The financial condition of Connecticut’s hospitals, and how they’ve fared under the federal health law, has been a source of dispute among state lawmakers. Hospitals have faced repeated funding cuts and increased taxes in recent state budgets.
Gov. Dannel P. Malloy’s administration has said hospitals are benefitting from Obamacare, since it has led to more patients with coverage – that is, more paying customers. But hospital officials say that, while they support the coverage expansion, it hasn’t led to a financial windfall, and that state funding cuts and tax hikes, along with cuts in Medicare payments in the health law, have added to the burden they face.
So what really happened to hospitals since Obamacare’s 2010 passage? To find out, we looked at recently released financial data from the 2014 fiscal year, the first after the major coverage expansion provisions of the health law took effect.
(Hospitals operate on the federal calendar, so their fiscal years run from Oct. 1 to Sept. 30. The most recent data, from the state Office of the Health Care Access, covers the fiscal year that ended Sept. 30, 2014.)
Here’s what it showed.
1. Outpatient hospital visits have increased, while inpatient visits have dropped.
The number of hospital inpatient visits dropped by 3.8 percent between 2009 and 2014. But the number of outpatient visits to hospitals rose by 8.6 percent during that time. Because outpatient visits far outnumber inpatient visits, that means that overall, hospitals treated more patients in the years since the health law passed.
2. A larger share of hospital patients have the lowest-paying form of coverage.
A major part of the health law was expanding Medicaid eligibility. Connecticut began expanding the program – known as HUSKY in Connecticut – in 2010 and widened eligibility further in 2014. HUSKY now covers more than 740,000 state residents, more than double the number covered at the start of 2010.
Not surprisingly, Connecticut hospitals saw more patients covered by Medicaid in the years since the coverage expansion began.
And Medicaid patients began to represent a larger share of overall patients.
From the 2009 through 2014 fiscal years, the percentage of inpatient discharges paid for by Medicaid rose from 16.5 percent to 24.3 percent.
Similarly, when it comes to outpatient care, patients covered by Medicaid accounted for a growing share of visits – up from 16.7 percent in 2009 to 23.5 percent in 2014.
Why is that important for hospitals’ bottom lines? Because Medicaid pays significantly less than private insurance does – and, according to OHCA, less than the cost of care.
For every dollar of hospital cost in 2013, for example, Medicaid paid hospitals 67 cents, according to OHCA figures. Medicare paid 83 cents, while private insurers paid $1.44.
In other words, according to hospital officials: Hospitals were delivering more care, but getting paid less than the cost of care for a larger share of those patients.
3. Fewer patients are uninsured, but there weren’t that many to begin with.
In the years since Obamacare took effect, hospitals have seen a big drop in visits by uninsured patients. But the overall impact of that drop is limited because, even before the health law, uninsured patients accounted for a relatively small percentage of hospital visits.
In 2009, uninsured patients accounted for 5.4 percent of outpatient hospital visits and 2.2 percent of inpatient discharges. In 2014, they represented 3.6 percent of outpatient visits and 1.3 percent of inpatient discharges.
Those figures suggest that the uninsured were underrepresented in hospital care. In 2009, an estimated 8.8 percent of Connecticut residents were uninsured, according to Census figures. One explanation that health care experts cite: People who have coverage are more likely to seek care than those who have to pay the full bill themselves.
4. Fewer patients had private insurance.
The percentage of hospital patients with private insurance – the form of coverage that pays hospitals the most – also dropped in the years since the health law passed. In 2009, people with private insurance accounted for 44 percent of outpatient visits and 38 percent of inpatient discharges. In 2014, that was down to 39 percent of outpatient visits and just under 32 percent of inpatient discharges.
5. Overall, the cost of uncompensated care dropped, but it’s crept up again at some hospitals.
Uncompensated care covers both patient care that hospitals deliver without expecting to be paid and bills that don’t get paid. Since 2009, the year before Obamacare, the average cost of uncompensated care at Connecticut hospitals dropped by 11.9 percent. Most hospitals saw a decline in uncompensated care costs, but seven had increases: Bridgeport, Connecticut Children’s, Greenwich, Charlotte Hungerford, St. Vincent’s, Windham and Yale-New Haven.
