Occasionally, I offer my opinions on healthcare finance, though I much prefer to offer financial leaders ideas on how to fix what ails the hospital rather than pour salt into already well-swollen wounds. Healthcare reform is one topic I have bypassed in my columns, and there is a reason—I generally prefer not to comment on something until it has come to pass, and there were more than a few moments in the last year that it seemed the healthcare reform bill might not do so.
But here we are, as of March 23, President Obama signed the Healthcare Reform Bill into law and now financial leaders are left to deal with the ramifications of that legislation in the years to come.
Now, there are oodles of areas of concern that I have with this new law. A few of them are:
1.) Tax-exempt status. An estimated 23 million Americans will remain without insurance coverage. Spread that out among hospitals nationwide, and assuming they all need care at some point, and hospitals will see a large portion of their uncompensated care losses disappear.
Seems like a reason to celebrate, but what affect is this bill going to have on not-for-profit hospitals' non-exempt tax status? One of our guest writers tackles this topic in some depth this week, and it offers some insights on what you may see in the coming years.
2.) Credit rating. You've been working on getting your hospital's credit ratings back in order; alas this legislation won't make that process easier. In the March 22 "Moody's Weekly Credit Outlook," the investor service says "most for-profit and not-for-profit hospitals should be able to navigate the implications of healthcare reform relatively unscathed." However, that's just through 2014 when the effects of the legislation really kick in.
Then the Moody's predictions change a bit: "Long term, we believe healthcare reform will be neutral to modestly positive for for-profit health systems, mildly credit-negative for pharmaceuticals and medical device manufacturers and negative for not-for-profit hospitals." Moody's says the reason is that stricter government auditing will force hospitals toward greater operational efficiency. Which begs the questions, how operationally efficient is your facility, and will this legislation affect your credit rating?
3.) U.S. economy. What does this bill mean for the almighty dollar? We're not out of the woods economically, folks. It's been surmised the healthcare reform bill means an additional expenditure of $940 billion that will be spent over the course of a few years. Some experts say with the already enormous deficit the government will have to print more money, there by devaluing the dollar, or borrow more. As any CFO will tell you, more debt means great default risk and this could put the country at greater risk for losing its AAA credit rating. That's not good for anyone. But other factors will play a role in that rating such as unemployment, which brings me to the other area on which you should be focused.
4.) Small business. This bill has a lot in it that might help small businesses weighed down by the burden of offering health insurance to their employees. Then again, it depends on what you consider to be a "small business." Beginning in 2014, employers with 50 or more workers could face federal fines for not providing insurance coverage. Several of the other changes would take effect much sooner. Assuming the economy turns around by 2014, this might be something these employers could financially handle; on the other hand businesses that are teetering into troubled waters may not. Not to be a pessimist, but that could lead to layoffs or business closures. If that happens, financial leaders may need to ask, how do we insolate our hospital against losses in charitable donations and the like?
All of these concerns are good food for thought; but my questions are just the tip of the iceberg when it comes to the possible challenges financial leaders will face due to the healthcare reform law. I know many healthcare leaders are filled with mixed emotions as well as questions about this new law. Now is your opportunity to sound off about this law—good or bad.
Tell me how you anticipate healthcare reform affecting your hospitals, and I'll see if the experts think your concerns are justified.
Post your comments and questions below or email me directly. In future columns, I'll try to address as many of your questions as possible. Let me talk to the experts for you and you can save the cost of hiring an expert.