Nonprofit Hospitals Should Benefit From Obama Plan: Moody's Report

CHICAGO - Nonprofit hospitals would generally benefit under the reform plan proposed by President-elect Barack Obama, according to a Moody's Investors Service analysis of the election's impact on the health care system.

While the impact on the health care industry as a whole would be mixed, not-for-profit providers would likely benefit from an increase in insured patients as well as a decline in costly emergency room visits, predicted Moody's.

"We see it as positive, but it's offset by incremental requirements," said analyst Costas Chrysostomou, who wrote the report. "More insured people benefit the hospitals from a volume perspective and from a reduction in emergency room visits, many of which are uncompensated. But incremental requirements and pay-for-performances rules do impose an additional burden on the providers."

Under the Obama plan, as outlined on the campaign trail, individuals would be offered government-sponsored health insurance at subsidized rates based on income levels. The plan requires that children be covered and would include an expansion of the State Children's Health Insurance Program.

An early estimate is that roughly 20 million more adults would be covered under Obama's plan, but the figure depends heavily on how much individuals will be required to contribute.

"Coming up with an estimate is extremely difficult, as the plan lacks detail," Chrysostomou said.

Moody's estimated the annual cost of Obama's plan would likely range from $100 billion to $200 billion, which would come on top of the $800 billion currently spent by the government on Medicare and Medicaid. The additional funding would come from both individual contributions and the government, part of which would be generated through new revenue from taxing payroll of larger employers that do not offer health care coverage.

"The Obama administration also expects substantial savings from cost-containment initiatives, such as chronic-disease management and wellness programs," Chrysostomou said in the report.

Providers are expected to benefit from an increase in insured patients and a decrease in uncompensated emergency room visits, bad debt, and charity care - and they could see additional benefits from other aspects of the plan, according to Moody's.

For example, the president-elect's health care reforms could end up leveling the playing field between the smaller, often fiscally pressured, stand-alone providers and the larger systems - the so-called credit gap that rating analysts say has grown in recent years.

Obama's plan includes $10 billion in annual funding over five years for information technology, an area in which smaller providers have often lagged behind the larger systems.

"Effectively this is helpful, it enables [smaller providers] to make investments," Chrysostomou wrote.

To earn government reimbursement, he said, providers would need to meet higher reporting standards, and a chunk of the federal funding for information technology would be set aside to help providers meet those heightened standards and earn the reimbursements.

While not-for-profit providers would see more benefits than drawbacks from the proposals, both health care insurers and pharmaceutical companies could face more pressure, according to Moody's.

Insurers will see more regulation - and a restriction in their ability to deny coverage - as well as cuts in Medicare Advantage reimbursements. Those pressures could trickle down to providers if insurers engage in tougher negotiations over reimbursement levels, Moody's said. However, the large insurance companies could benefit from employer mandates and expanded Medicaid and S-CHIP plans.

Pharmaceutical companies could take a hit if Medicare is allowed to negotiate drug prices and generic drugs become more prevalent, among other policy changes.

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