The Senate GOP's bill to repeal and replace the ACA would be a risk for states as well as public nonprofit hospitals, according to Fitch Ratings.
Fitch believes the bill, dubbed the Better Care Reconciliation Act, would have particularly negative credit implications for both entities.
"It would mean significant reductions in federal funding to states and changes in the payer mix and lower patient volumes for public hospitals. Higher uninsured rates would also act as a structural headwind for growth for corporate healthcare entities, though those issuers would benefit in the near term from the roll back of most of the industry taxes and fees that were implemented under the ACA," the agency said.
Fitch based these outcomes on "an unlikely total adoption of the BCRA" as well as the Congressional Budget Office's score of the House-approved American Health Care Act. The CBO had not yet scored the BCRA when Fitch released its report. However, that score was recently released and projects 22 million more people would lose coverage by 2026 under the Senate's bill compared to if the ACA is maintained. It also projects federal Medicaid spending would be cut by more than a quarter by 2026 under the BCRA. According to Fitch, the CBO estimated the AHCA would lower federal Medicaid spending by less than that — 24 percent— by that year.
"The speed and scale of that contraction could be difficult for states to manage and could affect both the states that expanded Medicaid under the ACA and those that did not," Fitch said of the CBO's estimate with the AHCA. "The 2020 and 2021 implementation dates for most Medicaid provisions would likely result in pressure on states to cut funding to local governments, public colleges and universities and healthcare providers."
The agency added it believes acute care hospitals, among all healthcare providers, would be the most pressured by state Medicaid cuts and by the increase in patients without coverage. Under the BCRA, "hospitals would have a higher percentage of uninsured patients and lower patient volumes as people will opt out of less critical care. Unless offset by cost savings or higher reimbursement from insured patients, this would pressure margins and could result in downward ratings pressure," Fitch said.
But the agency did note that the BCRA's inclusion of cost-sharing subsidies annually through 2019 would offer some reprieve for acute care hospitals and other healthcare providers in the near term, and the elimination of ACA taxes would also be advantageous for healthcare companies, at least in the near term.