Medicaid reimbursement and admissions can produce hospital profits but charity care and taxes can lower revenue, in accordance to the two recent studies.
Do Medicaid reimbursement amounts and federal uncompensated care payments actually cover the healthcare prices of treating larger proportions of Medicaid beneficiaries and uninsured individuals?
In Health Affairs, two new studies prove yes, but with various caveats. The studies indicate that treating Medicaid beneficiaries can be profitable for safety-net hospitals, but charity care and provider taxes might contribute to lower hospital revenues instead of profits.
The research undertook by Jeffrey Stensland, Zachary R. Gaumer and Mark E. Miller, discovered that Medicaid hospital admissions can be profitable to safety-net hospitals, due to the supplemental Medicare reimbursement programs that use Medicaid days to enable and determine payments.
The Medicare Disproportionate Share Hospital and Uncompensated Care programs were established by CMS in response to the conventional belief that Medicaid admissions are unprofitable. Although, the federal agency doesn’t determine the supplemental Medicare reimbursements using actual uncompensated care costs, like charity care and bad debt. Rather, it utilizes Medicaid days plus the number of Medicare days for low-income Medicare sufferers who get Supplemental Security Income (SSI).
As an outcome, researchers discovered that an extra day for a Medicaid admission would increase marginal hospital revenue by a total of $320 each day for an average Medicare hospital in the Disproportionate Share Hospital program.
Researchers verified that the increased revenue first stemmed from a $95 each day boost from Medicare fee-for-service by using data from 2.774 Medicare Disproportionate Share hospitals involve in 3 studies.
A $24 per day rise in Medicare Advantage revenue would also be observed by the safety.net hospitals because the plans generally reimburse hospitals based on Medicare fee-for-service rates, which increased per Medicaid day.
Furthermore, hospitals that qualify for Medicare disproportionate share hospital payments normally also get specific uncompensated care payments. CMS has a total of $6 billion in Medicare uncompensated care payments for the year 2017 and it plans to distribute $161 for each Medicaid and SSI stay to qualifying hospitals.
Safety-net hospitals for uncompensated care are also paid by the Medicare Advantage, researchers added. They projected Medicare Advantage uncompensated care reimbursement to equal $40 each Medicaid day.
The total $320 in Medicare payments from Medicaid and SSI stays accounted for over 17% of total healthcare costs linked with treating a Medicaid sufferer, the study summarized. When researchers added the extra revenue to Medicaid reimbursement revenue, which generally covers about 90% of patient charges, they discovered the Medicaid readmissions are typically profitable.
Although, Medicaid reimbursement rates covered between 76 to 127% of disproportionate share hospital charges relying on state, added researchers. So, safety-net hospitals in more generous states have more of an incentive to fill beds with Medicaid sufferers, but an admission might be less profitable for hospitals in other states.
Instead of Medicaid admission profitability, researchers also discovered that every extra uninsured charity care day at safety-net hospitals reduced Medicare reimbursement by $20, demonstrating that Medicare better supports the treatment of Medicaid patients and not uninsured sufferers.
The safety-net hospital revenue cycle challenges stemmed more from uncompensated care than Medicaid patients, the researchers concluded.
In addition to uninsured patient charges, the other Health Affairs study, undertook by Robert Nelb, Allen Dobson, Joan E. DaVanzo, James Teisl and Lane Koenig, discovered that provider and hospital taxes also decrease Medicaid profits.