The Supreme Court’s 5-4 decision to uphold the individual mandate of the Affordable Care Act, ACA is generally viewed as a positive outcome for hospitals, physicians and other health care providers. However, the Supreme Court’s ruling and many original provisions of the ACA raise significant concerns for health care providers.

 

Both the American Hospital Association and the American Medical Association issued formal press releases praising the decision to uphold the individual mandate. The AHA said “Today’s historic decision lifts a heavy burden from millions of Americans who need access to health coverage. The promise of coverage can now become a reality.”

 

The AMA said “We are pleased that this decision means millions of American can look forward to the coverage they need to get healthy and stay healthy.”

 

However, the AHA also signaled that it sees deficiencies in the ACA. It said “Now that the Supreme Court has made its decision, hospitals will continue their efforts to improve the law for patients, families, and communities.”

 

On one hand, the ACA’s insurance coverage for 32 million uninsured means additional revenue for providers. Additionally, the CMS chief actuary projected $575 billion in Medicare payment cuts for hospitals, skilled nursing facilities, long term care hospitals, inpatient rehabilitation facilities, hospices and home care agencies.

 

A 2010 Rand study estimated that net income for US hospitals would decrease by $11.3 billion despite a $75.2 billion increase in revenue from the newly insured. The decrease in net income resulted from the additional cost of services for the individuals who gained coverage.

 

The Rand study also projected that physician revenue and net income would increase but those increases would be seen largely by physicians who deliver primary care services to Medicare patients.

 

According to Matt Bavolack, Director of Marcum’s Health Care Group, “One area of great uncertainty and concern for providers is a changing payer mix.” He noted that 16 million of the 32 million people who are expected to gain coverage will be covered by Medicaid. Medicaid payment rates are usually lower than Medicare rates and certainly lower than commercial rates.

 

“Providers may see rapidly eroding operating margins,” says Bavolack “The unit cost of services could go up because of increased demand from additional patients while lower Medicaid payment rates may mean less revenue per unit of service.”

 

Mark Fromberg, another partner in Marcum’s Health Care Group adds that “The mix of commercial insurance plans could also change. Large employers have said they will continue to sponsor coverage for their employees which is comforting to providers, but millions of people are likely to obtain commercial coverage through the health insurance exchanges.” Fromberg continued “The companies that offer coverage through the exchanges and the benefit levels in those plans could cause an undesirable shift in a provider’s payer mix.”

 

The Affordable Care Act has started to reform the country’s health care system and unless it is repealed or modified, the Supreme Court’s decision means the pace of new regulations and other changes will increase going forward. The most significant changes are now less than 18 months away. Health care providers need to fully understand how the ACA will affect their services and the patients they see, and they need to begin planning for the changes that will occur.