Fitch: Hospitals in states that don't expand Medicaid could suffer

Hospitals operating in states that do not expand their Medicaid eligibility under the Affordable Care Act will face more financial hardships than facilities in states that embrace the program's expansion, according to a new report by Fitch Ratings.

Hospitals in the states that do not expand Medicaid could lose as much as $200 billion in revenue over the next decade while also having to endure payment cuts from the Disproportionate Share Hospital (DSH) program, according to the report, entitled "Adverse Expansion: Hospitals, States, and Medicaid." 

"These hospitals will face greater pressure to improve productivity or to cut unprofitable service lines to maintain financial performance and rating stability," the report said.

Fitch reported that 18 states are not expanding Medicaid, including Texas, Louisiana and Georgia. In total, these states have a population of 114.5 million. Another seven states, including Pennsylvania, New Hampshire and Maine, are still debating whether to expand or pursue alternatives. These states have a total population of 32 million Americans.

Twenty-five states and the District of Columbia have already agreed to expand Medicaid under the ACA. They represent 167.2 million Americans or just over half of the U.S. population.

Fitch expressed concern that hospitals in right-leaning Southern states--Texas, Florida, Georgia, Louisiana, Mississippi and South Carolina--stand to lose the most in terms of revenue. "Medicaid eligibility requirements in these states are amongst the most stringent in the nation and poverty levels are above average," the report noted. The report also said that those states represent 29 percent of the nation's uninsured and 25 percent of those living below the federal poverty level.

In a separate report issued by Fitch last week, it noted that hospital bad debt could be moderated by the rollout of the ACA.

The latest report did note that hospitals in some states could avoid the largest financial impact since the government plans to phase in DSH cuts over several years and states could change their stance and still take advantage of the federal open-ended policy about expanding Medicaid under the ACA.

To learn more:
- read the Fitch report (registration may be required)
- read the Fitch statement

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