U.S. Safety Net Hospitals Face Increased Risk of Failure As a Result of Affordable Care Act, According to New Alvarez & Marsal Report

Unintended Consequences of Law Include “Tsunami of Financial Challenges” for Hospitals of Last Resort and Potential for Exacerbated Healthcare Inequities for America’s Most Vulnerable Populations

Already in dire financial straits, U.S. safety net hospitals are now facing an increased risk of failure as a result of the Affordable Care Act, according to a new report released by Alvarez & Marsal’s Healthcare Industry Group. The report details a litany of unintended consequences of the legislation, including a “tsunami of financial challenges” for America’s more than 1500 hospitals of last resort. It also reveals that healthcare inequities and access could actually worsen – at least in the short term – for the country’s most vulnerable populations as a result of the timing and implementation of provisions.

“While this historic legislation had the noble ambition of making healthcare more accessible and affordable, we are now experiencing the fundamental disconnect between policy and reality, as unforeseen ramifications come to light,” said David Gruber MD, director of research in A&M’s Healthcare Industry Group. “Safety net hospitals are now operating in the untenable crosshairs of economic distress and healthcare reform. Already experiencing the deleterious effects of ongoing reductions in Medicaid spending and fiscal constraints at all government levels, they must now deal with shifting funding streams that historically have supported their missions. The combined result could have a negative impact on socially disadvantaged and clinically vulnerable patients in communities throughout the country.”

Among the factors that will worsen the financial condition of safety net hospitals, the report points to:

The full report, entitled “Safety Net Hospitals at Risk: Rethinking the Business Model” analyzes the complex ecosystem serving the Medicaid population and uninsured, funding sources, the potential impact of the PPACA, the role of Medicaid Managed Care and benchmark performers. It also provides an overview of the issues in key states, including California, Florida, Illinois, Louisiana, New Jersey, New York, Pennsylvania and Texas. The report is available for download at .

With nearly three decades of experience providing hands-on support and results to organizations navigating times of change and challenge, Alvarez & Marsal is a global professional services firm that specializes in turnaround management, operational performance improvement and business advisory services. With a distinctive combination of experienced healthcare industry practitioners and world-class activist consultants, A&M works with management, boards of directors and stakeholders of not-for-profit and investor-owned healthcare providers, biopharmaceutical companies, payors, suppliers and others to improve operational, financial and clinical performance. A&M professionals bring a proven execution-oriented approach focused on delivering results through strategic advisory; financial, operational and clinical performance improvement; interim, crisis and contract management; turnaround and restructuring, mergers and acquisitions transaction and financial advisory; and compliance, governance and investigations.

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