CHICAGO — There are too many questions swirling around the new federal health care law to fully assess its impact on nonprofit hospitals until after its implementation in 2014, said Martin Arrick, head of the nonprofit health care group at Standard & Poor’s.
“We are still in the very beginning stages of a multi-year process,” Arrick said Tuesday during a Standard & Poor’s webcast on the impact of U.S. health care reform on various sectors in the health care industry. “There are some very important questions which are still unanswered, and may not be answered until after 2014.”
Key provisions, such as the new insurance exchanges, are far from complete, and many of the regulations have not yet been published, Arrick said.
How many states will opt out of the Medicaid expansion, whether people will shed private insurance in favor of policies offered through the exchanges and the rate of payment to hospitals through the exchanges are all questions that will impact hospitals but won’t be answered until after the law is implemented, he said.
Standard & Poor’s does not expect reform to have any immediate credit impact on the nonprofit sector or individual providers.
Over the longer term, the impact will become more clear and likely will be mixed, Arrick said.
The number of insured people will rise — maybe not by 32 million, as originally projected, but still by a large number. That will be good for most hospitals, and will help offset other costs tied to the new law, Arrick said.
“If we are to assume something like 32 million more people come with insurance, even if the revenue per unit of service comes down, the overall revenue in the system will go up,” he said. “We’re going to have to keep a sharp eye on profitability, and payer mix, and see how that impacts credits.”
Reimbursements from most payers, particularly the federal government, will go down, stressing many credits. But the sector has become good at containing costs to manage revenue dips since 2008, and that will need to continue as providers enter the 10-year reform period, analysts said.
“Right now, the not-for-profit hospitals are doing fairly well, in part because they’ve seen reform and they have a sense they have to get their house in order. But we do see margins coming down over an extended period of time, and that will be a credit negative.”