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Finding wide variations in health reform implementation between states Date: 02/11/14

Beth Kutscher
Beth Kutscher

Modern Healthcare reporter Beth Kutscher watched the differences in Affordable Care Act implementation in her state of Tennessee and neighboring Kentucky. She began to think about what it meant for the hospitals in the two states – and she decided to find out. Here’s how she got her story.

By Beth Kutscher

The initial rollout of the federal health insurance marketplace has been bumpy, as we all know. People waited wait days, even weeks, until they could sign on without getting an error message. Servers were overloaded. Months later, policyholders are finding that they can’t make special election changes, such as adding a newborn, to their plans.

But in a few places enrollments were going smoothly and sign-up was happening at a steady, even rapid, pace. Kentucky was one of the early success stories. Under Democratic Gov. Steve Beshear, kynect, the state's online health marketplace, was enrolling about 1,000 people a day.

My own state of Tennessee was a stark contrast. The state had defaulted to the federal exchange, which meant that even if consumers – and especially younger, healthier individuals who help dilute the risk pool for insurers – had considered buying a plan, there was a good chance they’d log off in frustration and not return.

I had done a previous story on why so few hospitals in the country were participating as federally designated “navigators” to help with enrollment. For that article, I had tried to attend a sign-up event, but couldn’t find a single one in the Nashville area. I got a taste of the frustration firsthand.

My editors at Modern Healthcare had the idea of doing a “Divided States of Healthcare” spread. – and I was tasked with reporting on the different financial picture for hospitals in pro-ACA and anti-ACA states.

Credit ratings agencies like Moody’s Investors Service have done deep analyses of hospitals’ expected financial performance in 2014, but their sector outlook reports have generally focused on hospitals as a single group. The underlying assumption seemed to be that hospitals would experience healthcare reform in the same way – or that the regional variations would only have a modest effect on finances.

But that approach overlooked the fact that while the law may have originally anticipated a fairly uniform state approach to ACA implementation, politics and the Supreme Court ruling created wide variation. Some states did their own insurance exchanges and enrollment outreach, others left it to the feds. Some expanded Medicaid, and others did not. It stood to reason that these decisions would affect hospitals too.

Through my sources, I had already learned that one of Tennessee’s largest hospitals, Vanderbilt University Medical Center, was making deep cuts to its operating budget and slashing between 500 and 1,000 positions, in large part because of shrinking reimbursements. States that don’t expand Medicaid still stand to lose disproportionate share hospital payments, which provide some help to hospitals that see large numbers of uninsured patients. The federal government is cutting DSH payments because Medicaid expansion was supposed to reduce the level of charity care they provide to low-income people.

I had seen the push that hospital associations, in states like Tennessee and Florida, were making to urge officials to expand Medicaid and take advantage of federal match dollars that would otherwise go to Medicaid expansion states like Vermont, California and New Jersey.

I decided to call health systems that own hospitals in both pro-ACA and anti-ACA states. I also checked financial reports filed for bondholders, and made calls to state hospital associations and health departments.

While it's still too early to know how things will play out, it's clear that hospitals have different expectations for how healthcare reform will impact the bottom line depending on where they're located – ranging from cautious optimism to downright frustration.

In Long Beach, Calif., one health system is expanding the number of urgent care centers it operates and hiring new primary care physicians to meet what is expected to be strong demand. But in central Georgia, where there is only one “navigator” to help residents across 11 counties, hospital executives haven’t seen any increase in volume, beyond the expected flu-season uptick. In this region, many people don’t even make enough money to qualify for a health exchange. They were supposed to have been served by Medicaid expansion.

The difference is likely to be particularly stark for rural hospitals, which will be hard hit by the loss of DSH payments. We’ll continue to follow health care providers like Upper Allegheny Health System, where this divide is playing out in the 20 miles between Olean General Hospital and Bradford Regional Medical Center, located on opposite sides of the rural New York/Pennsylvania border.

Beth Kutscher is a reporter at Modern Healthcare covering health care finance, for-profit hospitals and regional business news in Tennessee, Kentucky, Florida and Georgia.