(Yale-New Haven’s cost of uncompensated care increased in part because it acquired The Hospital of St. Raphael in 2012, but its 2014 cost of uncompensated care is higher than the Yale and St. Raphael uncompensated care costs combined in 2009.)
And statewide, the average cost of uncompensated care rose between 2013 and 2014, driven largely by increases in uncompensated care at large urban hospitals, according to OHCA. Eleven hospitals saw increases in uncompensated care costs: Bridgeport, Greenwich, Hartford, John Dempsey, Lawrence + Memorial, Middlesex, MidState in Meriden, Norwalk, St. Vincent’s in Bridgeport, Windham and Yale-New Haven.
6. Connecticut spending on hospital care increased, but has it kept pace with Medicaid patient visits?
Malloy administration officials have noted that Connecticut’s spending on hospitals has increased dramatically since the health law took effect. That’s true.
Did that growth keep pace with the increase in care delivered to Medicaid patients?
From 2009 to 2014, there was a 51 percent increase in hospital visits by Medicaid patients – up from 1.27 million to 1.9 million.
How much did Medicaid spending on hospitals grow in that time?
According to the state Department of Social Services, it grew by nearly 70 percent – from $1.026 billion in 2009 to $1.743 billion in 2015. (That’s based on state fiscal years, which run from July 1 to June 30.)
The Connecticut Hospital Association says that increase is overstated because it includes money that given to hospitals as part of a tax system that allows the state to generate federal matching funds by collecting money from hospitals and returning it to the industry. The state began collecting $350 million per year from hospitals beginning in 2011, and returning the money to the industry. (It has since decreased the amount hospitals get back.) In the association’s view, the state shouldn’t count increased spending that was based on money hospitals paid to the state.
7. Hospital margins have gotten better – but not everywhere.
Hospital margins reflect far more than the impact of the health law. Still, they’re a useful indicator of hospital finances.
On average, hospital margins have improved statewide since the 2009 fiscal year.
(The health law passed in March 2010, and Connecticut began expanding Medicaid later that year. The first private insurance-related provisions of the health law took effect at the end of September 2010, the final week of the 2010 federal fiscal year.)
During the 2009 fiscal year, the average statewide margin was 2.61 percent. Since then, the lowest average margin was 3.63 percent in the 2011 fiscal year. The highest was 6.63 percent, in 2012.
Between 2003 and 2008, the highest statewide average margin was 3.62 percent in 2007. In other words: The worst overall year since the health law passed was better than the best year in the seven that preceded it.
But the financial performance of individual hospitals has varied widely, as the chart below shows.
|Hospital||FY 2009 Total Margin||FY 2010 Total Margin||FY 2011 Total Margin||FY 2012 Total Margin||FY 2013 Total Margin||FY 2014 Total Margin|
|HOSPITAL OF CENTRAL CONNECTICUT||3.81%||1.41%||6.13%||7.02%||6.26%||6.35%|
|LAWRENCE + MEMORIAL||5.16%||1.18%||7.87%||7.53%||4.95%||2.61%|
8. There’s another other big, unquantifiable Obamacare impact.
One thing that’s not captured by year-to-year financial data: The way health care is paid for is changing, driven in part by initiatives included in the health law.
Hospitals and other health care providers are trying to adapt to new funding models – most of which are still being developed and fine-tuned. The basic premise is that instead of getting paid for each service or procedure, as happens now, health care providers’ pay would increasingly be tied to achieving certain outcomes in patient care and containing costs. At some point, experts expect, health care providers will be responsible for managing the health of large groups of patients. Getting there requires some significant changes in how care is managed and delivered, made while care is largely still paid for on a per-episode basis. Many in health care refer to that as having one foot on the dock, one foot on the boat – while the boat is leaving. In other words, there’s a lot of change in health care right now, and hospitals are trying to adapt while still functioning under the old payment system.
How will those models evolve and affect hospital finances? Stay tuned.
Correction: The original version of this story included the statewide median margin for hospitals in 2014, not the statewide average. The story has been updated to show the accurate figure.