RACINE COUNTY — The Affordable Care Act is scrambling the reimbursement picture for hospitals in ways that make it impossible to predict the outcomes, Wheaton Franciscan executives say.
The new national health care law, or Obamacare, and other federal actions are reducing some government reimbursements, Wheaton officials said last week. It also will bring in new revenues.
When Medicare and Medicaid reimbursements change, they have a huge impact on All Saints, the Racine-based part of Wheaton.
Together, they comprised 51 percent of All Saints’ $430 million in revenue in the last fiscal year, officials said.
But Wheaton officials can’t untangle the effects of the ACA from ongoing declining government reimbursement.
“It’s messy,” Wheaton spokeswoman Anne Ballentine said.
On the loss side of the ledger — and apart from the ACA — Wheaton Chief Financial Officer Jon Sohn expects a climate of lower-than-inflation revenue increases this year and beyond, because of declining reimbursement from government payers. In this fiscal year, the loss could be about $13 million, Sohn said.
If congressional inaction leads to “sequestration,” that would mean automatic budget cuts that would cost Wheaton another $7 million-plus annually, Sohn said, for a total reduction of about $20 million.
And that would be the estimated further reduction every year thereafter, he said. “You just keep running that model.”
Twenty million dollars is just 1.2 percent of Wheaton’s current revenue total of $1.7 billion, but certain reductions are expected to be unrelenting.
Moreover, there’s no expectation of recouping those ongoing losses.
“We don’t foresee any of the payers giving us any material increases,” Sohn said.
Another consideration, Sohn said, is that Wheaton plans to do what’s necessary, such as awarding raises, to stay competitive.
And even before further government reimbursement reductions, $7 million in Medicare services and $4 million in Medicaid services at All Saints went unpaid in the last fiscal year, said incoming All Saints President Susan Boland.
Losses and gains
Obamacare’s impacts are impossible to predict, Sohn said, both on the gains and losses sides.
One thing the ACA does is slash by 75 percent a Medicare payment adjustment to hospitals that serve a disproportionate number of low-income people, Sohn said. All Saints now gets about $6 million a year that way, putting about $4.5 million of it at risk.
Then the ACA redistributes some of that adjustment money back to some of those hospitals, based on many factors including how many poor people will use the new insurance exchanges to buy insurance, and what happens in other states. So All Saints might or might not recoup some of the $4.5 million.
“They took a lot of the current reimbursements, put them in a box, shook it up and came up with the same reimbursement amount,” Sohn said.
“It’s significant and concerning, but impossible to model.”
Even though All Saints may get some of the money back in a redistribution, “We don’t expect to come out whole on that,” Ballentine said.
That’s the negative side. But Sohn pointed out hospitals should also see new revenues as a result of the law. They’re just impossible to forecast.
“You can’t quantify ... what new access to care will be through the exchanges,” Sohn said, referring to the Health Insurance Marketplace the law creates. By next year, people — both the previously uninsured and working people — and small businesses will be able to comparison-shop for health insurance at those exchanges. And the ACA mandates everyone carry health insurance.
Therefore, hospitals will receive compensation on previously uninsured people who so far have been charity care, or free care, cases. All Saints provided $11 million worth of charity care in fiscal year 2012, Boland said.
And Wheaton and All Saints should, as the ACA presumes, see some reduction in uncompensated care, Sohn said.
“To do a thorough analysis of the Affordable Care Act, you need to know where Medicaid starts and stops,” he said. “It will probably provide care to more vulnerable people.
“There are tons of pluses and minuses in this (Act),” Sohn said.
“And unknowns,” Ballentine added.