What the Obamacare Ruling Means for Health Care Providers

“Like insurance companies, institutional providers have devoted substantial effort and resources to preparing to comply with the Act’s requirements… Indeed, prior to the Court’s opinion, many institutional health care providers argued in favor of upholding the Act because the projected expansion of coverage to 30 million additional Americans would result in additional revenue for the sector.” (Skadden Arps)

For hospitals and other health care providers, the June 28, 2012 U.S. Supreme Court ruling to uphold the Patient Protection and Affordable Care Act might not have ended all uncertainty about the future of reform in the country.

But the decision will allow institutional health providers to begin implementing long-considered plans for a no-longer-distant future.

What might that future bring? Three themes:

1. Growth opportunities:

“Investments that will now be realized in this sector include expanded clinical capabilities, upgraded physical facilities and technology, and enhanced quality and performance programs.” (Skadden)

“From our viewpoint, the most important outcome will be in the marketplace. Hospital consolidation and expansion clearly will proceed apace. Health insurers will be able to move ahead, as some pledged to do irrespective of the decision, with what they had argued was the linchpin of the law—the individual mandate that was argued to prevent adverse selection—having been upheld… And, overarching all of this, with significant uncertainty having been removed, much of the health care investment and expansion capital that has remained on the sideline will now be in play.” (Epstein Becker Green)

2. Industry consolidation:

“Now that the law has been upheld, physicians and hospitals will likely join in new Medicare accountable care organizations. Hospitals and physicians may also want to become involved in federally supported CO-OP health insurance programs.” (Warner Norcross & Judd)

“…unless Congress acts, the government will continue in its current move toward increased fraud enforcement and changes in provider reimbursement methodologies. The government’s actions, in turn, will continue to push hospitals, health care networks and others to purchase physician practices, physicians will continue to merge into larger groups, and the push to build ‘Accountable Care Organizations’ and the like will continue.” (Trenam Kemker)

3. Potentially higher costs:

“Even though the costs of the Medicaid expansion are fully paid by the federal government for the first three years, it is unlikely that many of the 26 states that opposed the expansion would participate. Hospitals should consider that there might be another ‘donut hole’ of uninsured consumers who do not qualify for Medicaid, who do not have replacement health insurance coverage and who do not qualify for the insurance subsidy because they are below the poverty level. The law assumed that the Medicaid expansion would cover these people. Therefore, the goal of universal healthcare still eludes the policy makers, and hospitals and physicians will once again have to bear the financial consequences of this part of the Court’s decision.” (Duane Morris)

“While the mandate was upheld and the law’s provisions promising to expand coverage to millions remain in intact, the ruling does not alleviate concerns that the mandate penalties (the greater of $95 or 1% of taxable income in 2014) are relatively weak. This, combined with other ACA provisions, including 3:1 age band compression, adjusted community rating, and an annual fee on the health insurance sector, threatens to result in increased premiums, particularly for non-group coverage.” (Mintz Levin)

Read the updates:

See also:

[Link: Healthcare Summit Reveals Industry Movement Independent of the Supreme Court Decision – Allen Matkins]

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