By Robin Respaut
SAN FRANCISCO (Reuters) – A year and a half after the Affordable Care Act brought widespread reforms to the U.S. healthcare system, Chicago’s Cook County Health & Hospitals System has made its first profit in 180 years.
Seven hundred miles south, the fortunes of Atlanta’s primary public hospital, Grady Health System, haven’t improved, and it remains as dependent as ever on philanthropy and county funding to stay afloat.
The disparity between the two “safety net” hospitals, both of which serve a disproportionate share of their communities’ poorest patients, illustrates a growing divide nationwide.
In states like Illinois that have opted to accept federal money to expand Medicaid, some large, public hospitals are finding themselves on solid financial footing for the first time in decades, and formerly uninsured patients are now getting regular care.
But in states that did not expand the government medical program for the poor, primarily ones with conservative electorates opposed to Obamacare, including Georgia, the impact of the Affordable Care Act on public hospitals has been negligible.
While the public exchanges established by the federal government and 14 states have brought coverage to many previously uninsured people in all parts of the country, the effect on the poorest Americans varies drastically from state to state.
Nearly four million low-income, uninsured Americans living in states that didn’t expand Medicaid would have qualified for coverage had their states chosen to expand it, according to the Kaiser Family Foundation. And public hospitals in those states, many of which rely on bond markets for funding, are likely to feel the pinch even more acutely over time, experts said.
“Providers in these states are going to be at a disadvantage,” said Jim LeBuhn, senior director at Fitch Ratings. “It’s going to make it that much more challenging for these providers to maintain their financial profiles.”
Since the Affordable Care Act’s first open enrollment in 2013, the number of Americans covered under Medicaid has risen by 21 percent, to 71.1 million.
Nonprofit hospitals in the 30 states that expanded Medicaid reported on average 13 percent less bad debt from unpaid bills last year, according to Moody’s Investors Service. In contrast, according to Moody’s, such “hospitals in non-expansion states saw bad debt increase through much of the year.”
Hospitals in Medicaid expansion states, according to Kaiser, reported an average 32 percent decrease in uninsured patients and a 40 percent cut in unreimbursed costs of care for patients without the ability to pay, known in the industry as charity care costs. In non-expansion states, the number of uninsured patients declined by 4.4 percent and charity care costs dropped by 6.2 percent.
New recipients of Medicaid benefited, too. After one year, adults who gained the coverage were 55 percent more likely to have their own doctor than those who did not, Kaiser found. Medicaid also increased the likelihood of receiving preventive care, such as mammograms and cholesterol checks.
A TALE OF TWO HOSPITALS
Both Cook County and Grady are safety-net hospitals based in urban counties where the poverty level is slightly higher than the national average, and both have handled high numbers of uninsured clients in recent years: about half of the patients at Cook and nearly a third at Grady.
Since Obamacare took effect, the numbers at the Georgia hospital have remained about the same. But things have changed dramatically at the Illinois hospital, in large part due to the area’s enrollment of about 170,000 of an estimated 330,000 eligible for the expanded Medicaid.
“This has been a sea change for us,” said Dr. John Jay Shannon, Cook County Health’s chief executive.
Within two years, the percent of uninsured patients at the hospital had dropped from more than a half to about a third, almost entirely driven by increased Medicaid coverage, hospital data show. And for the first time in the hospital’s history, a majority of the patients it treated had coverage.
A third of the new Medicaid enrollees treated at Cook County were patients new to the system. And, hospital administrators say, those with chronic diseases such as diabetes, who used to be frequent emergency room visitors, now have personal physicians to help them manage their conditions.
In the fiscal year ending in November 2014, uncompensated charity care dropped to $342 million from $500 million the year before. Funding from Medicaid nearly doubled the health system’s operating revenues, a major reason that, after ending 2013 with a net loss of $67.6 million, Cook County Health finished its most recent fiscal year in the black.
Now, the provider, like other safety-net hospitals, has a new challenge: holding onto old clients.
“For the first time in our history, we need to compete for our patients,” said Shannon. “A world of improved access is also a world of choice.”
At Grady Health System in Atlanta, meanwhile, the number of patients covered by insurance increased by less than 2 percent last year. Bad debt from unpaid bills has continued to climb, to $396 million from $269 million in 2013. And the percentage of patients covered by Medicaid didn’t change.
“We’ve seen no difference from the Affordable Care Act,” said John Haupert, Grady’s chief executive. Many patients “are still coming to us as a safety-net provider and falling under our charity care.”
Georgia is one of 20 states, disproportionately clustered in the South, that didn’t expand Medicaid. About 89 percent of those left out of the new Medicaid coverage, because their states chose not to expand the program, live in the South, Kaiser Family Foundation found.
Grady has a better financial outlook than many hospitals in states that didn’t expand Medicaid, thanks to a philanthropic campaign that has raised $350 million since 2008 to fund new infrastructure and expand clinical services. But, unlike Cook County, which has reduced some dependence on local government support with the help of Medicaid expansion dollars, Grady remains reliant on $57 million in tax support from two local counties. Without the local funding, Grady would be running a deficit.
“From a global perspective, it seems like the ACA is working,” said Kevin Holloran, senior director at Standard & Poor’s. But in non-expansion states, like Georgia, “it’s really a neutral. It’s just the status quo.”
(Reporting By Robin Respaut; Editing by Peter Henderson and Sue Horton)