If the individual mandate within the Patient Protection and Affordable Care Act is struck down in the Supreme Court, non-profit hospitals would lose their most valuable asset within that healthcare law, according to a report released today by Moody's Investors Service.
"A ruling that the individual mandate to purchase health insurance is unconstitutional would heighten credit risk for [non-profit] hospitals, which are the vast majority of community hospitals in the U.S.," said Mark Pascaris, Moody's vice president, senior analyst and author of the report. "This uncertainty — in an already pressured operating environment — continues to drive our negative outlook on the sector."
Moody's analysts said the PPACA, in its entirety, is a long-term credit negative for non-profit hospitals since Medicare rate reductions and new forms of reimbursement models (such as bundled payments) will negatively impact their revenue streams. However, the individual mandate would reduce hospitals' uncompensated care and would provide a source of reimbursement that they otherwise would never have seen.
There are other potential credit positives within the healthcare reform law for non-profit hospitals, such as the extension of health coverage to young adults up to the age of 26 and the creation of state health insurance exchanges. However, Moody's said if the mandate is revoked, the negatives will outweigh the positives even more, which could include larger droves of uninsured patients and the lower reimbursements from commercial payors as they try to offset the increase in premiums from the loss of the mandate.
"A ruling that the individual mandate to purchase health insurance is unconstitutional would heighten credit risk for [non-profit] hospitals, which are the vast majority of community hospitals in the U.S.," said Mark Pascaris, Moody's vice president, senior analyst and author of the report. "This uncertainty — in an already pressured operating environment — continues to drive our negative outlook on the sector."
Moody's analysts said the PPACA, in its entirety, is a long-term credit negative for non-profit hospitals since Medicare rate reductions and new forms of reimbursement models (such as bundled payments) will negatively impact their revenue streams. However, the individual mandate would reduce hospitals' uncompensated care and would provide a source of reimbursement that they otherwise would never have seen.
There are other potential credit positives within the healthcare reform law for non-profit hospitals, such as the extension of health coverage to young adults up to the age of 26 and the creation of state health insurance exchanges. However, Moody's said if the mandate is revoked, the negatives will outweigh the positives even more, which could include larger droves of uninsured patients and the lower reimbursements from commercial payors as they try to offset the increase in premiums from the loss of the mandate.
More Articles on Moody's Healthcare Reports:
Moody's: 1Q of 2012 Shows Even Mix of Hospital Upgrades, Downgrades
Moody's: Nullified PPACA Would Hurt For-Profit Hospitals
Moody's: Acquisitions of Physician Practices Expected to Continue