for charity care services. And we’re worried that new plans, with higher out-of-pocket costs for consumers, could increase hospitals’ bad debt expenses. Those are some of the very important unknowns that we hope to see through this data over time."