Certain provisions of the Affordable Care Act, including the expansion of Medicaid eligibility in some states, continue to benefit the U.S. for-profit hospital industry. However, the favorable impact of the ACA on for-profit hospitals is on the decline, according to a report by Fitch Ratings.
Since the end of 2013, bad debt expense as a percentage of total net revenues dropped for a group of six acute care hospital companies rated by Fitch to an average of 9.9 percent of revenues in the first half of 2015.
"Comparing the rate of growth in revenue gross and net of bad debt expense shows that a drop in bad debt expense as a percentage of revenue was at least a modest tailwind to reported revenue growth for each of the six companies in both full-year 2014 and the first six months of 2015," according to Fitch.
Although these effects are likely to be durable, they are not accelerating. "Not surprisingly, three of the five companies that have reported results for the third quarter of 2015 saw higher bad debt expense as a percentage of net revenue than the prior-year period," said Fitch.
The higher bad debt expense as a percentage of net revenue is evidence that "the tailwind to payer mix provided by the ACA is tapering," according to Fitch.
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