A majority of health systems experienced operating margin declines after ACA insurance coverage expansion, according to a Navigant study.
For the study, Navigant examined audited financial reports for 104 for- and nonprofit systems, which operate 2,289 hospitals.
Four findings:
1. Sixty-five percent of analyzed systems saw operating income declines from fiscal year 2015 to fiscal year 2017.
2. Additionally, 27 percent of analyzed systems lost operating income in at least one of the three fiscal years studied, and 11 percent had negative operating margins from fiscal years 2015 through 2017.
3. Operating income declines overall during the three fiscal years studied totaled $6.8 billion, and analyzed systems saw average operating margin declines of 38.7 percent. For-profit system margins fell more than nonprofit margins (39 percent versus 34 percent).
4. Navigant said the primary cause of systems' operating margin declines was that hospitals' expenses grew by 3 percentage points faster than their revenues over the studied period. Other contributing factors cited by Navigant include: "weakening demand for such core hospital services as surgery and inpatient admissions"; "deteriorating collection rates for private accounts in non-ACA expansion states"; and "steady erosion in Medicare payment rates due to the ACA and the 2012 federal budget sequester."
"To reverse this operating performance decline, hospitals must achieve both strategic clarity regarding their growth and transformation investments and improved operating discipline in a markedly tougher environment," the study's authors concluded.
Read more about the study here.
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