Hospi­tal ex­ecs as­sure in­vestors they can weather ACA re­peal

Modern Healthcare - - NEWS - By Dave Barkholz

Hospi­tal ex­ec­u­tives who pa­raded be­fore in­vestors last week at the J.P. Mor­gan Health­care Con­fer­ence in San Fran­cisco put on a brave face about the com­ing re­peal of the Af­ford­able Care Act.

To be sure, they were wor­ried about the mil­lions of Amer­i­cans newly in­sured un­der the ex­changes and state Med­i­caid ex­pan­sions whose cov­er­age is threat­ened.

Kaiser Per­ma­nente CEO Bernard Tyson said it would be un­con­scionable for Congress to re­peal the ACA with­out a si­mul­ta­ne­ous re­place­ment. And he went fur­ther by in­sist­ing that the cur­rent ACA be the “start­ing point” for ben­e­fits and provider stan­dards in a re­place­ment plan.

That was the com­pas­sion­ate side. At the same time, sys­tems were talk­ing to in­vestors and an­a­lysts, and they chose not to spook them with dire pre­dic­tions about the im­pacts of re­peal.

Tenet Health­care CEO Trevor Fet­ter told his au­di­ence dur­ing a packed ses­sion that two-thirds of the ACA pa­tients that Tenet sees had health in­sur­ance be­fore Oba­macare and had moved over to the ex­changes.

Dal­las-based Tenet, the na­tion’s third-largest in­vestor-owned hospi­tal com­pany, de­rives about 3% of its ad­mis­sions and 5% of rev­enue from ex­change pa­tients, Fet­ter said.

But here’s the kicker: Tenet has seen about $230 mil­lion in ben­e­fits from the health­care law be­tween its in­cep­tion in 2010 and 2016. In con­trast, Medi­care cuts im­posed un­der the law have cost Tenet $350 mil­lion over that time, Fet­ter said. That’s a net neg­a­tive of $120 mil­lion since 2010.

“Once you look back to the Medi­care cuts that be­gan in 2010, we be­lieve that the ACA has low­ered our cu­mu­la­tive earn­ings, not raised them,” Fet­ter said.

LifePoint Health CEO Bill Car­pen­ter made a sim­i­lar point last month at the Citi 2016 Global Health­care Con­fer­ence. LifePoint, the na­tion’s fourth­largest in­vestor-owned hospi­tal com­pany, gen­er­ates from ACA vol­umes about $60 mil­lion an­nu­ally in earn­ings be­fore in­ter­est, taxes, de­pre­ci­a­tion and amor­ti­za­tion, Car­pen­ter told the as­sem­bled an­a­lysts.

If the new Congress and the Don­ald Trump ad­min­is­tra­tion sim­ply re­pealed ACA and re­versed the Medi­care cuts made as part of the pro­gram, LifePoint would be no worse off, he said.

But the world typ­i­cally doesn’t work that way, Wright Las­siter III, the new CEO of the Henry Ford Health Sys­tem in Detroit, said in an in­ter­view. Gov­ern­ment re­im­burse­ment cuts are un­likely to be com­pletely re­stored, es­pe­cially as bud­get deficits and com­pet­ing pri­or­i­ties vie for dol­lars, he said.

Las­siter said sub­si­dized in­sur­ance and Med­i­caid ex­pan­sion un­der the ACA in Michi­gan have given the newly in­sured an op­por­tu­nity to seek pre­ven­tive care and early di­ag­no­sis. That’s a ben­e­fit to the over­all health of the com­mu­nity and a dy­namic to keep costs in check if peo­ple can get care be­fore their af­flic­tions send them to emer­gency rooms.

Or, as Tyson put it at the J.P. Mor­gan con­fer­ence, pre­vi­ously unin­sured pa­tients have gained ac­cess “to the front door” of health­care.

In­vestor fears of an ACA re­peal, mean­while, have abated. Af­ter a pan­icked sell-off of hospi­tal stocks im­me­di­ately fol­low­ing Don­ald Trump’s elec­tion, most have re­bounded back to where they started or slightly above.

The stock price of Com­mu­nity Health Sys­tems closed Fri­day at $6.94, up 17% since Nov. 8. Se­lect Med­i­cal’s shares rose 30% over that time to $14.85.

Shares of bell­wether HCA Hold­ings, the na­tion’s largest in­vestor-owned hospi­tal com­pany, were down just 2% to $79.41. Sim­i­larly, LifePoint’s shares had re­gained most of the ground they had lost, clos­ing at $59.20 Fri­day, down 3% since Nov. 8.

Even Tenet has ral­lied. Its shares closed Fri­day at $18.22, down 10% from a Nov. 8 close of $20.27. But its shares had sunk as low as $14.38 on Dec. 14.

Fitch Rat­ings Man­ag­ing Di­rec­tor Me­gan Neuburger said if the ACA went away overnight, the im­pact on hos­pi­tals would not cause a mass down­grad­ing of their debt. Neuburger said there would be an as­sump­tion that at least some of the Medi­care cuts made as part of ACA would be re­stored. “It would not be the end of the world.”

“Once you look back to the Medi­care cuts that be­gan in 2010, we be­lieve that the ACA has low­ered our cu­mu­la­tive earn­ings, not raised them.” TREVOR FET­TER Tenet Health­care CEO

Pre­vi­ously unin­sured pa­tients have gained ac­cess “to the front door” of health­care. BERNARD TYSON Kaiser Per­ma­nente CEO

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