Moody's: Narrow networks in exchanges could hamper hospital finances

Hospitals generally support the Affordable Care Act (ACA), noting that it provides them with a reliable revenue stream from a larger number of insured patients, who otherwise couldn't pay their bills. But acute care facilities should lower their enthusiasm, a new report from Moody's Investors Service suggests.

Portions of the ACA have the potential to inflict financial damage on not-for-profit hospitals in the long-term, largely because of the unwillingness or inability of those who purchased coverage as part of the healthcare reform law to pay their deductibles or out-of-pocket costs, according to Moody's.

"Today's high deductibles are tomorrow's bad debt," said report author Daniel Steingart, a Moody's assistant vice president and analyst.

The second risk for hospitals is whether commercial payers reap any profit from plans they have sold to consumers via the health insurance exchange. If not, they may either raise premiums, which could lead to disenrollments, or ask hospitals to take cuts on negotiated payment rates, according to Moody's.

The third risk arises from narrow networks, favored by many health plans in the exchanges. If the networks are successful, the report states, it could put financial pressure on providers. "Hospitals that do not join narrow networks could lose business, while those that join may not see the higher patient volumes that will make up for the lower reimbursements," the report concluded.

However, some narrow networks created controversy. For example, some plans excluded top-rated cancer centers from their provider networks, which could reduce the quality of care enrollees with oncology needs receive.

"After open enrollment for the ACA health insurance coverage ends ... the credit implications, both positive and negative, will become clearer," Steingart said.

To learn more:
- read the Moody's statement
- check out the report (purchase required)

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