Fitch: Hospitals in Medicaid expansion-resistant states feel pinch

Hospitals in the two dozen states that did not expand Medicaid eligibility under the Affordable Care Act (ACA) are beginning to feel the financial fallout of that decision, according to a new report from Fitch Ratings.

The District of Columbia and the 26 states that have expanded Medicaid eligibility will see an additional $83.6 billion in additional federal revenue, the report notes. By contrast, the remaining states that turned down Medicaid expansion have forfeited some $88 billion in revenue through 2016.

"Fitch suspects that the benefit of expanded Medicaid coverage has helped hospitals and health systems offset the negative impact of weak volumes and reduced Medicare reimbursement experienced throughout the sector," the ratings company said in a statement.

So far in 2014, Fitch has downgraded the credit ratings of 10 hospitals or healthcare systems. Of those, five are in states that did not expand Medicaid.

"Several of those downgrades were driven by operating performance declines related to funding and reimbursement pressures, which may have been lessened by Medicaid expansion," Fitch said. It noted that eight of the nine upgrades it has issued to hospitals and healthcare systems this year were in states that expanded Medicaid eligibility.

Hospitals in states that expanded Medicaid coverage also reported improved payer mix and diversity of its patients.

"We expect these trends to continue and become more severe after 2014. The reimbursement reductions in ACA will be phased in over time," Fitch said. "Hospitals and health systems will continue to feel the brunt of further reimbursement cuts to Medicare payments as well as expected reductions to federal funding of Medicaid disproportionate share in 2015 and 2016."

Leaving the decision to expand Medicaid to the individual states is creating a gulf in the percentages of people who have health insurance versus those who do not, Forbes reported.

To learn more:
- read the Fitch announcement
- here's the Forbes article