These are challenging times for Akron’s Summa and Akron General health systems. Standard and Poor’s, the credit-rating agency, recently lowered Akron General’s creditworthiness. Both local systems laid off employees early this year. Summa reportedly is conducting a second round of layoffs. In the past few months, both institutions also have announced deals, yet to be finalized, that would give ownership stakes, General entirely, to much larger out-of-town partners.
Hospital executives are consistent in explaining the reasons for such steps: They are responding to market pressures, to increased regional competition, to the need for efficiency, to technology and changing patterns in the use of services and to government policies. In short, they are positioning themselves to weather accelerating change in all aspects of health care when the Affordable Care Act is phased in fully.
For hospitals, whether they are stand-alone community facilities or health systems, what happens with Medicaid after this year is a critical factor in the economic equation. When the U.S. Supreme Court ruled last summer that the health-reform law was constitutional, it also threw a monkey wrench into a law structured as a package deal.
Uninsured and low-income patients add considerably to health-care costs when hospitals pick up the bills for their care, the cost of charity and uncompensated care eventually reflected in higher prices for medical services and higher premiums. To help slow the rate of growth in health-care costs, the reform law originally required all 50 states to expand Medicaid to low-income individuals up to 138 percent of the federal poverty level, with the goal of lowering the number of uninsured.
The law anticipated significant decreases in the number of uninsured as a result of the requirement. It therefore included steep cuts in the supplemental payments the federal government makes as partial reimbursements to hospitals that serve large numbers (“disproportionate share”) of low-income and uninsured patients.
The court made Medicaid expansion optional, instead. The result is: If a state government opts to expand Medicaid to reduce the size of its uninsured and under-insured population, hospitals would not have to spend as much on uncompensated and charity care, the savings putting them in position to offset other scheduled reductions in federal payments. If a state says no, as many Republicans at the Statehouse advocate, hospitals are stuck with the deep cuts in Medicaid “disproportionate share” payments.
So, the argument over Medicaid expansion in Ohio is not just about extending health coverage to the poor and vulnerable. At stake also is whether state lawmakers will allow hospitals a path to stabilize their finances and avoid even more painful decisions that ripple through their communities.