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 Hospitals typically lay out multi-year operating plans that
prioritize investments, such as new clinics, medical wings,
technology or other projects that help draw in more patients and
increase revenue. In addition to enhancing patient care, these
projects are vital to the local economy as a driver of jobs ranging
from construction and maintenance to restaurants and transportation.
Denver Health Medical Center, for example, opened a new $26.9
million clinic in the city's southwest in 2016 to provide care to an
area lacking in health services and saw more patients within six
months than it had expected over two years. The health system
planned to build or remodel five more facilities based on the new
clinic's success.
But since November's election, when Republicans swept the White
House and Congress, Denver Health has deferred $73.7 million-worth
of construction projects that had been planned to serve more
low-income residents, many of whom were newly insured under
Obamacare.
"We want to know what will happen with the Medicaid expansion
population, and what will be the timeline for that," said Peg
Burnette, Denver Health’s chief financial officer. "Due to the
uncertainty, we're not going to issue new debt. We have no plans for
that in the near future."
Denver Health is not alone. Across the country, hospitals are
shifting to a more conservative stance as they await sweeping
changes to the nation's healthcare law that for the first time in
U.S. history would reverse a government healthcare entitlement
program. The Affordable Care Act, commonly known as Obamacare,
provided coverage to 20 million Americans and brought higher
revenues to many hospitals.
The law's likely overhaul puts many hospitals in a uniquely daunting
position of being unable to predict how many of their patients will
be insured and what type of coverage they will have in the future.
As a result, many are more wary than in years past to invest in
expensive capital projects, issue debt, or expand into new regions,
said healthcare experts and hospital executives.
This is playing out in Arizona, where Kingman Regional Medical
Center is taking cost-cutting measures by renegotiating medical
supply and service contracts. The University of Alabama at
Birmingham Health System, which includes six hospitals, is largely
holding off hiring non-clinical staff, a trend also evident in
national data.
Across the industry, hospital jobs so far in 2017 grew by 8,775
monthly on average, compared to 11,413 jobs for the same period last
year, Bureau of Labor Statistics data shows. (Graphic http://tmsnrt.rs/2mtyO0w)
The Republican-proposed bill, set to come before the U.S. House of
Representatives on Thursday for a vote, would unwind the Medicaid
expansion, cap federal payments to states and replace Obamacare's
income-based tax credits with flat age-based credits. The bill would
still need approval in the Senate if it clears the House this week.
When asked about the early signs of hospitals putting spending on
hold, a White House spokesperson expressed confidence that "the
disastrous Obamacare law will be replaced with the American Health
Care Act — the vehicle which will reform our broken healthcare
system."
The nonpartisan Congressional Budget Office estimates the new
proposal would cause 14 million people to lose health insurance next
year and 24 million by 2026. The bill has divided House and Senate
Republicans and sparked fierce criticism from Democrats and leading
medical and hospital groups, including the American Medical
Association and American Hospital Association. (Graphic http://tmsnrt.rs/2n0ZMKf)
"It's very challenging to plan for your future in an environment
like this," said Beth Feldpush, senior vice president of policy and
advocacy at America's Essential Hospitals, a group that represents
safety-net hospitals nationally.
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Not all hospitals are on hold. Some healthcare groups in areas with
growing populations, such as Atlanta and Houston, are pushing ahead
with capital expansion projects. Others, such as Maryland's Prince
George's County, are still planning to move forward with
construction plans, thanks in part to a partnership with the
University of Maryland Medical System.
With the new medical center, Prince George’s County hopes to end its
long-time reliance on $30 million annually from public subsidies to
help cover operations. But that goal assumed Obamacare would remain
intact, said Thomas Himler, Prince George's deputy chief
administrative officer.
"It could be that three years out we are no longer making money, we
are losing money," said Himler.
The uncertainty has seeped into the municipal bond market, where
nonprofit hospitals access capital. The sector sold 36 percent less
debt for new projects so far in 2017, compared to the same period
last year, while the rest of the municipal market increased the
amount of new money issued by 23 percent, Thomson Reuters data
shows. While municipal analysts say it’s too early to draw
conclusions, the uncertainty surrounding Obamacare is a likely cause
for the decline.
"There's a wait-and-see feeling," said Kevin Holloran, a senior
director at S&P Global Ratings. "Hospitals are saying, we'll revisit
this in six months or more."
REVENUES AND RESTRAINT
Since enrollment started in 2014, the Affordable Care Act brought
significant changes to Denver Health Medical Center, a safety-net
hospital with the busiest trauma center in Colorado. Historically,
nearly two-thirds of patients were either uninsured or covered by
Medicaid, the government health insurance program for the poor.
Almost immediately after Obamacare went into effect, rates of
uninsured dropped and Medicaid coverage jumped to over half of all
patients.
With so many more patients covered, hospital margins grew and days
of cash-on-hand climbed. Such financial improvements enabled the
hospital to invest in new projects, including the Pena Family Health
Center in southwest Denver. The hospital planned to construct three
more clinics, to expand two existing clinics, and to build a new
parking garage to drive new revenues and expand its coverage.
But since November's elections, much of those plans have been
deferred, including a $24 million expansion of a second clinic,
largely financed through bonds. The health system still plans to
move forward with the construction of one clinic and the remodeling
of another. But those plans could be bigger.
"There's great demand that we're concerned about not being able to
meet in the future," said Burnette.
(Reporting by Robin Respaut in San Francisco and Yasmeen Abutaleb in
Washington; editing by Edward Tobin)
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