Medicaid expansion gives boost to hospital chains

Medicaid expansion as part of the Affordable Care Act (ACA) has not only helped millions of Americans improve their health, it also helped for-profit hospitals improve their bottom lines, Reuters reported.

Hospital Corporation of America (HCA), the for-profit hospital chain, was able to post better-than-expected earnings for the second quarter ending June 30 due to the increase in the number of patients it treated insured by Medicaid, according to Reuters. Revenue for the quarter increased 9.2 percent, to $9.23 billion, according to HCA, but more telling was the chain's provision for doubtful accounts, which dropped by a third.

"In general, Medicaid is the real driver of increases in insured populations," Snow Capital Management Analyst Jessica Bemer told the wire service.

HCA's Medicaid admissions jumped 32 percent so far in 2014 in four expansion states where it has facilities, according to Reuters, while uninsured patient volumes dropped by nearly half.

That appears to be borne out by general hospital data. A recent survey by Jefferies concluded that inpatient volumes increased in the second quarter for the first time in several years, although that increase--less than one-half of one percent, was negligible. Jefferies attributed the boost in part to the ACA, but also cited the improving economy and increasing demand for inpatient services.

But some hospital chains in states that did not expand Medicaid say they also received a boost in earnings.

"The pleasant surprise of 2014 has really been the performance of our Texas markets," Steve Filton, chief financial officer for Universal Health Services, told Reuters. Filton attributed that to the improving economy, although Reuters reported that the so-called "woodwork effect"--wherein news about the ACA prompts more people qualified for Medicaid under the old guidelines to apply for coverage.

Seventeen of the states that did not expand Medicaid eligibility still saw increases in their rolls, according to a study by Avalere Health. Another report by the Kaiser Commission on Medicaid and the Uninsured last year predicted such a boost.

To learn more:
- read the Reuters article
- check out the HCA earnings report