Examining the Impact of the PPACA

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This week, Becker’s Hospital Review issued a comprehensive look at how the Patient Protection and Affordable Care Act (PPACA) is going to affect providers in the coming years. Writers Peter Pavarini, JD, partner at Squire Sanders, and Matt Lindsay, vice president of Lancaster Pollard, broke the impact of the law into three categories.

First, Pavarini and Lindsay examined the law’s impact on the industry as a whole, noting that Standard & Poor’s, Fitch Ratings, and Moody’s Investor Service, “the Big Three credit-rating agencies,” viewed both the Supreme Court affirmation of the law and Obama’s reelection “as a credit-neutral event.”

The authors write, “Although they differ in whether they view the law as positive or negative, the rating agencies generally expect rated borrowers to have sufficient time to manage these reforms with little effect on their credit quality, at least in the near or midterm.”

Despite the vagueness of the law and the instability surrounding the national debate, Pavarini and Lindsay acknowledged that providers, by and large, have been slowly, but faithfully preparing for the coming changes, especially in the areas of quality, clinical outcomes, and cost efficiency. Basically, they noted, the understanding that good results will be rewarded, while poor results will be penalized is near-universal, and the accountable-care concept is being accepted and embraced.

Second, they looked at PPACA’s impact on hospitals and health systems. “As the PPACA’s health-insurance provisions kick in, a drop in the number of uninsured patients could result in a significant reduction in a hospital’s charity caseload as well as its bad debt,” they write. “But hospitals should continue to approach how they bill patients eligible for financial assistance very carefully. The PPACA does not relieve hospitals of the duty not to charge such patients artificially high prices nor does it change the fair collection requirements of prior law.”

Of course, there is the issue of declining reimbursements in the face of Medicare and Medicaid expansion, not to mention “greater risk-sharing with providers [that] could offset any budgetary gains.” Therefore, being astute about payer mix and the setting and managing of rates will be vital for hospitals.

Third, they examined the impact PPACA would have on skilled nursing and assisted-living facilities and how the cuts to reimbursements will hurt these organizations the most since the largest percentage of their income is derived from Medicare and Medicaid. Home care may also become more popular and profitable, thus putting a dent in the business received by this market.

The writers advised changing your “business model to diversify revenue streams, bundling services, and contracting with larger providers. However, to succeed at accountable care, facilities will need to successfully manage high acuity care at a lower cost and reduce hospitalizations.”

There is also a large section regarding organizations’ access to capital that is worth reading. The entire article can be found here.

How has your organization prepared for PPACA? What initiatives is it currently working on to brace the facility for the influx of newly insured patients and the cuts in reimbursements? What are your thoughts on how to deal with these changes?

-by Pete Fernbaugh

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