Many hospitals anticipate dropped revenue due to ACA

With the future of the health reform law in the hands of the U.S. Supreme Court, a majority of hospitals and health systems are anticipating a drop in revenue as a result of the Affordable Care Act (ACA).

According to a survey from healthcare compliance and benefits management firm HighRoads in Boston and national healthcare compensation consultant, Sullivan Cotter, 55 percent of hospitals anticipate a drop in revenue, 12 percent anticipate an increase in revenue and 28 percent report that they don't yet know the impact that the ACA will have on revenues.

[Also: ACA gives states flexibility in creating insurance exchanges, says report]

The survey, called Employee Benefit Practices in Hospitals and Health Systems, was conducted between November 2011 and January 2012, according to Maureen Cotter, senior director of HighRoads. The survey received responses from 178 participants, including 126 health systems, which had an average employee range of between 3,000 and 9,500. Overall, 1.6 million employees were represented in the survey, said Cotter.

In addition to overall revenue projections, the survey looked at hospitals' plans for how to best provide health coverage to employees.

"This is a transformational period for many hospitals. We asked them about what they thought the future held for them as far as healthcare reform goes. The results validate what we had been hearing from clients. This helps to provide a backdrop for what's been going on," said Cotter. "Even though 70 percent of those surveyed stated that they are committed to providing coverage in the long term, and no organizations have plans to discontinue coverage now or in the future, the coverage provided may take a new shape. Among those surveyed, 58 percent plan to become an accountable care organization (ACO) and 18 percent plan to structure their employee health plan as an ACO-like program."

[Also: ACA competitive bidding could save taxpayers $42.8B]

One feature unique to health systems and hospitals is their ability to create their own smaller provider network for employees to select from so that the hospital could essentially 'pay itself' for delivering care to its employees. However, the survey found that there is no set standard of claims accounting for these types of services. The most common answer was to use the standard carrier negotiated discount (30 percent); however, many organizations are using a deeper discount in one form or another. Organizations with a conservative approach to the accounting treatment of 'domestic claims' may trigger the excise tax under ACA earlier than those with different approaches, said Cotter.

When comparing health systems and hospitals to all other general industry sectors, the survey found the following:

• Hospitals and health systems have an average enrollment of 66 percent in preferred provider organization (PPO)/point of service (POS) plans compared to the general industry with 62 percent.
• Enrollment in health maintenance organizations (HMO/Exclusive Provider Organization (EPO)) was 25 percent for hospitals and health systems compared to 19 percent for the general industry.
• 81 percent of hospitals and health systems encourage employees to use their own facilities or providers, yet costs are not necessarily less than general industry.

"Hospitals and health systems have unique benefits management challenges that may be magnified by ACA requirements," said Cotter. "By looking exclusively at employee benefits trend information for this distinct market, we hope to enable hospitals and health systems to optimize their benefits plans to better provide for their employees while lowering overall costs to their organization."

Follow HFN Associate Editor Kelsey Brimmer on Twitter @kbrimmerhfn.

[Also: ACA extended free preventive services to 54M Americans]